Unum 2008 Annual Report Download - page 88

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During 2008 and 2006, Unum Group received $100.0 million and $150.0 million, respectively, from its insurance subsidiaries for the
repayment of surplus debentures previously issued to Unum Group in 1997 and in 1996. The debentures had maturity dates of October
2027 and December 2006, respectively.
Restrictions under applicable state insurance laws limit the amount of ordinary dividends that can be paid to a parent company from its
insurance subsidiaries in any 12-month period without prior approval by regulatory authorities. For life insurance companies domiciled in
the United States, that limitation generally 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 generally further limited to the amount of
statutory surplus as it relates to policyholders. Based on the restrictions under current law, during 2009, $653.3 million is available for the
payment of ordinary dividends to Unum Group from its traditional U.S. insurance subsidiaries, excluding Northwind Re and Tailwind Re.
Unum Group and/or certain of its nance subsidiaries may also receive dividends from its United Kingdom-based afliate, Unum Limited,
subject to applicable insurance company regulations and capital guidance in the United Kingdom. Approximately £145.5 million is available
for the payment of dividends from Unum Limited during 2009, subject to regulatory approval.
The amount available during 2008 for the payment of ordinary dividends from Unum Group’s traditional U.S. insurance subsidiaries
was $626.5 million, of which $165.6 million was declared and paid. The traditional U.S. insurance subsidiaries also paid extraordinary
dividends of $469.1 million in 2008 of which $28.2 million was declared in 2007. The amount available during 2008 from Unum Limited was
£202.1 million, of which £125.0 million was declared and paid.
Northwind Holdings’ and Tailwind Holdings’ ability to meet their debt payment obligations will be dependent upon the receipt of
dividends from Northwind Re and Tailwind Re, respectively. The ability of Northwind Re and Tailwind Re to pay dividends to their respective
parent companies will depend on their satisfaction of applicable regulatory requirements and on the performance of the reinsured
business. During 2008, Northwind Re received regulatory approval from the insurance department of its state of domicile to pay dividends
of $80.6 million to Northwind Holdings, and Tailwind Re received regulatory approval from the insurance department of its state of domicile
to pay dividends of $24.1 million to Tailwind Holdings.
The payment of dividends to the parent company from our subsidiaries also requires the approval of the individual subsidiary’s board
of directors.
The ability of Unum Group and certain of its intermediate holding company subsidiaries and/or nance subsidiaries to continue to
receive dividends from their insurance subsidiaries without regulatory approval generally depends on the level of earnings of those insurance
subsidiaries as calculated under law. In addition to regulatory restrictions, the amount of dividends that may be paid by insurance subsidiaries
will depend on additional factors, such as RBC ratios, funding growth objectives at an affiliate level, and maintaining appropriate capital
adequacy ratios to support desired ratings. Insurance regulatory restrictions do not limit the amount of dividends available for distribution
from non-insurance subsidiaries except where the non-insurance subsidiaries are held directly or indirectly by an insurance subsidiary and
only indirectly by Unum Group. Unum Group’s RBC ratio for its traditional U.S. insurance subsidiaries, calculated on a weighted average basis
using the NAIC Company Action Level formula, was approximately 332 percent at the end of 2008, with the individual RBC ratios for Unum
Group’s principal traditional U.S. insurance subsidiaries all in excess of our long-term target ratio of 300 percent. The individual RBC ratios for
Northwind Re and Tailwind Re, our special purpose financial captive insurance companies, are calculated using the NAIC Company Action
Level formula and have a target level of 200 percent. The RBC ratios for Northwind Re and Tailwind Re were each approximately equal to the
200 percent target level at the end of 2008. The individual RBC ratio for each of our insurance subsidiaries is above the range that would
require state regulatory action.
Debt
At December 31, 2008, we had long-term debt, including senior secured notes and junior subordinated debt securities, totaling
$2,259.4 million and short-term debt of $190.5 million. Short-term debt consisted of $132.2 million 5.859% senior notes due May 2009 and
$58.3 million of reverse repurchase agreements. The reverse repurchase agreements were entered into during the fourth quarter of 2008,
with a weighted average interest rate of 2.71 percent and a maturity date of January 20, 2009. Our leverage ratio, when calculated excluding