Unum 2009 Annual Report Download - page 132

130
Notes To Consolidated Financial Statements
Unum
2009
Plan Assets
The objective of our pension and OPEB plans is to maximize long-term return, within acceptable risk levels, in a manner that is consistent
with the fiduciary standards of the Employee Retirement Income Security Act (ERISA), while maintaining sufficient liquidity to pay current
benefits and expenses.
The investment portfolio for our U.S. pension plans contain a diversified blend of domestic and international large cap, mid cap, and
small cap equity securities, U.S. government and corporate fixed income securities, private equity funds of funds, and hedge funds of funds.
The domestic large cap, mid cap, and small cap equity securities are mainly comprised of equity index funds that are designed to track the
Standard & Poor’s (S&P) 500, S&P 400 Mid Cap Index, and Russell 2000 indices, respectively. International equity investments and emerging
market equity investments consist of equity index funds that track the Morgan Stanley Capital International (MSCI) Europe Australasia Far
East Index and the MSCI Emerging Markets Index, respectively. Corporate fixed income securities consist of investment-grade and below-
investment-grade corporate bonds. Alternative investments, which include private equity funds of funds and hedge funds of funds, utilize
proprietary strategies that tend to have a low correlation to the U.S. stock market. The target allocations for invested assets are 60 percent
equity securities, 30 percent fixed income securities, and 10 percent alternative investments. Prohibited investments include, but are not
limited to, unlisted securities, futures contracts, options, short sales, and investments in securities issued by the Company or its affiliates.
Assets for our U.K. pension plan are primarily invested in a pooled fund consisting of diversified growth assets. The remaining assets
in the U.K. plan are invested in a fixed-interest U.K. corporate bond fund and an index-linked U.K. government bond fund. The diversified
growth fund is designed to generate a return that matches the U.K. Retail Price Index plus five percent over a five to seven year period. This
fund is comprised primarily of domestic (U.K.) and international equity securities, emerging market fixed income securities, and a blend of
investment-grade and below-investment-grade fixed income securities. Investment in fixed-interest U.K. corporate bonds is achieved through
the ownership of a fund that primarily invests in corporate bonds with maturity dates greater than 10 years. Investment in U.K. index-linked
bonds is achieved through ownership of a fund that traces the Financial Times Stock Exchange 5 year Index-linked Index. The target allocation
for the assets is 60 percent equity securities and 40 percent fixed income securities. There are no categories of investments that are
specifically prohibited by the U.K. plan, but there are general guidelines that ensure prudent investment action is taken. Such guidelines
include the prevention of the plan from using derivatives for speculative purposes and limiting the concentration of risk in any one type
of investment.
Assets for life insurance benefits payable to certain former retirees covered under the OPEB plan are invested in life insurance contracts
issued by one of our insurance subsidiaries. The terms of these contracts are consistent in all material respects with those the subsidiary
offers to unaffiliated parties that are similarly situated. There are no categories of investments specifically prohibited by the OPEB plan.
We believe our investment portfolios are well diversified by asset class and sector, with no potential risk concentrations in any one category.