Unum 2009 Annual Report Download - page 79

77
Unum 2009 Annual Report
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 382 percent at the end of 2009, with the individual RBC ratios for Unum Group’s principal traditional U.S.
insurance subsidiaries all in excess 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 target levels of 200 percent. The RBC
ratios for Northwind Re and Tailwind Re each exceeded the 200 percent target level at the end of 2009. The individual RBC ratio for each of
our insurance subsidiaries is above the range that would require state regulatory action.
Debt
At December 31, 2009, we had long-term debt, including senior secured notes and junior subordinated debt securities, totaling
$2,549.6 million. We had no short-term debt at December 31, 2009. Our leverage ratio, when calculated excluding the non-recourse debt
and associated capital of Tailwind Holdings and Northwind Holdings, was 20.5 percent at December 31, 2009 compared to 21.5 percent at
December 31, 2008. Our leverage ratio, when calculated using consolidated debt to total consolidated capital, was 24.8 percent at December 31,
2009 compared to 26.6 percent at December 31, 2008.
We monitor our compliance with our debt covenants. There are no significant financial covenants associated with any of our outstanding
debt obligations. During 2009, Moody’s issued a ratings downgrade from A2 to Baa1 on the debt rating of the non-recourse debt issued by
Northwind Holdings, which will cause an increase in the fee paid to the third party guarantor on Northwind Holdings’ debt. The increase in
this fee is not material to our earnings on a consolidated basis or to earnings for the Individual Disability - Closed Block segment. Also during
2009, Moody’s confirmed the Baa1 debt rating of the non-recourse debt issued by Tailwind Holdings. Any further ratings downgrade from
either S&P or Moody’s with respect to non-recourse debt issued by Tailwind Holdings or Northwind Holdings could cause additional increases
in the fees paid to the third party guarantor on those debt issuances but would not cause a breach. We remain in compliance with all debt
covenants and have not observed any current trends that would cause a breach of any debt covenants.
Purchases and Retirement of Debt
In 2009, we purchased and retired the remaining $132.2 million of our 5.859% senior notes due May 2009, $1.2 million aggregate
principal of our 7.19% medium-term notes due 2028, and $0.6 million aggregate principal of our 6.75% notes due 2028. We also repaid
$58.3 million of reverse repurchase agreements outstanding at December 31, 2008.
In 2008, we retired the remaining $175.0 million of our 5.997% senior notes due May 2008. We also purchased and retired $36.6 million
of our 6.85% senior debentures due 2015 and $17.8 million of our 5.859% senior notes due May 2009.
In 2007, we purchased and retired $17.5 million of our outstanding 6.75% notes scheduled to mature in 2028. Pursuant to a cash 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. Also in 2007, in open market transactions, we purchased $34.5 million
of our outstanding 6.85% notes due 2015.
In 2009 and 2008, we made principal payments of $48.0 million and $59.3 million on Northwind Holdings’ floating rate, senior secured
non-recourse notes due 2037. During 2009, 2008, and 2007, we made principal payments of $10.0 million, $10.0 million, and $17.5 million,
respectively, on Tailwind Holdings’ floating rate, senior secured non-recourse notes due 2036.
In February 2007, the scheduled remarketing of the senior note element of the 2004 units occurred, as stipulated by the terms of the
original offering, and we reset the interest rate of $300.0 million of senior notes due in 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 units by
issuing 17.7 million shares of common stock. We received proceeds of approximately $300.0 million from the transaction.