Unum 2010 Annual Report Download - page 75

Unum 2010 Annual Report
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Cash Available from Subsidiaries
Unum Group and certain of its intermediate holding company subsidiaries depend on payments from subsidiaries to pay dividends to
stockholders, to pay debt obligations, and/or to pay expenses. These payments by our insurance and non-insurance subsidiaries may take
the form of dividends, operating and investment management fees, and/or interest payments on loans from the parent to a subsidiary.
Restrictions under applicable state insurance laws limit the amount of 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 dividends to a parent company from its insurance subsidiaries is generally further limited
to the amount of unassigned statutory surplus.
Unum Group and/or certain of its intermediate holding company subsidiaries may also receive dividends from its United Kingdom-
based affiliate, Unum Limited, subject to applicable insurance company regulations and capital guidance in the United Kingdom.
Northwind Holdings’ and Tailwind Holdings’ ability to meet their debt payment obligations is 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 business reinsured by
Northwind Re and Tailwind Re.
The payment of dividends to the parent company from our subsidiaries also requires the approval of the individual subsidiary’s board
of directors.
The amount available during 2010 for the payment of ordinary dividends from Unum Group’s traditional U.S. insurance subsidiaries
was $719.7 million, of which $410.8 million was declared and paid. The amount available during 2010 from Unum Limited was
£198.5 million, of which £50.0 million was declared and paid. During 2010, Tailwind Re and Northwind Re paid dividends of $18.8 million
and $58.9 million to Tailwind Holdings and Northwind Holdings, respectively.
Although we may not utilize the entire amount of available dividends, based on the restrictions under current law, $622.3 million is
available during 2011 for the payment of ordinary dividends to Unum Group from its traditional U.S. insurance subsidiaries, which excludes
Northwind Re and Tailwind Re, our special purpose financial captive insurance companies. Approximately £207.5 million is available for the
payment of dividends from Unum Limited during 2011, subject to regulatory approval. However, it is unlikely that we will utilize the entire
amount available during 2011.
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 398 percent at the end of 2010, 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 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 2010. The individual RBC ratio for each of our insurance subsidiaries is above the range
that would require state regulatory action.
During 2008, Unum Group received $100.0 million from an insurance subsidiary for the repayment of a surplus debenture issued to
Unum Group in 1997 with a maturity date of October 2027.
The ability of Unum Group and certain of its intermediate holding company subsidiaries to continue to receive dividends from their
insurance subsidiaries generally depends on the level of earnings of those insurance subsidiaries and additional factors such as RBC ratios
and FSA capital adequacy requirements, 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. We intend to retain a level of capital in our traditional U.S. insurance subsidiaries such that we maintain a
weighted average risk-based capital above capital adequacy requirements. We also expect Unum Limited to operate above FSA capital
adequacy requirements and minimum solvency margins.