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Unum 2011 Annual Report
Unum
2011
151
Notes To Consolidated Financial Statements
Cash-Settled Awards
Activity for cash-settled awards classified as a liability is as follows:
Shares (000s) Weighted Average Grant Date Fair Value
Outstanding at December 31, 2010 102 $20.79
Granted 85 26.22
Vested (34) 20.79
Outstanding at December 31, 2011 153 23.80
Cash-settled awards vest over a one to three year service period, beginning at the date of grant, and the compensation cost is recognized
ratably during the vesting period. Forfeitable dividend equivalents on cash-settled awards are accrued in the form of additional units.
Compensation cost for cash-settled awards subject to accelerated vesting upon retirement is recognized over the implicit service period.
The amount payable per unit awarded is equal to the price per share of Unum Group’s common stock at settlement of the award,
and as such, we measure the value of the award each reporting period based on the current stock price. The effects of changes in the stock
price during the service period are recognized as compensation cost over the service period. Changes in the amount of the liability due to
stock price changes after the service period are compensation cost of the period in which the changes occur.
The weighted average grant date fair value per unit for cash-settled awards granted during 2011 and 2010 was $26.22 and $20.79,
respectively. The total fair value of cash-settled awards vested and paid during 2011 was $0.7 million and $0.9 million, respectively.
No cash-settled awards were granted prior to 2010, and none vested prior to 2011. There is no unrecognized compensation cost related to
the cash-settled awards, other than future changes in the liability due to future stock price changes, as the units do not require additional
future service.
Performance Restricted Stock Units (PRSUs)
In 2007, we issued approximately 1.25 million PRSUs with a grant date fair value of $15.99. Vesting for this grant was contingent
upon meeting various company threshold performance and stock price conditions by December 31, 2011. Forfeitable dividend equivalents
on PRSUs were accrued in the form of additional restricted stock units.
We estimated the fair value on the date of initial grant using the Monte-Carlo model. The following assumptions were used to value
the grant:
• Expected volatility of 29 percent, based on our historical daily stock prices.
• Expected life of 4.4 years, which equaled the maximum term.
• Expected dividend yield of 1.24 percent, based on the dividend rate at the date of grant.
• Risk free interest rate of 3.97 percent, based on the yield of treasury bonds at the date of grant.
We used the accelerated method of amortization for the recognition of compensation expense, which treated each of the three
vesting tranches as a separate award over the expected life of the unit. Even though the performance conditions were attained, the stock
price condition was not met at December 31, 2011. As a result, no PRSUs vested under this program.