Unum 2011 Annual Report Download - page 81

Unum 2011 Annual Report
Unum
2011
79
Miscellaneous liabilities include commissions due and accrued, deferred compensation liabilities, state premium taxes payable,
amounts due to reinsurance companies, accounts payable, obligations to return unrestricted cash collateral to our derivatives counterparties,
and various other liabilities that represent contractual obligations. Obligations where the timing of the payment was uncertain are included
in the one year or less category. See Note 4 of the “Notes to Consolidated Financial Statements” contained herein for additional information
on our derivatives.
At December 31, 2011, we had legally binding unfunded commitments of $160.6 million which are recognized as liabilities in our
consolidated balance sheets, to fund tax credit partnership investments with a corresponding recognition of other long-term investments.
These commitments are represented in the purchase obligation line on the preceding schedule and will be funded over the next several years.
Off-Balance Sheet Arrangements
As noted in the preceding commitments table, we have operating lease commitments totaling $215.0 million at December 31, 2011.
Operating leases include noncancelable obligations on certain office space, equipment, and software.
Purchase obligations include off-balance sheet non-binding commitments of $100.9 million to fund certain of our investments in
private placement securities, private equity partnerships, and other partnerships. These are shown in the preceding table based on the
expiration date of the commitments. The funds will be due upon satisfaction of contractual notice from the partnership trustee or issuer of
the private placement securities. The amounts may or may not be funded. Also included are noncancelable obligations with outside parties
for computer data processing services and related functions and software maintenance agreements. The aggregate obligation remaining
under these agreements was $26.7 million at December 31, 2011.
As part of our regular investing strategy, we receive collateral from unaffiliated third parties through transactions which include
both securities lending and also short-term agreements to purchase securities with the agreement to resell them at a later specified date.
For both types of transactions, we require that a minimum of 102 percent of the fair value of the securities loaned or securities purchased
under repurchase agreements be maintained as collateral. Generally, cash is received as collateral under these agreements. In the event
that securities are received as collateral, we are not permitted to sell or re-post them. We also post our fixed maturity securities as collateral
to unaffiliated third parties through transactions including both securities lending and also short-term agreements to sell securities with the
agreement to repurchase them at a later specified date. See “Transfers of Financial Assets” as follows for further discussion.
To help limit the credit exposure of the derivatives, we enter into master netting agreements with our counterparties whereby
contracts in a gain position can be offset against contracts in a loss position. We also typically enter into bilateral, cross-collateralization
agreements with our counterparties to help limit the credit exposure of the derivatives. These agreements require the counterparty in a
loss position to submit acceptable collateral with the other counterparty in the event the net loss position meets or exceeds an agreed
upon amount. Our current credit exposure on derivatives, which is limited to the value of those contracts in a net gain position less
collateral held, was $19.9 million at December 31, 2011. We post fixed maturity securities or cash as collateral to our counterparties. The
carrying value of fixed maturity securities posted as collateral to our counterparties was $114.9 million at December 31, 2011. We had no
cash posted as collateral to our counterparties at December 31, 2011.
Our derivatives counterparties have posted non-cash collateral in various segregated custody accounts to which we have a security
interest in the event of counterparty default. This collateral, which is not reflected in the preceding table, had a fair value of $40.1 million at
December 31, 2011.
Transfers of Financial Assets
To manage our cash position more efficiently, we enter into repurchase agreements with unaffiliated financial institutions. We
generally use repurchase agreements as a means to finance the purchase of invested assets or for short-term general business purposes
until projected cash flows become available from our operations or existing investments. Our repurchase agreements are typically
outstanding for less than 30 days. We post collateral through our repurchase agreement transactions whereby the counterparty commits
to purchase securities with the agreement to resell them to us at a later, specified date. The fair value of collateral posted is generally
102 percent of the cash received.