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UNUM 2013 ANNUAL REPORT / 163
Note 15. Statutory Financial Information
Statutory Net Income, Capital and Surplus, and Dividends
Statutory net income for U.S. insurance companies is reported in conformity with statutory accounting principles prescribed by the
National Association of Insurance Commissioners (NAIC) and adopted by applicable domiciliary state laws. The commissioners of the states
of domicile have the right to permit other specific practices that may deviate from prescribed practices. Our traditional U.S. life insurance
subsidiaries have no prescribed or permitted statutory accounting practices that differ materially from statutory accounting principles
prescribed by the NAIC.
Certain of our traditional U.S. life insurance subsidiaries cede blocks of business to Northwind Re, Tailwind Re, and UnumProvident
International Ltd. (UPIL), all of which are affiliated captive reinsurance subsidiaries (captive reinsurers) with Unum Group as the ultimate
parent. These captive reinsurers were established for the limited purpose of reinsuring risks attributable to specified policies issued or
reinsured by our life insurance subsidiaries. The captive reinsurers are all domiciled in the United States as of December 31, 2013. Our
captive reinsurers have no material state prescribed accounting practices, except for UPIL. During 2013, we re-domesticated UPIL, which
was previously domiciled in Bermuda, to the state of Vermont. Vermont reporting requirements for pure captive insurance companies
follow GAAP, unless the commissioner permits the use of some other basis of accounting. UPIL has permission from Vermont to follow
accounting practices that are generally consistent with current NAIC statutory accounting principles for its insurance reserves and invested
assets supporting reserves. All other assets and liabilities are accounted for in accordance with GAAP, as prescribed by Vermont, which
allows for the full recognition of deferred tax assets which are more likely than not to be realized. Statutory accounting principles have
a stricter limitation for the recognition of deferred tax assets. The impact of following the prescribed and permitted practices of Vermont
rather than statutory accounting principles prescribed by the NAIC resulted in higher capital and surplus for UPIL of approximately
$176 million as of December 31, 2013.
The operating results and capital and surplus of our traditional U.S. life insurance subsidiaries and our captive reinsurers, prepared in
accordance with prescribed or permitted accounting practices of the NAIC or states of domicile, are presented separately below. Results for
2012 and prior include those for UPIL as filed with insurance regulators in Bermuda.
Year Ended December 31
(in millions of dollars) 2013 2012 2011
Combined Net Income
Traditional U.S. Life Insurance Subsidiaries $584.5 $624.5 $642.9
Captive Reinsurers $ 13.3 $ 40.8 $ 64.6
Combined Net Gain from Operations
Traditional U.S. Life Insurance Subsidiaries $617.5 $649.8 $664.0
Captive Reinsurers $ 13.6 $ 37.4 $ 55.4
December 31
(in millions of dollars) 2013 2012
Combined Capital and Surplus
Traditional U.S. Life Insurance Subsidiaries $3,450.5 $3,426.5
Captive Reinsurers $1,679.4 $1,765.3