Unum 2013 Annual Report Download - page 74

72 / UNUM 2013 ANNUAL REPORT
Unum Group and/or certain of its intermediate holding company subsidiaries may also receive dividends from our U.K. subsidiaries,
the payment of which may be subject to applicable insurance company regulations and capital guidance in the U.K. Unum Limited will
be impacted by new capital requirements and risk management standards under Solvency II which is to be adopted January 1, 2016.
Solvency II requirements have not been fully finalized, but the current proposals contain amended requirements on capital adequacy
and risk management for insurers. Although the impact of Solvency II cannot be fully determined at this time, its implementation will
result in changes to the capital, supervisory, and disclosure requirements applicable to our U.K. subsidiaries.
The payment of dividends to the parent company from our subsidiaries also requires the approval of the individual subsidiary’s board
of directors.
The ability of Unum Group and certain of its intermediate holding company subsidiaries to continue to receive dividends from their
insurance subsidiaries also depends on additional factors such as RBC ratios and capital adequacy and/or solvency requirements, funding
growth objectives at an affiliate level, and maintaining appropriate capital adequacy ratios to support desired ratings. 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 405 percent at December 31, 2013, compared to 396 percent at December 31, 2012. The capital adequacy and/or
individual RBC ratios for each of our U.S. insurance subsidiaries, including our captive reinsurers, is above the range that would require state
regulatory action. During 2014, we intend to maintain a level of capital in our U.S. and U.K. insurance subsidiaries above the applicable
capital adequacy requirements and minimum solvency margins.
The amount available during 2013 for the payment of ordinary dividends from Unum Group’s traditional U.S. insurance subsidiaries,
which excludes our captive reinsurers, was $623.7 million, of which $550.4 million was declared and paid. The amount available during
2013 from Unum Limited was £144.7 million, of which £37.5 million was declared and paid to one of our U.K. holding companies. During
2013, Tailwind Re and Northwind Re paid dividends of $12.4 million and $43.3 million to Tailwind Holdings and Northwind Holdings,
respectively. UPIL paid no dividends during 2013.
Although we may not utilize the entire amount of available dividends, based on applicable restrictions under current law, approximately
$591 million is available, without prior approval by regulatory authorities, during 2014 for the payment of dividends from our traditional
U.S. insurance subsidiaries, which excludes our captive reinsurers. Approximately £188 million is available for the payment of dividends from
Unum Limited during 2014, subject to regulatory approval.
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.
Funding for Employee Retirement Benefits
In 2013, we adopted plan amendments which freeze participation and benefit accruals in our defined benefit pension plans in the U.S.
and U.K., effective December 31, 2013 for the U.S. plans and June 30, 2014 for the U.K. plan. Because the amendments eliminate all future
service accruals subsequent to the effective dates of the amendments, we were required to remeasure the benefit obligations of our pension
plans, which decreased our net pension liability approximately $330 million with a corresponding increase in other comprehensive income,
less applicable income tax of approximately $115 million as of the respective dates of remeasurement. Concurrent with our amendments to
our defined benefit pension plans, we adopted amendments to increase the benefits under our defined contribution plans commensurate
with the effective dates of the pension plan amendments.
We have met all minimum pension funding requirements set forth by ERISA. We made a voluntary contribution of $50.0 million to
our U.S. qualified defined benefit plan during 2013, but we do not expect to make any additional contributions during 2014. We contribute
to our U.K. pension plan sufficient to meet the minimum funding requirement under U.K. legislation. We made required contributions of
£2.5 million during 2013, and we expect to make contributions of approximately £1.4 million during 2014. We made contributions during
2013 of approximately $18.8 million and £1.9 million to our U.S. and U.K. defined contribution plans, respectively, and expect to make
contributions of approximately $71.5 million and £2.5 million during 2014.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations