Unum 2013 Annual Report Download - page 79

UNUM 2013 ANNUAL REPORT / 77
Consolidated Cash Flows
Operating Cash Flows
Net cash provided by operating activities was $1,031.5 million for 2013, compared to $1,379.6 million and $1,193.7 million for 2012 and
2011, respectively. Operating cash flows are primarily attributable to the receipt of premium and investment income, offset by payments of
claims, commissions, expenses, and income taxes. Premium income growth is dependent not only on new sales, but on renewals and
growth of existing business, renewal price increases, and persistency. Investment income growth is dependent on the growth in the
underlying assets supporting our insurance reserves and capital and on the earned yield. The level of commissions and operating expenses
is attributable to the level of sales and the first year acquisition expenses associated with new business as well as the maintenance of
existing business. The level of paid claims is affected partially by the growth and aging of the block of business and also by the general
economy, as previously discussed in the operating results by segment. Operating cash flows also included contributions of $70.4 million,
$74.3 million, and $20.3 million to our defined benefit pension plans and other postretirement benefit plans for 2013, 2012, and 2011,
respectively.
The variance in the change in insurance reserves and liabilities and change in income tax adjustments to reconcile net income to net
cash provided by operating activities for 2011 compared to 2013 and 2012 was due primarily to the 2011 charges for our long-term care
and individual disability closed blocks of business.
Investing Cash Flows
Investing cash inflows consist primarily of the proceeds from the sales and maturities of investments. Investing cash outflows
consist primarily of payments for purchases of investments. Net cash used by investing activities was $39.9 million for 2013, compared to
$1,113.4 million and $410.3 million for 2012 and 2011, respectively. Our investment strategy is to match the cash flows and durations of
our assets with the cash flows and durations of our liabilities to meet the funding requirements of our business. Currently, when our fixed
maturity securities mature, the proceeds may be reinvested at a yield below that assumed in the pricing of our insurance products. When
market opportunities arise, as occurred during the third quarter of 2013, we may sell selected securities and reinvest the proceeds to
improve the yield and credit quality of our portfolio. We may at times also sell selected securities and reinvest the proceeds to improve the
duration matching of our assets and liabilities and/or re-balance our portfolio. As a result, sales before maturity may vary from period to
period. The sale and purchase of short-term investments is influenced by our securities lending program and by the amount of cash which
is at times held in short-term investments to facilitate the availability of cash to fund the purchase of appropriate long-term investments
and/or to fund our capital deployment program.
See Notes 3 and 4 of the “Notes to Consolidated Financial Statements” contained herein for further information on our investing
cash flows.
Financing Cash Flows
Financing cash flows consist primarily of borrowings and repayments of debt, issuance or repurchase of common stock, and dividends
paid to stockholders. Net cash used by financing activities was $974.8 million in 2013, compared to $305.5 million and $720.4 million in 2012
and 2011, respectively.
The balance outstanding under our securities lending program decreased by $379.3 million in 2013 and increased by $143.5 million
and $312.3 million in 2012 and 2011, respectively.
During 2013, we purchased and retired the outstanding principal of $62.5 million on our floating rate, senior secured non-recourse
notes issued by Tailwind Holdings for $56.2 million and made principal payments of $60.0 million on our senior secured non-recourse notes
issued by Northwind Holdings. Aggregate principal payments on the Tailwind Holdings and Northwind Holdings notes were $70.0 million
and $84.4 million during 2012 and 2011, respectively. During 2012, we issued $250.0 million of 5.75% senior notes and received proceeds
of $246.4 million, excluding the associated debt issuance costs and discounts. During 2011, we made short-term debt repayments of
$225.1 million at the maturity date of our senior notes due March 2011.