Unum 2014 Annual Report Download

Download and view the complete annual report

Please find the complete 2014 Unum annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 172

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172

OWTH Vision VALUES Profitability DISCIPLINE Focus CONSISTENCY Customers OPPORTUNITY Community LEADERSHIP Growth VISION Values PRO
nsistency CUSTOMERS Opportunity COMMUNITY Leadership GROWTH Vision VALUES Profitability DISCIPLINE Focus CONSISTENCY Customers OPP
DERSHIP Growth VISION Values PROFITABILITY Discipline FOCUS Consistency CUSTOMERS Opportunity COMMUNITY Leadership GROWTH Vision
ocus CONSISTENCY Customers OPPORTUNITY Community LEADERSHIP Growth VISION PROFITABILITY Discipline FOCUS Consistency CUSTOMERS O
dership GROWTH Vision VALUES Profitability DISCIPLINE Focus CONSISTENCY Customers OPPORTUNITY Community LEADERSHIP Growth VISION V
OCUS Consistency CUSTOMERS Opportunity COMMUNITY Leadership GROWTH Vision VALUES Profitability DISCIPLINE Focus CONSISTENCY Custome
DERSHIP Growth VISION Values PROFITABILITY Discipline FOCUS Consistency CUSTOMERS Opportunity COMMUNITY Leadership GROWTH Vision
ocus CONSISTENCY Customers OPPORTUNITY Community LEADERSHIP Growth VISION Values PROFITABILITY Discipline FOCUS Consistency CUSTOM
dership GROWTH Vision VALUES Profitability DISCIPLINE Focus CONSISTENCY Customers OPPORTUNITY Community LEADERSHIP Growth VISION V
OCUS Consistency CUSTOMERS Opportunity COMMUNITY Leadership GROWTH Vision VALUES Profitability DISCIPLINE Focus CONSISTENCY Custome
DERSHIP GROWTH Vision VALUES Profitability DISCIPLINE Focus CONSISTENCY Customers OPPORTUNITY Community LEADERSHIP Growth VISION
OCUS Consistency CUSTOMERS Opportunity COMMUNITY Leadership GROWTH Vision VALUES Profitability DISCIPLINE Focus CONSISTENCY Custome
DERSHIP Growth VISION Values PROFITABILITY Discipline FOCUS Consistency CUSTOMERS Opportunity COMMUNITY Leadership GROWTH Vision
ocus CONSISTENCY Customers OPPORTUNITY Community LEADERSHIP Growth VISION PROFITABILITY Discipline FOCUS Consistency CUSTOMERS O
adership GROWTH Vision VALUES Profitability DISCIPLINE Focus CONSISTENCY Customers OPPORTUNITY Community LEADERSHIP Growth VISION V
OCUS Consistency CUSTOMERS Opportunity COMMUNITY Leadership GROWTH Vision VALUES Profitability DISCIPLINE Focus CONSISTENCY Custome
LUES Profitability DISCIPLINE Focus CONSISTENCY Customers OPPORTUNITY Community LEADERSHIP Growth VISION Values PROFITABILITY Discip
STOMERS Opportunity COMMUNITY Leadership GROWTH Vision VALUES Profitability DISCIPLINE Focus CONSISTENCY Customers OPPORTUNITY Co
ION Values PROFITABILITY Discipline FOCUS Consistency CUSTOMERS Opportunity COMMUNITY Leadership GROWTH Vision VALUES Profitability
stomers OPPORTUNITY Community LEADERSHIP Growth VISION PROFITABILITY Discipline FOCUS Consistency CUSTOMERS Opportunity COMMUN
LUES Profitability DISCIPLINE Focus CONSISTENCY Customers OPPORTUNITY Community LEADERSHIP Growth VISION Values PROFITABILITY Discip
STOMERS Opportunity COMMUNITY Leadership GROWTH Vision VALUES Profitability DISCIPLINE Focus CONSISTENCY Customers OPPORTUNITY Co
ION Values PROFITABILITY Discipline FOCUS Consistency CUSTOMERS Opportunity COMMUNITY Leadership GROWTH Vision VALUES Profitability
stomers OPPORTUNITY Community LEADERSHIP Growth VISION Values PROFITABILITY Discipline FOCUS Consistency CUSTOMERS Opportunity CO
ion VALUES Profitability DISCIPLINE Focus CONSISTENCY Customers OPPORTUNITY Community LEADERSHIP Growth VISION Values PROFITABILITY
STOMERS Opportunity COMMUNITY Leadership GROWTH Vision VALUES Profitability DISCIPLINE Focus CONSISTENCY Customers OPPORTUNITY Co
mmunity LEADERSHIP Growth VISION Values PROFITABILITY Discipline FOCUS Consistency CUSTOMERS Opportunity COMMUNITY Leadership GR
fitability DISCIPLINE Focus CONSISTENCY Customers OPPORTUNITY Community LEADERSHIP Growth VISION Values PROFITABILITY Discipline FOCU
portunity COMMUNITY Leadership GROWTH Vision VALUES Profitability DISCIPLINE Focus CONSISTENCY Customers OPPORTUNITY Community LE
alues PROFITABILITY Discipline FOCUS Consistency CUSTOMERS Opportunity COMMUNITY Leadership GROWTH Vision VALUES Profitability DISCIPL
stomers OPPORTUNITY Community LEADERSHIP Growth VISION Values PROFITABILITY Discipline FOCUS Consistency CUSTOMERS Opportunity CO
ion VALUES Profitability DISCIPLINE Focus CONSISTENCY Customers OPPORTUNITY Community LEADERSHIP Growth VISION Values PROFITABILITY
STOMERS Opportunity COMMUNITY Leadership GROWTH Vision VALUES Profitability DISCIPLINE Focus CONSISTENCY Customers OPPORTUNITY Co
ION Values PROFITABILITY Discipline FOCUS Consistency CUSTOMERS Opportunity COMMUNITY Leadership GROWTH Vision VALUES Profitability
Positioned for
GROWTH
2014 ANNUAL REPORT

Table of contents

  • Page 1
    ... Opportunity COMMUNITY Leadership GROWTH Vision VALUES Profitability DISCIPLINE Focus CONSISTENCY Customers OPPORTUNITY Co N Values PROFITABILITY Discipline FOCUS Consistency CUSTOMERS Opportunity COMMUNITY Leadership GROWTH Vision VALUES Profitability Positioned for GROWTH 2014 ANNUAL REPORT

  • Page 2
    ... of Debt, Net of Tax Reserve Charges for Closed Block, Net of Tax Unclaimed Death Benefits Reserve Increase, Net of Tax Group Life Waiver of Premium Benefit Reserve Reduction, Net of Tax Deferred Acquisition Costs for Closed Block, Net of Tax Special Tax Items Net Income Book Value Per Share...

  • Page 3
    ... continue to do so in the future. The most important of these is remaining disciplined in all that we do - in our business focus, in our commitment to superior customer service, in our prudent financial and risk management, in our precise execution of our business plans (delivering on what we say...

  • Page 4
    ...tability across most of our businesses, excellent customer retention and solid investment performance - despite the challenging interest rate environment. Additionally, the growth trends that emerged in 2013 accelerated in 2014, as we saw very positive sales and premium increases in all of our core...

  • Page 5
    ... group long-term disability and long-term care lines of business. During the year we strengthened our long-term care reserves by nearly $700 million to better reï¬,ect a continuation of this low interest rate environment. I'm confident that we are doing all the right things to manage this business...

  • Page 6
    ... management continuity and an orderly leadership transition will enable the company to continue to generate outstanding results well into the future. On behalf of all of us at Unum, thank you for your continued support. Thomas R. Watjen Chief Executive Officer 4 UNUM • 2014 ANNUAL REPORT

  • Page 7
    ... U.K. and Ireland who approach each work day with a passion for helping others. Few companies have as rich a culture and history as Unum. We're a pioneer in offering financial protection benefits through the workplace - and we feel we have an important leadership role to continue that tradition of...

  • Page 8
    ...they are unable to work. With governments in both countries short on resources and solutions to close financial gaps, the responsibility for building a personal financial safety net lands squarely on individuals. And for the vast majority of us, the workplace is the best place to be educated about...

  • Page 9
    UNUM • 2014 ANNUAL REPORT 7

  • Page 10
    The pressing need for financial protection, changing marketplace, and increasing role employees play in selecting and paying for products. 8 UNUM • 2014 ANNUAL REPORT

  • Page 11
    ... than the market average, and low exposure to problem areas. "Although we constantly refine our plans to meet changing business needs and financial market realities, what doesn't change is our long-term perspective." Breege Farrell Executive Vice President and Chief Investment Officer Although...

  • Page 12
    ..., businesses, and even oceans. We work hard to help employees see the connection between their individual performance and the company's overall success. The achievements of our people are rewarded in ways large and small, from daily recognition through our Spotlight online forum to an annual Disney...

  • Page 13
    UNUM • 2014 ANNUAL REPORT 11

  • Page 14
    ... and Chief Executive Officer, Unum UK; and Tim Arnold, President and Chief Executive Officer, Colonial Life; about executing Unum's growth agenda. What are the growth opportunities for our business in today's environment? Peter: The greatest opportunity is extending the financial safety net to...

  • Page 15
    ...behind our service is modern, simple to use and personalized. We're adding new capabilities for submitting claims online and helping customers get the information they need when and how it works best for them. And our Enrollment and Consumerism teams work across our businesses to find the best ways...

  • Page 16
    ... selling certain product lines, such as long-term care and older individual disability policies, and separate them from our ongoing business operations for financial reporting purposes. Although the premium associated with the Closed Block is small, more than 30 percent of Unum's capital is...

  • Page 17
    ...long-term care line and continued to develop tools and analytic capabilities to better understand how this business will play out over time. We have also implemented rate increases on this block. The long-term care business is "guaranteed renewable," which means we reserved the right to change rates...

  • Page 18
    ... Human Resources Timothy G. Arnold President and Chief Executive Officer, Colonial Life Peter O'Donnell President and Chief Executive Officer, Unum UK Stephen J. Mitchell Senior Vice President, President, Closed Block Operations Breege A. Farrell Executive Vice President and Chief Investment...

  • Page 19
    2014 Financial Review - Unum Group 18 Selected Financial Data 20 Management's Discussion and Analysis of Financial Condition and ...Statements 164 Reports of Independent Registered Public Accounting Firm and Management's Annual Report on Internal Control Over Financial Reporting 167 Cautionary ...

  • Page 20
    ... Investment Income Net Realized Investment Gain (Loss) Other Income Total Benefits and Expenses Benefits and Change in Reserves for Future Benefits (1) Commissions Interest and Debt Expense Other Expenses (2) Total Income Before Income Tax Income Tax Net Income Balance Sheet Data Assets Long-term...

  • Page 21
    ... the net change in deferred acquisition costs as well as compensation expense and other expenses. Included in these expenses is $64.4 million in 2014 related to a settlement loss for a pension plan amendment and $196.0 million in 2011 related to the impairment of long-term care closed block deferred...

  • Page 22
    ... Block segment reported a loss in 2014 as a result of the reserve increase for long-term care. Excluding the reserve increase, operating income increased 12.1 percent in 2014 relative to 2013, with an increase in net investment income and favorable risk results in our long-term care line of business...

  • Page 23
    ... and marketable securities held at Unum Group and our other intermediate holding companies, which are a significant source of liquidity for us, were approximately $575 million at December 31, 2014. 2014 Long-term Care Reserve Increase Policy reserves for our long-term care block of business are...

  • Page 24
    ... the best interests of our customers. 2013 Group Life Waiver of Premium Benefit Reserve Reduction Within our Unum US segment, we offer group life insurance coverage which consists primarily of renewable term life insurance and includes a provision for waiver of premium, if disabled. The group life...

  • Page 25
    ... our Unum US group life waiver reserves and, as a result, reduced the applicable claim reserves by $85.0 million and increased 2013 net income $55.2 million. Consolidated Company Outlook for 2015 We believe our disciplined approach to providing financial protection products at the workplace puts...

  • Page 26
    ...Net Realized Investment Gain Total Revenue Before-tax Operating Income Net Realized Investment Gain Non-operating Retirement-related Loss Costs Related to Early Retirement of Debt Long-term Care Reserve Increase Unclaimed Death Benefits Reserve Increase Group Life Waiver of Premium Benefit Reserve...

  • Page 27
    ... and voluntary benefits products in our Unum US segment; individual disability products in our Unum UK segment; disability and cancer and critical illness policies in our Colonial Life segment; and individual disability, long-term care, and other products in our Closed Block segment. The reserves...

  • Page 28
    ... claims and claim expenses we will pay and the expected future premiums we will receive, with a provision for profit allowed. Policy reserves for our Closed Block segment include certain older policy forms for individual disability, individual and group long-term care, and certain other products...

  • Page 29
    ...Unum US group and individual long-term disability claims and for our Closed Block group and individual long-term care claims that have been reported. Under the tabular reserve methodology, reserves for reported claims are based on certain characteristics of the actual reported claimants, such as age...

  • Page 30
    ....7 $7,253.6 Policy Reserves % Total Total Reinsurance Ceded Total Net Group Disability Group Life and Accidental Death & Dismemberment Individual Disability Voluntary Benefits Unum US Segment Unum UK Segment Colonial Life Segment Individual Disability Long-term Care Other Closed Block Segment...

  • Page 31
    ...changes to social security and other government-based welfare benefits programs which provide policy benefit offsets, among other factors, will inï¬,uence claim incidence rates, claim resolution rates, and claim costs. In addition, for policies offering coverage for disability or long-term care at...

  • Page 32
    ... rates in 2012. We expect that claim incidence trends for Unum US group long-term disability may continue to somewhat follow general economic conditions and demographics of the general U.S. workforce. During 2014, our claim incidence rates for our Closed Block long-term care line of business...

  • Page 33
    ... 31, 2014 claim reserve balance Unum US group long-term disability Closed Block individual disability 3.6% 2.5% $250 $245 In addition, we consider variability in our reserve assumptions related to long-term care policy reserves. These reserves are held under the gross premium valuation method...

  • Page 34
    ... 31 2014 2012 (in millions of dollars) Unum US Group Disability Group Life and Accidental Death & Dismemberment Supplemental and Voluntary: Individual Disability Voluntary Benefits Unum UK Group Long-term Disability Group Life Supplemental Colonial Life Accident, Sickness, and Disability Life...

  • Page 35
    ... adjustments ranging from 1.01 percent to 2.10 percent at December 31, 2013. The changes were based on observable market spreads. Newly issued private placement securities have historically offered yield premiums higher than a similar interest rate spread on comparable newly issued public securities...

  • Page 36
    ... • Current and future business prospects and trends of earnings • The valuation of the security's underlying collateral • Relevant industry conditions and trends relative to their historical cycles • Market conditions • Rating agency and governmental actions • Bid and offering prices and...

  • Page 37
    ...the long-term rate of return on plan assets, and mortality rates. We also use, as applicable, expected increases in compensation levels and a weighted average annual rate of increase in the per capita cost of covered benefits, which reï¬,ects a health care cost trend rate, and the U.K. pension plan...

  • Page 38
    ... and benefit payments. A lower long-term rate of return on plan assets increases our net periodic benefit cost. Investment risk is measured and monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies, and quarterly investment portfolio reviews. Risk...

  • Page 39
    ... U.S. plan assets during 2014, in excess of our assumed rate of return for 2014, will have a favorable impact on our net periodic pension costs for 2015. This favorable impact on costs is offset by a decrease in the discount rate for all of our plans and a decrease in the expected long-term rate of...

  • Page 40
    ...ts, which are comprised of retiree life, medical, and dental benefits. It is our practice to use general assets to pay medical and dental claims as they come due in lieu of utilizing plan assets for the medical and dental benefit portions of our OPEB plan. See Executive Summary and Note 9 of the...

  • Page 41
    ..." contained herein. Accounting Developments For information on new accounting standards and the ...2014 % Change 2013 % Change 2012 Revenue Premium Income Net Investment Income Net Realized Investment Gain Other Income Total Revenue Benefits and Expenses Benefits and Change in Reserves for Future...

  • Page 42
    ...Closed Block segment. Net investment income declined in 2014 relative to 2013 due primarily to a decrease in yield on invested assets and lower miscellaneous income, which includes income from bond call premiums, mortgage fees and payoffs, and partnership investments, partially offset by an increase...

  • Page 43
    ... in 2014, and the settlement loss related to our 2014 pension plan amendment. Partially offsetting these expense increases is a lower level of net actuarial loss amortization in 2014 compared to 2013 due to pension plan amendments adopted during 2013. Other expenses, including compensation expense...

  • Page 44
    ..., Closed Block, and Corporate. Financial information for each of our reporting segments is as follows. Unum US Segment The Unum US segment includes group long-term and short-term disability insurance, group life and accidental death and dismemberment products, and supplemental and voluntary lines...

  • Page 45
    ... the Unum US segment. In the sections following, financial results and key ratios are also presented for the major lines of business within the segment. Year Ended December 31 (in millions of dollars, except ratios) 2014 % Change 2013 % Change 2012 Operating Revenue Premium Income Net Investment...

  • Page 46
    ... results and key performance indicators for Unum US group disability. Year Ended December 31 (in millions of dollars, except ratios) 2014 % Change 2013 % Change 2012 Operating Revenue Premium Income Group Long-term Disability Group Short-term Disability Total Premium Income Net Investment Income...

  • Page 47
    ... level of sales. Year Ended December 31, 2013 Compared with Year Ended December 31, 2012 Premium income increased slightly in 2013 compared to 2012 primarily due to growth from rate increases, partially offset by a decline in persistency in the group long-term disability product line. We believe...

  • Page 48
    ...Reserves for Future Benefits Commissions Deferral of Acquisition Costs Amortization of Deferred Acquisition Costs Other Expenses Total Income Before Income Tax and Net Realized Investment Gains and Losses Unclaimed Death Benefits (UDB) Reserve Increase Group Life Waiver of Premium Benefit (Waiver...

  • Page 49
    ... block of business which resulted from sales and premium rate increases, partially offset by a decline in persistency. Net investment income was lower in 2013 compared to 2012 primarily due to a decrease in the yield on invested assets, partially offset by an increase in the level of invested assets...

  • Page 50
    ... and key performance indicators for Unum US supplemental and voluntary product lines. Year Ended December 31 (in millions of dollars, except ratios) 2014 % Change 2013 % Change 2012 Operating Revenue Premium Income Individual Disability Voluntary Benefits Total Premium Income Net Investment Income...

  • Page 51
    ... Premium income was generally consistent in 2013 compared to 2012, with growth in voluntary benefits offset by a decrease in the individual disability product line due to a reinsurance contract entered into during the second quarter of 2013 to cede a small block of individual disability business...

  • Page 52
    ... customer accounts. The sales mix in the group market sector for 2014 was approximately 66 percent core market and 34 percent large case market, generally consistent with the level of 2013. Sales in our individual disability line of business, which are primarily concentrated in the multi-life...

  • Page 53
    ... risk environment for our group disability product line in 2015, with the impact of the lower claim reserve discount rate offset by premium rate increases we place in the market, resulting in a benefit ratio for full year 2015 that is generally consistent with the level of 2014. Our amortization of...

  • Page 54
    ...of Operations Unum UK Segment The Unum UK segment includes insurance for group long-term disability, group life, and supplemental lines of business which include individual disability and critical illness. Unum UK's products are sold primarily in the United Kingdom through field sales personnel and...

  • Page 55
    ...pounds, except ratios) 2014 % Change 2013 % Change 2012 Operating Revenue Premium Income Group Long-term Disability Group Life Supplemental Total Premium Income Net Investment Income Other Income Total Benefits and Expenses Benefits and Change in Reserves for Future Benefits Commissions Deferral...

  • Page 56
    ... to 2013 due to premium rate increases in our group long-term disability and group life product lines, favorable persistency, and an increased retention level in our reinsurance program, as of January 1, 2014, for our group life products that provide lump sum benefits. Partially offsetting these...

  • Page 57
    ... customers partially offset by lower sales to existing customers. In the group long-term disability core market, or employee groups with fewer than 500 lives, sales declined in 2014 relative to the prior year. Group life sales within the core market segment were higher in 2014 compared to 2013 for...

  • Page 58
    ...31, 2012 Sales in group long-term disability in 2013 were consistent with 2012, with higher new account sales and an increase in core market sales offset by a decrease in sales to existing customers and a decline in sales in the large case market. Group life sales were lower in 2013 compared to 2012...

  • Page 59
    ...except ratios) 2014 % Change 2013 % Change 2012 Operating Revenue Premium Income Accident, Sickness, and Disability Life Cancer and Critical Illness Total Premium Income Net Investment Income Other Income Total Benefits and Expenses Benefits and Change in Reserves for Future Benefits Commissions...

  • Page 60
    ... invested assets and lower miscellaneous income. Favorable risk results in 2014 compared to 2013 primarily reï¬,ect improved claim experience in the cancer and critical illness product line. This was partially offset by less favorable experience in the accident, sickness, and disability product line...

  • Page 61
    ... update features contractually allowable on existing policies. We discontinued offering individual long-term care in 2009 and group long-term care in 2012. Other insurance products include group pension, individual life and corporate-owned life insurance, reinsurance pools and management operations...

  • Page 62
    ... results and key performance indicators for the Closed Block segment. Year Ended December 31 (in millions of dollars, except ratios) 2014 % Change 2013 % Change 2012 Operating Revenue Premium Income Individual Disability Long-term Care All Other Total Premium Income Net Investment Income Other...

  • Page 63
    ... tools, and capital management. We expect operating revenue to decline over time as these closed blocks of business wind down, although we anticipate additional premium income associated with long-term care rate increases. We also expect a small amount of group long-term care certificates may...

  • Page 64
    ...claims experience related to mortality and morbidity, investment returns, premium rate increases, and persistency. We believe that the interest adjusted loss ratios for the individual disability and long-term care lines of business will be relatively ï¬,at over the long term, but these product lines...

  • Page 65
    ... Compared with Year Ended December 31, 2012 Net investment income was lower in 2013 compared to 2012 due to a decrease in the yield on invested assets, a decrease in reported investment income attributable to tax credit partnerships, and lower short-term interest rates. Other income was higher in...

  • Page 66
    ...percent in tax credit partnerships, 35 percent in private placements, and 10 percent in commercial mortgage loans. The remaining assets can be held in publicly traded investment-grade corporate securities, mortgage/asset backed securities, bank loans, government and government agency securities, and...

  • Page 67
    ... in our portfolios, using different oil and gas price scenarios, and we continue to closely monitor this situation. Currently, we expect downward ratings pressure on some of our securities, but we do not expect material losses in our energy sector investments. UNUM • 2014 ANNUAL REPORT 65

  • Page 68
    ... Treasury rates which occurred during the period. The increase in the unrealized loss on below-investment-grade fixed maturity securities during 2014 was due primarily to an increase in credit spreads in certain industries or sectors. We held no fixed maturity securities at December 31, 2014 with...

  • Page 69
    ... on the sale of securities issued by a large U.S. department store chain. In 2011, the company's management was replaced by a new team of executives that embarked on a radically different retailing strategy. While the company had ample liquidity and sizable value in real estate assets, initial...

  • Page 70
    .... Other Our exposure to non-current investments, defined as foreclosed real estate and invested assets which are delinquent as to interest and/or principal payments, totaled $40.4 million and $39.9 million on a fair value basis at December 31, 2014 and 2013, respectively. See Notes 3 and 4 of the...

  • Page 71
    ..., principally in our insurance subsidiaries. Premium and investment income, as well as maturities and sales of invested assets, provide the primary sources of cash. Debt and/or securities offerings provide additional sources of liquidity. Cash is applied to the payment of policy benefits, costs...

  • Page 72
    ..., is above the range that would require state regulatory action. 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...

  • Page 73
    ... of $10.0 million. Northwind Holdings made principal payments on its ï¬,oating rate, senior secured notes of $41.6 million in 2014 and $60.0 million in both 2013 and 2012. Issuance of Debt In 2014, we issued $350.0 million of unsecured 10-year senior notes in a public offering. These notes, due...

  • Page 74
    ... subject to certain terms and limitations. At December 31, 2014, letters of credit totaling $2.1 million had been issued from the credit facility, but there was no borrowed amount outstanding. Our credit facility's financial covenants contain provisions regarding our leverage and net worth. We do...

  • Page 75
    ... liabilities include commissions due and accrued, deferred compensation liabilities, state premium taxes payable, amounts due to reinsurance companies, obligations to return unrestricted cash collateral to our securities lending and derivatives counterparties, legally binding commitments...

  • Page 76
    ... and Results of Operations Transfers of Financial Assets Our investment policy permits us to lend fixed maturity securities to unaffiliated financial institutions in short-term securities lending agreements, which increase our investment income with minimal risk. We account for all of our...

  • Page 77
    ... change in insurance reserves and liabilities to reconcile net income to net cash provided by operating activities as reported in our consolidated statements of cash ï¬,ows for 2014 compared to the prior two years was due primarily to the 2014 reserve increase for our long-term care line of business...

  • Page 78
    ...for Unum Group and the financial strength ratings for each of our traditional insurance subsidiaries as of the date of this filing. AM Best Fitch Moody's S&P Outlook Issuer Credit Ratings Financial Strength Ratings Provident Life and Accident Provident Life and Casualty Unum Life of America First...

  • Page 79
    ... rating for Unum Group following our 2015 Outlook Meeting held that day during which we discussed our expected long-term care reserve charge. On December 19, 2014, AM Best also affirmed its A rating of our primary domestic insurance subsidiaries and affirmed the senior debt rating of Unum Group...

  • Page 80
    ... match to limit interest rate risk. Due to the long duration of our long-term care product, the timing and/or amount of our investment cash ï¬,ows may not match those of our maturing liabilities. We model and test asset and liability portfolios to improve interest rate risk management and net yields...

  • Page 81
    ... FV + 100 BP Change in FV Assets Fixed Maturity Securities (1) Mortgage Loans Policy Loans, Net of Reinsurance Ceded Liabilities Unrealized Adjustment to Reserves, Net of Reinsurance Ceded and Deferred Acquisition Costs (2) Short-term Debt Long-term Debt Derivatives (1) Swaps Embedded Derivative in...

  • Page 82
    ... the actual average exchange rates for 2014 and 2013, before-tax operating income, as reported in U.S. dollars, would have decreased approximately $15 million in each of those two years. Dividends paid by Unum Limited are generally held at our U.K. finance subsidiary or our U.K. holding company. If...

  • Page 83
    ... other management committees serve risk and control functions responsible for providing risk oversight, or the second line of risk control. The internal audit team provides a second level of independent review, or our third line of risk control. The risk and finance committee of Unum Group's board...

  • Page 84
    ... our corporate strategy. In contrast to many multi-line peer companies, we do not offer retirement savings, traditional medical benefits, or property and casualty insurance. Our corporate strategy is focused on providing group, individual, and voluntary benefits, either as stand-alone products or...

  • Page 85
    ..., risk limit determination, reinsurance purchases, hedging activities, asset allocation, pricing, and corporate development. Risk Management Activities We accept and manage strategic, credit, and insurance risks in accordance with our corporate strategy, investment policy, and annual business plans...

  • Page 86
    ...of dollars) 2014 2013 Assets Investments Fixed Maturity Securities - at fair value (amortized cost: $38,803.4; $38,289.6) Mortgage Loans Policy Loans Other Long-term Investments Short-term Investments Total Investments Other Assets Cash and Bank Deposits Accounts and Premiums Receivable Reinsurance...

  • Page 87
    ...2014 2013 Liabilities and Stockholders' Equity Liabilities Policy and Contract Benefits Reserves for Future Policy and Contract Benefits Unearned Premiums Other Policyholders' Funds Deferred Income Tax Short-term Debt Long-term... Retained Earnings Treasury Stock ...UNUM • 2014 ANNUAL REPORT 85

  • Page 88
    ...dollars, except share data) 2014 2013 2012 Revenue Premium Income Net Investment Income Realized Investment Gain (Loss) Other-Than-Temporary Impairment Loss on Fixed Maturity Securities Other Net Realized Investment Gain Net Realized Investment Gain Other Income Total Revenue Benefits and Expenses...

  • Page 89
    ...2014 2013 2012 Net Income Other Comprehensive Income (Loss) Change in Net Unrealized Gain on Securities Before Adjustment (net of tax expense (benefit) of $725.8; $(1,102.8); $467.7) Change in Adjustment to Deferred Acquisition Costs and Reserves for Future Policy...UNUM • 2014 ANNUAL REPORT 87

  • Page 90
    ... December 31 (in millions of dollars) 2014 2013 2012 Common Stock Balance at Beginning of Year Common Stock Activity Retirement of Treasury Stock Balance at End of Year Additional Paid-in Capital Balance at Beginning of Year Common Stock Activity Retirement of Treasury Stock Balance at End of Year...

  • Page 91
    ... Other Investments Net Sales (Purchases) of Short-term Investments Net Increase (Decrease) in Payables for Collateral on Investments Net Purchases of Property and Equipment Other, Net Net Cash Used by Investing Activities Cash Flows from Financing Activities Issuance of Long-term Debt Long-term Debt...

  • Page 92
    ...-paid group benefits, and other related services. We market our products primarily to employers interested in providing benefits to their employees. We have three principal operating business segments: Unum US, Unum UK, and Colonial Life. Our other reporting segments are Closed Block and Corporate...

  • Page 93
    .... Interest income is accrued on the principal amount of the loan based on the loan's contractual interest rate. Included in policy loans are $3,068.4 million and $3,043.7 million of policy loans ceded to reinsurers at December 31, 2014 and 2013, respectively. UNUM • 2014 ANNUAL REPORT 91

  • Page 94
    ... is reported as a component of income tax or other expenses. We will adopt updated accounting guidance for tax credit partnerships, where applicable, effective January 1, 2015. See "Accounting Updates Outstanding" as follows for further discussion. Our investments in private equity partnerships are...

  • Page 95
    ... if applicable, are recognized in earnings as a component of net realized investment gain or loss during the period of change in fair value. Cash ï¬,ow activity from the settlement of derivative contracts is reported in the consolidated statements of cash ï¬,ows as a component of proceeds from sales...

  • Page 96
    ... of December 31, 2014 and 2013, respectively. Value of Business Acquired: Value of business acquired represents the present value of future profits recorded in connection with the acquisition of a block of insurance policies. The asset is amortized based upon expected future premium income for non...

  • Page 97
    ... fund balances. Reserves for Policy and Contract Benefits: Policy reserves represent future policy and contract benefits for claims not yet incurred. Policy reserves for non interest-sensitive life and accident and health products are determined using the net level premium method. The reserves are...

  • Page 98
    ... holders and are not included in revenue. Fees from our administrative-services only and family medical leave products are reported as other income when services are rendered. Reinsurance: We routinely enter into reinsurance agreements with other insurance companies to spread risk and thereby limit...

  • Page 99
    ...not provide for deferred taxes to the extent unremitted foreign earnings are deemed permanently invested. Accounting for Participating Individual Life Insurance: Participating policies issued by one of our subsidiaries prior to its 1986 conversion from a mutual to a stock life insurance company will...

  • Page 100
    ... from the scope of this update are insurance contracts, although our fee-based service products are included within the scope. The core principal of this guidance is that revenue recognition should depict the transfer of goods or services to customers in an amount that reï¬,ects the consideration...

  • Page 101
    ... chart. December 31 2014 (in millions of dollars) Carrying Amount Fair Value Carrying Amount 2013 Fair Value Assets Fixed Maturity Securities Mortgage Loans Policy Loans Other Long-term Investments Derivatives Equity Securities Miscellaneous Long-term Investments Liabilities Policyholders' Funds...

  • Page 102
    ... Long-term Investments: Carrying amounts for tax credit partnerships equal the unamortized balance of our contractual commitments and approximate fair value. Fair values for private equity partnerships are primarily derived from net asset values provided by the general partner in the partnerships...

  • Page 103
    .../supply • Sector and issuer level spreads • Security credit ratings/maturity/capital structure/optionality • Corporate actions • Underlying collateral • Prepayment speeds/loan performance/delinquencies/weighted average life/seasoning • Public covenants • Comparative bond analysis...

  • Page 104
    ... our pricing sources. For purposes of valuing net counterparty risk, we measure the fair value of a group of financial assets and financial liabilities on the basis of the price that would be received to sell a net long position or transfer a net short position for a particular risk exposure in...

  • Page 105
    ... pricing with vendor purchased software programs, including valuations based on estimates of future profitability, to estimate the fair value. Additionally, we may obtain prices from independent third-party brokers to aid in establishing valuations for certain of these securities. Key assumptions...

  • Page 106
    ... Agencies and Authorities States, Municipalities, and Political Subdivisions Foreign Governments Public Utilities Mortgage/Asset-Backed Securities All Other Corporate Bonds Redeemable Preferred Stocks Total Fixed Maturity Securities Other Long-term Investments Derivatives Interest Rate Swaps Foreign...

  • Page 107
    ... Agencies and Authorities States, Municipalities, and Political Subdivisions Foreign Governments Public Utilities Mortgage/Asset-Backed Securities All Other Corporate Bonds Redeemable Preferred Stocks Total Fixed Maturity Securities Other Long-term Investments Derivatives Interest Rate Swaps Foreign...

  • Page 108
    ... 3 Transfers Earnings Income or Loss Purchases Sales Into Out of (in millions of dollars) Beginning of Year End of Year Fixed Maturity Securities States, Municipalities, and Political Subdivisions Foreign Governments Public Utilities Mortgage/Asset-Backed Securities All Other Corporate Bonds...

  • Page 109
    ... Level 3 Transfers Earnings Income or Loss Purchases Sales Into Out of End of Year Fixed Maturity Securities States, Municipalities, and Political Subdivisions Foreign Governments Public Utilities Mortgage/Asset-Backed Securities All Other Corporate Bonds Redeemable Preferred Stocks Total Fixed...

  • Page 110
    ... (in millions of dollars) Fair Value Unobservable Input Range/Weighted Average Fixed Maturity Securities States, Municipalities, and Political Subdivisions - Private All Other Corporate Bonds - Private $101.0 Comparability Adjustment (b) 0.25%-1.00%/0.71% 432.8 Comparability Adjustment Discount...

  • Page 111
    December 31, 2013 (in millions of dollars) Fair Value Unobservable Input Range/Weighted Average Fixed Maturity Securities States, Municipalities, and Political Subdivisions - Private Mortgage/Asset-Backed Securities - Private All Other Corporate Bonds - Private $142.7 Comparability Adjustment (b) ...

  • Page 112
    ...of dollars) United States Government and Government Agencies and Authorities States, Municipalities, and Political Subdivisions Foreign Governments Public Utilities Mortgage/Asset-Backed Securities All Other Corporate Bonds Redeemable Preferred Stocks Total Fixed Maturity Securities $ 1,028.6 1,706...

  • Page 113
    ...) Fair Value Fair Value United States Government and Government Agencies and Authorities States, Municipalities, and Political Subdivisions Foreign Governments Public Utilities Mortgage/Asset-Backed Securities All Other Corporate Bonds Total Fixed Maturity Securities $ 41.1 412.5 87.2 506.0 341...

  • Page 114
    ...-grade fixed maturity securities are more likely to develop credit concerns than investment-grade securities. At December 31, 2014, the unrealized losses in our below-investment-grade fixed maturity securities were generally due to credit spreads in certain industries or sectors and, to a lesser...

  • Page 115
    ... statements was $484.1 million, comprised of $289.0 million of tax credit partnerships and $195.1 million of private equity partnerships. These variable interest entity investments are reported as other long-term investments in our consolidated balance sheets. Additionally, we recognize a liability...

  • Page 116
    ... and $4.4 million, respectively, as of December 31, 2013. The bond is reported as a component of fixed maturity securities, and the partnership is reported as a component of other long-term investments in our consolidated balance sheets. At December 31, 2014, we had no commitments to fund the...

  • Page 117
    ... quality ratings on an annual basis. This review process is performed more frequently for mortgage loans deemed to have a higher risk of delinquency. Mortgage loans, sorted by the applicable credit quality indicators, are as follows: December 31 (in millions of dollars) 2014 2013 Internal Rating Aa...

  • Page 118
    ... on the property in a subsequent quarter of 2014. At December 31, 2014 and 2013, we held no mortgage loans that were on nonaccrual status or past due regarding principal and/or interest payments. There have been no changes to our accounting policies or methodology from the prior period regarding...

  • Page 119
    Transfers of Financial Assets To manage our cash position more efficiently, we may 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 ...

  • Page 120
    ... or similar agreement. Our accounting policy is to not offset these financial instruments in our balance sheets. Net amounts disclosed below have been reduced by the amount of collateral pledged to or received from our counterparties. December 31, 2014 Gross Amount of Recognized Financial...

  • Page 121
    ... dollars) 2014 2013 2012 Fixed Maturity Securities Derivatives Mortgage Loans Policy Loans Other Long-term Investments Short-term Investments Gross Investment Income Less Investment Expenses Less Investment Income on Participation Fund Account Assets Less Amortization of Tax Credit Partnerships Net...

  • Page 122
    ... Transactions hedging interest rate risk are primarily associated with our individual and group long-term care and individual and group disability products. All other product portfolios are periodically reviewed to determine if hedging strategies would be appropriate for risk management purposes. We...

  • Page 123
    ... an agreement in which we agree with another party to pay, at specified intervals, a fixed-rate fee in exchange for insurance against a credit event on a specific investment. If a defined credit event occurs, our counterparty may either pay us a net cash settlement, or we may surrender the speci...

  • Page 124
    ... debt issued by one of our U.K. subsidiaries. Also during 2013, we terminated, as scheduled, $150.0 million notional amount of received fixed, pay variable forward starting interest rate swaps used to hedge the anticipated purchase of fixed maturity securities. 122 UNUM • 2014 ANNUAL REPORT

  • Page 125
    ..., 2014 and 2013, we had $600.0 million notional amount of receive fixed, pay variable interest rate swaps to hedge the changes in the fair value of certain fixed rate long-term debt. These swaps effectively convert the associated fixed rate long-term debt into ï¬,oating rate debt and provide for...

  • Page 126
    ... financial instruments, as reported in our consolidated balance sheets. December 31, 2014 Asset Derivatives (in millions of dollars) Balance Sheet Location Fair Value Liability Derivatives Balance Sheet Location Fair Value Designated as Hedging Instruments Interest Rate Swaps Foreign Exchange...

  • Page 127
    ....4 The following table summarizes the location of gains and losses on our derivatives not designated as hedging instruments, as reported in our consolidated statements of income. Year Ended December 31 (in millions of dollars) 2014 2013 2012 Net Realized Investment Gain (Loss) Credit Default Swaps...

  • Page 128
    ... 166.4 The net unrealized gain on securities consists of the following components: December 31 (in millions of dollars) 2014 2013 2012 Change for the Year Ended December 31 2014 2013 Fixed Maturity Securities Other Investments Deferred Acquisition Costs Reserves for Future Policy and Contract Bene...

  • Page 129
    ... of dollars) 2014 2013 Net Unrealized Gain on Securities Net Realized Investment Gain (Loss) Gain (Loss) on Sales of Securities and Other Invested Assets Other-Than-Temporary Impairment Loss Income Tax Benefit Total Net Gain on Cash Flow Hedges Net Investment Income Gain on Interest Rate Swaps and...

  • Page 130
    ... claims with long-tail payouts on which interest earned on assets backing liabilities is an integral part of pricing and reserving. Interest accrued on prior year reserves has been calculated on the opening reserve balance less one-half year's cash payments at our average reserve discount rate...

  • Page 131
    ... may receive long-term care benefits. We changed our morbidity assumptions to reï¬,ect emerging industry experience as well as our own Company experience, and we updated our projection of future premium rate increase approvals. Using our revised best estimate assumptions, as of December 31, 2014 we...

  • Page 132
    ... 2013 Group Life Waiver of Premium Benefit Reserve Reduction Within our Unum US segment, we offer group life insurance coverage which consists primarily of renewable term life insurance and includes a provision for waiver of premium, if disabled. The group life waiver of premium benefit (group life...

  • Page 133
    ... 31 (in millions of dollars) 2014 2013 Deferred Tax Liability Deferred Acquisition Costs Fixed Assets Invested Assets Other Gross Deferred Tax Liability Deferred Tax Asset Reserves Employee Benefits Other Gross Deferred Tax Asset Total Net Deferred Tax Liability UNUM $ 97.4 93.0 1,999.2 64...

  • Page 134
    ...128.4 121.1 $1,249.5 The U.K. government enacted income tax rate reductions during each of the years 2010 through 2013. During 2013, the rate was reduced from 23 percent to 21 percent effective April 2014, and to 20 percent effective April 2015. Although the rate reductions in each instance became...

  • Page 135
    ... assets to the amount that is more likely than not to be realized. As of December 31, 2014 and 2013, we had no valuation allowance. Total income taxes paid net of refunds during 2014, 2013, and 2012 were $155.7 million, $398.1 million, and $185.0 million, respectively. UNUM • 2014 ANNUAL REPORT...

  • Page 136
    ...the following: December 31 2014 (in millions of dollars) Interest Rates Maturities 2013 Long-term Debt Senior Secured Notes issued 2007 Senior... $151.9 million in 2015, $350.0 million in 2016, $200.0 million in 2018, and $2,081.0 million in 2020 and thereafter. 134 UNUM • 2014 ANNUAL REPORT

  • Page 137
    ...principal payments on the Northwind notes of $41.6 million in 2014 and $60.0 million in both 2013 and 2012. In 2006, Tailwind Holdings, LLC (Tailwind Holdings) a wholly-owned subsidiary of Unum Group, issued $130.0 million of insured, senior, secured notes due 2036 in a private offering. During 2012...

  • Page 138
    ...trust in connection with the capital securities offering. The debentures mature in 2038. The sole assets of the trust are the junior subordinated debt securities. Interest Paid Interest paid on long-term and short-term debt and related securities during 2014, 2013, and 2012 was $145.9 million, $144...

  • Page 139
    ...a limited-time offer of benefit payouts to eligible former employees with a vested right to a pension benefit. The offer provided eligible former employees, regardless of age, with an option to elect to receive a lump-sum settlement of his or her entire accrued pension benefit in December 2014 or...

  • Page 140
    ... Plan We discontinued offering retiree life insurance to future retirees effective December 31, 2012 but continue to provide this benefit to employees who retired prior to that date. As a result of this plan amendment, we recognized a curtailment gain of $4.2 million and a prior service credit of...

  • Page 141
    ...2014 2013 2014 U.K. Plan 2013 2014 OPEB 2013 Current Liability Noncurrent Liability Noncurrent Asset Underfunded (Overfunded) Status Unrecognized Pension and Postretirement Benefit Costs Net Actuarial Gain (Loss) Prior Service Credit Deferred Income Tax Asset...2.4 UNUM • 2014 ANNUAL REPORT 139

  • Page 142
    ...class consists primarily of commercial real estate investments. The international equity funds may allocate a certain percentage of assets to forward currency contracts. The fixed income securities include U.S. government and agency asset-backed securities, corporate investment-grade bonds, private...

  • Page 143
    ...dollars) Total Invested Assets Equity Securities: U.S. Large Cap U.S. Mid Cap U.S. Small Cap International Emerging Markets Fixed Income Securities: U.S. Government and Agencies Corporate State and Municipal Securities Alternative Investments: Private Equity Direct Investments Private Equity Funds...

  • Page 144
    ... to the NAV for 2014 or 2013. The private equity direct investments and private equity funds of funds generally cannot be redeemed by investors, and distributions are received following the maturity of the underlying assets. It is estimated that these underlying assets will begin to mature...

  • Page 145
    ...31, 2013 Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in millions of dollars) Total Assets Life Insurance Contracts $- $- $11.4 $11.4 UNUM • 2014 ANNUAL REPORT 143

  • Page 146
    ... Assets Contributions Net Benefits and Expenses Paid End of Year Life Insurance Contracts $11.5 $0.2 $15.6 $(15.9) $11.4 For the years ended December 31, 2014 and 2013, the actual return on plan assets relates solely to investments still held at the reporting date. There were no transfers...

  • Page 147
    ... life insurance reserve for our OPEB plan at December 31, 2014 and 2013 is 5.75 percent, which is based on full investment in fixed income securities with an average book yield of 5.46 percent and 5.58 percent in 2014 and 2013, respectively. Our rate of compensation increase assumption is generally...

  • Page 148
    ... assumed health care cost trend rate at December 31, 2014 would have increased (decreased) the service cost and interest cost by $0.1 million and $(0.1) million, respectively, and the postretirement benefit obligation by $4.7 million and $(3.4) million, respectively. The unrecognized net actuarial...

  • Page 149
    ..., when the average market price of Unum Group common stock during the period exceeds the exercise price of the stock options and the grant price of the nonvested restricted stock units and the nonvested performance share units. The outstanding stock options have exercise prices ranging from $11...

  • Page 150
    ... for the years ended December 31, 2014, 2013, and 2012, respectively. In December 2014, we retired 60.0 million shares of our treasury stock with an average total cost of $1,451.7 million. Preferred Stock Unum Group has 25.0 million shares of preferred stock authorized with a par value of $0.10...

  • Page 151
    ...the underlying common stock as of the grant date. Stock options generally have a term of eight years after the date of grant and fully vest after three years. At December 31, 2014, approximately 17.05 million shares were available for future grants under the 2012 Plan. Under the stock incentive plan...

  • Page 152
    ... 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, 2013 Granted Vested Outstanding at December 31, 2014 165 46 (88) 123 $24.09 33.85 24.47 27.31 150 UNUM • 2014 ANNUAL REPORT

  • Page 153
    ... additional future service. Stock Options Stock option activity is summarized as follows: Remaining Contractual Term (in years) Intrinsic Value (in millions) Shares (000s) Weighted Average Exercise Price Outstanding at December 31, 2013 Exercised Outstanding at December 31, 2014 Exercisable...

  • Page 154
    ... wherein we retain the assets in our general account. The remaining one percent of our reinsurance recoverable is held by companies either rated below A- by AM Best or not rated. Reinsurance data is as follows: (in millions of dollars) 2014 Year Ended December 31 2013 2012 Direct Premium Income...

  • Page 155
    ... update features contractually allowable on existing policies. We discontinued offering individual long-term care in 2009 and group long-term care in 2012. Other insurance products include group pension, individual life and corporate-owned life insurance, reinsurance pools and management operations...

  • Page 156
    ... of Debt for Corporate Long-term Care Reserve Increase for Closed Block Unclaimed Death Benefits Reserve Increase for Unum US Unclaimed Death Benefits Reserve Increase for Colonial Life Group Life Waiver of Premium Benefit Reserve Reduction for Unum US Income Before Income Tax $10,493.6 16...

  • Page 157
    Premium income by major line of business within each of our segments is presented as follows: 2014 Year Ended December 31 2013 (in millions of dollars) 2012 Unum US Group Disability Group Long-term Disability Group Short-term Disability Group Life and Accidental Death & Dismemberment Group Life ...

  • Page 158
    ... Unum US Unum UK Colonial Life Closed Block Corporate Total Year Ended December 31, 2014 Premium Income Net Investment Income Other Income Operating Revenue Operating... Year Ended December 31, 2013 Premium Income Net Investment Income Other Income Operating Revenue Operating Income (Loss) Interest...

  • Page 159
    ... (12.0) 1.8 $1,755.5 December 31 (in millions of dollars) 2014 2013 Unum US Unum UK Colonial Life Closed Block Corporate Total Assets $18,676.5 3,702.5 3,692.2 33,960.2 2,465.7 $62,497.1 $18,384.3 3,654.1 3,482.9 31,564.2 2,318.1 $59,403.6 Revenue is primarily derived from sources in the United...

  • Page 160
    ... insurance claim is evaluated based on its own merits, there is rarely a single act or series of actions which can properly be addressed by a class action. Nevertheless, we monitor these cases closely and defend ourselves appropriately where these allegations are made. 158 UNUM • 2014 ANNUAL...

  • Page 161
    ... certain group life insurance policies when we paid life insurance proceeds by establishing interest-bearing retained asset accounts rather than by mailing checks. In September 2013, the District Court awarded damages to the plaintiffs based on a benchmark it created by averaging the interest rates...

  • Page 162
    ... granted plaintiff leave to file an amended complaint. In August 2014, the plaintiff filed a second amended purported class action complaint entitled Michael Don, Executor of The Estate of Ruben Don v. Unum Group, and Unum Life Insurance Company of America in the United States District Court for...

  • Page 163
    ...U.S. life insurance subsidiaries cede blocks of business to Northwind Re, Tailwind Reinsurance Company, and Fairwind Insurance Company (Fairwind), all of which are affiliated captive reinsurance subsidiaries (captive reinsurers) domiciled in the United States, with Unum Group as the ultimate parent...

  • Page 164
    ... regulatory authorities, during 2015 for the payment of dividends to Unum Group from its traditional U.S. life insurance subsidiaries. The ability of our captive insurers to pay dividends to their respective parent companies will depend on their satisfaction of applicable regulatory requirements and...

  • Page 165
    ...quarter of 2014 reserve increase of $698.2 million before tax and $453.8 million after tax related to long-term care. • Fourth quarter of 2014 settlement loss of $64.4 million before tax and $41.9 million after tax related to a pension plan amendment. • Fourth quarter of 2013 reserve increase of...

  • Page 166
    ... 31, 2014, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Unum Group and subsidiaries' internal control over financial reporting as of December 31, 2014, based...

  • Page 167
    ...internal control over financial reporting encompasses the processes and procedures management has established to (i) maintain records that, in reasonable detail, accurately and fairly reï¬,ect the Company's transactions and dispositions of assets; (ii) provide reasonable assurance that transactions...

  • Page 168
    ...over financial reporting as of December 31, 2014, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Unum Group and subsidiaries as of December 31, 2014 and 2013, and...

  • Page 169
    ..., and policy benefit offsets due to, among other factors, the rate of unemployment and consumer confidence, the emergence of new diseases, epidemics, or pandemics, new trends and developments in medical treatments, the effectiveness of our claims operational processes, and changes in government...

  • Page 170
    ... Principal Operating Businesses Closed Block $873.9 80.9 $5,955.8 2,756.3 14.7% Corporate Total (44.4) $910.4 After-tax Operating Income (713.0) $7,999.1 Average Allocated Equity 11.4% Operating Return on Equity (in millions) Year Ended December 31, 2013 Year Ended December 31, 2012 Year...

  • Page 171
    ...8996 Unum Life Insurance Company of America Portland, Maine Corporate Information Susan N. Roth Corporate Secretary 1 Fountain Square Chattanooga, TN 37402 800 718 8824 Colonial Life & Accident Insurance Company Columbia, South Carolina Unum Limited Dorking, England Transfer Agent Computershare...

  • Page 172
    Unum Group 1 Fountain Square Chattanooga, TN 37402 www.unum.com © 2015 Unum Group. All rights reserved. Unum is a registered trademark and marketing brand of Unum Group and its insuring subsidiaries. All the paper used in this annual report is Elemental Chlorine Free. The papers used for the ...