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122 UNUM • 2014 ANNUAL REPORT
Notes To Consolidated Financial Statements
Derivative Transactions
The table below summarizes, by notional amounts, the activity for each category of derivatives. The notional amounts represent the
basis upon which our counterparty pay and receive amounts are calculated.
Swaps
Receive Receive Receive
Variable/Pay Fixed/Pay Fixed/Pay Credit
(in millions of dollars) Fixed Fixed Variable Default Forwards Options Total
Balance at December 31, 2011 $174.0 $554.0 $685.0 $ — $ — $ — $1,413.0
Additions — — 250.0 — 86.0 — 336.0
Terminations — 45.2 185.0 — 86.0 — 316.2
Balance at December 31, 2012 174.0 508.8 750.0 — — — 1,432.8
Additions — 160.0 — 97.0 24.0 10.0 291.0
Terminations 24.0 38.4 150.0 — 24.0 10.0 246.4
Balance at December 31, 2013 150.0 630.4 600.0 97.0 — — 1,477.4
Additions — 250.1 — — 68.0 — 318.1
Terminations — 40.1 — — 68.0 — 108.1
Balance at December 31, 2014 $150.0 $840.4 $600.0 $97.0 $ — $ — $1,687.4
Cash Flow Hedges
As of December 31, 2014 and 2013, we had $618.0 million and $630.4 million, respectively, notional amount of receive fixed,
pay fixed, open current and forward foreign currency interest rate swaps to hedge fixed income foreign currency-denominated securities
and U.S. dollar-denominated debt issued by one of our U.K. subsidiaries.
During 2014, we novated certain of our foreign currency interest rate swaps with a notional amount of $97.0 million and a fair value
of $(29.5) million to a new counterparty. At the time of novation, these derivatives were effective hedges, and we therefore deferred the
unrealized loss into other comprehensive income and will recognize the loss in earnings during the periods in which the hedged items
affect earnings. In conjunction with the novation, these derivatives were de-designated as hedges, and subsequent changes in their fair
value will be reported in earnings as a component of net realized investment gain or loss. To establish a new effective hedging relationship
with the fixed income foreign currency denominated securities previously hedged, we entered into $124.7 million notional amount
of foreign currency interest rate swaps during 2014 whereby we receive fixed rate functional currency principal and interest in exchange
for fixed rate payments in foreign currency.
During 2014, we redeemed a portion of the outstanding principal of the U.S. dollar-denominated debt issued by one of our
U.K. subsidiaries. In conjunction with this redemption, we reclassified $13.1 million of the deferred gain on cash flow hedges from
accumulated other comprehensive income to realized investment gain in our consolidated statements of income. This amount represents
the applicable portion of the deferred gain from previously terminated derivatives associated with the hedge of this debt. See Note 8.
During 2013, we entered into $150.0 million notional amount of foreign currency swaps to hedge the currency risk on a portion
of the U.S. dollar-denominated 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.