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140 UNUM • 2014 ANNUAL REPORT
Notes To Consolidated Financial Statements
Plan Assets
The objective of our U.S. pension and OPEB plans is to maximize long-term return, within acceptable risk levels, in a manner that
is consistent with the fiduciary standards of the Employee Retirement Income Security Act (ERISA), while maintaining sufficient liquidity
to pay current benefits and expenses.
During 2014, we modified our target allocation for invested asset classes for our U.S. qualified defined benefit pension plan to add
opportunistic credit and real estate asset classes. The opportunistic credit asset class consists of investments in funds that hold varied
fixed income investments purchased at depressed values with the intention to later sell those investments for a gain. The real estate asset
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 placement securities, and bonds issued by states or other municipalities. Alternative investments utilize
proprietary strategies that are intended to have a low correlation to the U.S. stock market. Prohibited investments include, but are not
limited to, unlisted securities, futures contracts, options, short sales, and investments in securities issued by Unum Group or its affiliates.
The invested asset classes, asset types, and benchmark indices for our U.S. qualified defined benefit pension plan is as follows. We target
approximately 35 percent to equity securities, 40 percent to fixed income securities, and 25 percent to opportunistic credit, alternative,
and real estate investments.
Asset Class Asset Type Benchmark Indices
Equity Securities Collective fund; Individual holdings Standard & Poor’s 400 and 500 Midcap; Russell 2000
Value and Growth; Morgan Stanley Capital International
(MSCI) All Country World Excluding U.S.; MSCI Europe
Australasia Far East; and MSCI Emerging Markets
Fixed Income; Opportunistic Credits Collective fund; Individual holdings Custom Index
Alternative Investments
(Hedge and Private Equity)
Fund of funds; Direct investments Hedge Fund Research Institute Fund of Funds;
Russell 2000
Real Estate Collective fund National Council of Real Estate Investment Fund
Open-end Diversified Core Equity Index
Assets for our U.K. pension plan are primarily invested in a pooled diversified growth fund. This fund invests in assets such as
global equities, hedge funds, commodities, below-investment-grade fixed income securities, and currencies. The objectives of the fund
are to generate capital appreciation over the course of a complete economic and market cycle and to deliver equity-like returns in the
medium-to-long term while maintaining approximately two thirds of the volatility of equity markets. Performance of this fund is measured
against the U.K. inflation rate plus four percent. The remaining assets in the U.K. plan are invested in leveraged interest rate and inflation
swap funds of varying durations designed to broadly match the interest rate and inflation sensitivities of the plan’s liabilities. The current
target allocation for the assets is 75 percent diversified growth assets and 25 percent interest rate and inflation swap funds. There are no
categories of investments that are specifically prohibited by the U.K. plan, but there are general guidelines that ensure prudent investment
action is taken. Such guidelines include the prevention of the plan from using derivatives for speculative purposes and limiting the
concentration of risk in any one type of investment.
Assets for the OPEB plan are invested in life insurance contracts issued by one of our insurance subsidiaries. The assets support
life insurance benefits payable to certain former retirees covered under the OPEB plan. The terms of these contracts are consistent in all
material respects with those the subsidiary offers to unaffiliated parties that are similarly situated. There are no categories of investments
specifically prohibited by the OPEB plan.
We believe our investment portfolios are well diversified by asset class and sector, with no potential risk concentrations in any
one category.