Unum 2014 Annual Report Download - page 163

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UNUM • 2014 ANNUAL REPORT 161
Note 15. Statutory Financial Information
Statutory Net Income, Capital and Surplus, and Dividends
Statutory net income for U.S. life insurance companies is reported in conformity with statutory accounting principles prescribed by the
National Association of Insurance Commissioners (NAIC) and adopted by applicable domiciliary state laws. The commissioners of the states
of domicile have the right to permit other specific practices that may deviate from prescribed practices. Our traditional U.S. life insurance
subsidiaries have no prescribed or permitted statutory accounting practices that differ materially from statutory accounting principles
prescribed by the NAIC.
Certain of our traditional 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. These captive reinsurers were established for the limited purpose of reinsuring
risks attributable to specified policies issued or reinsured by our life insurance subsidiaries. Our captive reinsurers have no material state
prescribed accounting practices, except for Fairwind, which was re-domesticated from Bermuda to the state of Vermont during 2013.
Vermont reporting requirements for pure captive insurance companies follow GAAP, unless the commissioner permits the use of some
other basis of accounting. Fairwind has permission from Vermont to follow accounting practices that are generally consistent with current
NAIC statutory accounting principles for its insurance reserves and invested assets supporting reserves. All other assets and liabilities are
accounted for in accordance with GAAP, as prescribed by Vermont, which allows for the full recognition of deferred tax assets which are
more likely than not to be realized. Statutory accounting principles have a stricter limitation for the recognition of deferred tax assets.
The impact of following the prescribed and permitted practices of Vermont rather than statutory accounting principles prescribed by the
NAIC resulted in higher capital and surplus for Fairwind of approximately $200 million and $176 million as of December 31, 2014
and 2013, respectively.
The operating results and capital and surplus of our traditional U.S. life insurance subsidiaries and our captive reinsurers, prepared in
accordance with prescribed or permitted accounting practices of the NAIC or states of domicile, are presented separately below. Results for
2012 include those for Fairwind as filed with insurance regulators in Bermuda.
Year Ended December 31
(in millions of dollars) 2014 2013 2012
Combined Net Income (Loss)
Traditional U.S. Life Insurance Subsidiaries $ 623.1 $584.5 $624.5
Captive Reinsurers $(123.0) $ 13.3 $ 40.8
Combined Net Gain (Loss) from Operations
Traditional U.S. Life Insurance Subsidiaries $ 618.1 $617.5 $649.8
Captive Reinsurers $(123.8) $ 13.6 $ 37.4
December 31
(in millions of dollars) 2014 2013
Combined Capital and Surplus
Traditional U.S. Life Insurance Subsidiaries $3,462.8 $3,450.5
Captive Reinsurers $1,668.3 $1,679.4