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64 UNUM • 2014 ANNUAL REPORT
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Investments
Overview
Our investment portfolio is well diversified by type of investment and industry sector. We have established an investment strategy
that we believe will provide for adequate cash flows from operations and allow us to hold our securities through periods where significant
decreases in fair value occur. We believe our emphasis on risk management in our investment portfolio, including credit and interest rate
management, has positioned us well and generally reduced the volatility in our results.
Below is a summary of our formal investment policy, including the overall quality and diversification objectives:
• The majority of investments are in high quality publicly traded securities to ensure the desired liquidity and preserve the capital
value of our portfolios.
• The long-term nature of our insurance liabilities also allows us to invest in less liquid investments to obtain superior returns.
A maximum of 10 percent of the total investment portfolio may be invested in below-investment-grade securities, 2 percent in
equity securities, 3 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 municipal securities.
• We intend to manage the risk of losses due to changes in interest rates by matching asset duration with liabilities, in the aggregate.
• The weighted average credit quality rating of the portfolio should be Baa1 or higher.
• The maximum investment per issuer group is limited based on internal limits reviewed by the risk and nance committee of
Unum Group’s board of directors and approved by the boards of directors of our insurance subsidiaries and is more restrictive than
the five percent limit generally allowed by the state insurance departments which regulate the type of investments our insurance
subsidiaries are allowed to own. These internal limits are as follows:
Rating Internal Limit
($ in millions)
AAA/AA $200
A 175
BBB+ 150
BBB 125
BBB- 90
BB+ 75
BB 60
BB- 50
B+ 30
B/B- 20
CCC 10
• The portfolio is to be diversied across industry classication and geographic lines.
• Derivative instruments may be used to replicate permitted asset classes, hedge interest rate risk, credit risk, and foreign currency
risk, and match liability duration and cash flows consistent with the plan reviewed by the risk and finance committee of Unum
Group’s board of directors and approved by the boards of directors of our insurance subsidiaries.
• Asset mix guidelines and limits are established by us, reviewed by the risk and nance committee of Unum Group’s board of
directors, and approved by the boards of directors of our insurance subsidiaries.
• The allocation of assets and the selection and timing of the acquisition and disposition of investments are subject to ratication, on a
weekly basis, by an investment subcommittee appointed by the boards of directors of our insurance subsidiaries. These actions are
also reviewed by the risk and finance committee of Unum Group’s board of directors on a quarterly basis.
• We review these investment policies and guidelines annually, or more frequently if deemed necessary, and recommend
adjustments, as appropriate. Any revisions or exceptions are reviewed by the risk and finance committee of Unum Group’s board of
directors and must be approved by the boards of directors of our insurance subsidiaries.
See “Critical Accounting Estimates” contained herein for further discussion of our valuation of investments.