Unum 2014 Annual Report Download - page 72

70 UNUM • 2014 ANNUAL REPORT
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Cash Available from Subsidiaries
Unum Group and certain of its intermediate holding company subsidiaries depend on payments from subsidiaries to pay dividends to
stockholders, to pay debt obligations, and/or to pay expenses. These payments by our insurance and non-insurance subsidiaries may take
the form of dividends, operating and investment management fees, and/or interest payments on loans from the parent to a subsidiary.
Restrictions under applicable state insurance laws limit the amount of dividends that can be paid to a parent company from its
insurance subsidiaries in any 12-month period without prior approval by regulatory authorities. For life insurance companies domiciled in
the U.S., that limitation generally equals, depending on the state of domicile, either ten percent of an insurer’s statutory surplus with
respect to policyholders as of the preceding year end or the statutory net gain from operations, excluding realized investment gains and
losses, of the preceding year. The payment of dividends to a parent company from a life insurance subsidiary is generally further limited
to the amount of unassigned funds.
Certain of our domestic insurance subsidiaries cede blocks of business to Northwind Reinsurance Company (Northwind Re), Tailwind
Reinsurance Company (Tailwind Re), and Fairwind Insurance Company (Fairwind), all of which are affiliated captive reinsurance subsidiaries
domiciled in the United States with Unum Group as the ultimate parent. The ability of Northwind Re, Tailwind Re, and Fairwind to pay
dividends to their respective parent companies will depend on their satisfaction of applicable regulatory requirements and on the
performance of the business reinsured by Northwind Re, Tailwind Re, and Fairwind.
The ability of Unum Group and certain of its intermediate holding company subsidiaries to continue to receive dividends from their
insurance subsidiaries also depends on additional factors such as RBC ratios and capital adequacy and/or solvency requirements, funding
growth objectives at an affiliate level, and maintaining appropriate capital adequacy ratios to support desired ratings. Unum Group’s RBC
ratio for its traditional U.S. insurance subsidiaries, calculated on a weighted average basis using the NAIC Company Action Level formula, was
in excess of 400 percent at December 31, 2014, and generally consistent with the prior year. The capital adequacy and/or individual RBC ratios
for each of our U.S. insurance subsidiaries, including our captive reinsurers, 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 in the U.K. Our European holding
company and its subsidiaries, including Unum Limited, will be impacted by new capital requirements and risk management standards
under Solvency II, which is expected to be adopted January 1, 2016. Solvency II proposals, which are expected to be finalized during the
first quarter of 2015, contain amended requirements on capital adequacy and risk management for insurers. The impact of Solvency II on
our U.K. subsidiaries cannot be fully determined at this time, but the adoption of Solvency II will likely result in an increase in supervisory
and disclosure requirements and could also result in increased capital requirements.
The payment of dividends to the parent company from our subsidiaries also requires the approval of the individual subsidiary’s board
of directors.
The amount available during 2014 for the payment of ordinary dividends from Unum Group’s traditional U.S. insurance subsidiaries,
which excludes our captive reinsurers, was $591.0 million, of which $564.0 million was declared and paid. The amount available during
2014 from Unum Limited was £187.8 million, of which £60.0 million was declared and paid to one of our U.K. holding companies. During
2014, Tailwind Re and Northwind Re paid dividends of $12.8 million and $41.3 million to Tailwind Holdings and Northwind Holdings,
respectively. Fairwind paid no dividends during 2014.