Unum 2015 Annual Report Download - page 164

Notes To Consolidated Financial Statements
162 Unum 2015 Annual Report
As derived from the most recent annual statutory basis financial statements filed with insurance regulators, the statutory net income and
statutory capital and surplus of our United Kingdom insurance subsidiary, Unum Limited, were £50.7 million and £445.9 million, respectively.
Risk-based capital (RBC) standards for U.S. life insurance companies are prescribed by the NAIC. The domiciliary states of our U.S. insurance
subsidiaries have all adopted a version of the RBC model formula of the NAIC, which prescribes a system for assessing the adequacy of
statutory capital and surplus for all life and health insurers. The basis of the system is a risk-based formula that applies prescribed factors to
the various risk elements in a life and health insurer’s business to report a minimum capital requirement proportional to the amount of risk
assumed by the insurer. The life and health RBC formula is designed to measure annually (i) the risk of loss from asset defaults and asset
value fluctuations, (ii) the risk of loss from adverse mortality and morbidity experience, (iii) the risk of loss from mismatching of asset and
liability cash flow due to changing interest rates, and (iv) business risks. The formula is used as an early warning tool to identify companies
that are potentially inadequately capitalized. State insurance laws grant insurance regulators the authority to require various actions by,
or take various actions against, insurers whose total adjusted capital does not meet or exceed certain RBC levels. The total adjusted capital
of each of our U.S. insurance subsidiaries at December 31, 2015 is in excess of those RBC levels.
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.
Based on the restrictions under current law, $663.6 million is available, without prior approval by regulatory authorities, during 2016
for the payment of dividends to Unum Group from its traditional U.S. life insurance subsidiaries. The ability of our captive insurers 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.
We also have the ability to receive dividends from Unum Limited, subject to applicable insurance company regulations and capital
guidance in the United Kingdom. As of January 1, 2016, Solvency II, a European Union directive that prescribes new capital requirements
and risk management standards for the European insurance industry, replaced the previous capital requirements for Unum Limited. There
was no material change to capital requirements or to solvency ratios. We have £147.8 million available for the payment of dividends from
Unum Limited during 2016, subject to regulatory approval.
Deposits
At December 31, 2015 and 2014, our U.S. insurance subsidiaries had on deposit with U.S. regulatory authorities securities with a book
value of $284.1 million and $279.1 million, respectively, held for the protection of policyholders.