SEC Info - Unum Group - ‘10-K’ for 12/31/20

109

CONSOLIDATED BALANCE SHEETS

Unum Group and Subsidiaries


	December 31
	2020		2019
	(in millions of dollars)

Assets

Investments
Fixed Maturity Securities - at fair value (amortized cost of $ i 36,546.5; $ i 41,079.3; allowance for credit losses of $ i 6.8; $ i —)	$	i 44,137.3	$	i 47,443.7
Mortgage Loans (net of allowance for credit losses of $ i 13.1; $ i —)	i 2,432.1		i 2,397.0
Policy Loans	i 3,683.9		i 3,779.5
Other Long-term Investments	i 960.2		i 844.2
Short-term Investments	i 1,470.0		i 1,294.5
Total Investments	i 52,683.5		i 55,758.9

Other Assets
Cash and Bank Deposits	i 197.0		i 84.1
Accounts and Premiums Receivable (net of allowance for credit losses of $ i 38.8; $ i 10.3)	i 1,519.3		i 1,602.9
Reinsurance Recoverable (net of allowance for credit losses of $ i 11.7; $ i —)	i 10,666.0		i 4,780.7
Accrued Investment Income	i 611.4		i 693.0
Deferred Acquisition Costs	i 2,272.6		i 2,324.0
Goodwill	i 353.0		i 351.7
Property and Equipment	i 498.0		i 534.1

Income Tax Receivable	i 72.7		i —
Other Assets	i 1,752.3		i 884.0

Total Assets	$	i 70,625.8	$	i 67,013.4

See notes to consolidated financial statements.

110

CONSOLIDATED BALANCE SHEETS - Continued

Unum Group and Subsidiaries


	December 31
	2020		2019
	(in millions of dollars)

Liabilities and Stockholders' Equity

Liabilities
Policy and Contract Benefits	$	i 1,855.4	$	i 1,745.5
Reserves for Future Policy and Contract Benefits	i 49,653.0		i 47,780.1
Unearned Premiums	i 349.3		i 363.9
Other Policyholders’ Funds	i 1,663.9		i 1,599.7
Income Tax Payable	i —		i 256.7
Deferred Income Tax	i 416.1		i 95.4
Short-term Debt	i —		i 399.7
Long-term Debt	i 3,345.7		i 2,926.9
Other Liabilities	i 2,471.4		i 1,880.5

Total Liabilities	i 59,754.8		i 57,048.4

Commitments and Contingent Liabilities - Note 14	i		i

Stockholders' Equity
Common Stock, $ i i 0.10 / par
Authorized: i i 725,000,000 / shares
Issued: i 306,566,572 and i 305,813,326 shares	i 30.7		i 30.6
Additional Paid-in Capital	i 2,376.2		i 2,348.1
Accumulated Other Comprehensive Income	i 374.2		i 37.3
Retained Earnings	i 11,269.6		i 10,728.7
Treasury Stock - at cost: i i 102,876,514 / shares	( i 3,179.7)		( i 3,179.7)

Total Stockholders' Equity	i 10,871.0		i 9,965.0

Total Liabilities and Stockholders' Equity	$	i 70,625.8	$	i 67,013.4

See notes to consolidated financial statements.

111

CONSOLIDATED STATEMENTS OF INCOME

Unum Group and Subsidiaries

Year Ended December 31

2020

2019

2018

(in millions of dollars, except share data)

Revenue

Premium Income

i 9,378.1

i 9,365.6

i 8,986.1

Net Investment Income

i 2,360.7

i 2,435.3

i 2,453.7

Net Realized Investment Gain (Loss)

i 1,199.1

( i 23.2)

( i 39.5)

Other Income

i 224.2

i 221.2

i 198.2

Total Revenue

i 13,162.1

i 11,998.9

i 11,598.5

Benefits and Expenses

Benefits and Change in Reserves for Future Benefits

i 8,972.9

i 7,496.2

i 8,020.4

Commissions

i 1,057.3

i 1,122.7

i 1,108.4

Interest and Debt Expense

i 188.2

i 177.4

i 167.3

Cost Related to Early Retirement of Debt

i —

i 27.3

i —

Deferral of Acquisition Costs

( i 576.2)

( i 658.6)

( i 668.0)

Amortization of Deferred Acquisition Costs

i 606.1

i 609.9

i 565.5

Compensation Expense

i 953.2

i 898.3

i 885.9

Other Expenses

i 996.6

i 943.6

i 891.2

Total Benefits and Expenses

i 12,198.1

i 10,616.8

i 10,970.7

Income Before Income Tax

i 964.0

i 1,382.1

i 627.8

Income Tax Expense (Benefit)

Current

( i 116.6)

i 274.8

i 227.4

Deferred

i 287.6

i 7.0

( i 123.0)

Total Income Tax Expense

i 171.0

i 281.8

i 104.4

Net Income

i 793.0

i 1,100.3

i 523.4

Net Income Per Common Share

Basic

i 3.89

i 5.25

i 2.38

Assuming Dilution

i 3.89

i 5.24

i 2.38

See notes to consolidated financial statements.

112

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Unum Group and Subsidiaries

Year Ended December 31

2020

2019

2018

(in millions of dollars)

Net Income

i 793.0

i 1,100.3

i 523.4

Other Comprehensive Income (Loss)

Change in Net Unrealized Gain on Securities Before Adjustment (net of tax expense (benefit) of $ i 250.2; $ i 757.0; $( i 614.2))

i 983.0

i 2,870.9

( i 2,314.5)

Change in Adjustment to Deferred Acquisition Costs and Reserves for Future Policy and Contract Benefits, Net of Reinsurance (net of tax expense (benefit) of $( i 138.2); $( i 511.7); $ i 371.7)

( i 531.2)

( i 1,942.6)

i 1,411.8

Change in Net Gain on Hedges (net of tax benefit of $ i 23.8; $ i 17.0; $ i 8.2)

( i 90.0)

( i 62.8)

( i 31.7)

Change in Foreign Currency Translation Adjustment (net of tax expense (benefit) of $( i 4.3); $ i 0.2; $( i 0.6))

i 20.3

i 23.6

( i 50.7)

Change in Unrecognized Pension and Postretirement Benefit Costs (net of tax expense (benefit) of $( i 34.8); $( i 9.3); $ i 17.0)

( i 45.2)

( i 37.6)

i 60.9

Total Other Comprehensive Income (Loss)

i 336.9

i 851.5

( i 924.2)

Comprehensive Income (Loss)

i 1,129.9

i 1,951.8

( i 400.8)

See notes to consolidated financial statements.

113

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Unum Group and Subsidiaries

Year Ended December 31

2020

2019

2018

(in millions of dollars)

Common Stock

Balance at Beginning of Year

i 30.6

i 30.5

Common Stock Activity

i 0.1

i —

Balance at End of Year

i 30.7

i 30.6

i 30.5

Additional Paid-in Capital

Balance at Beginning of Year

i 2,348.1

i 2,321.7

i 2,303.3

Common Stock Activity

i 28.1

i 26.4

i 18.4

Balance at End of Year

i 2,376.2

i 2,348.1

i 2,321.7

Accumulated Other Comprehensive Income (Loss)

Balance at Beginning of Year

i 37.3

( i 814.2)

i 127.5

Adjustment to Adopt Accounting Standard Update - Note 1

i —

( i 17.5)

Balance at Beginning of Year, as Adjusted

i 37.3

( i 814.2)

i 110.0

Other Comprehensive Income (Loss)

i 336.9

i 851.5

( i 924.2)

Balance at End of Year

i 374.2

i 37.3

( i 814.2)

Retained Earnings

Balance at Beginning of Year

i 10,728.7

i 9,863.1

i 9,542.2

Adjustment to Adopt Accounting Standard Update - Note 1

( i 18.9)

( i 3.4)

i 14.5

Balance at Beginning of Year, as Adjusted

i 10,709.8

i 9,859.7

i 9,556.7

Net Income

i 793.0

i 1,100.3

i 523.4

Dividends to Stockholders (per common share: $ i 1.14; $ i 1.09; $ i 0.98)

( i 233.2)

( i 231.3)

( i 217.0)

Balance at End of Year

i 11,269.6

i 10,728.7

i 9,863.1

Treasury Stock

Balance at Beginning of Year

( i 3,179.7)

( i 2,779.3)

( i 2,428.6)

Purchases of Treasury Stock

i —

( i 400.4)

( i 350.7)

Balance at End of Year

( i 3,179.7)

( i 2,779.3)

Total Stockholders' Equity at End of Year

i 10,871.0

i 9,965.0

i 8,621.8

See notes to consolidated financial statements.

114

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unum Group and Subsidiaries

Year Ended December 31

2020

2019

2018

(in millions of dollars)

Cash Flows from Operating Activities

Net Income

i 793.0

i 1,100.3

i 523.4

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities

Change in Receivables

i 242.9

i 37.5

( i 4.7)

Change in Deferred Acquisition Costs

i 29.9

( i 48.7)

( i 102.5)

Change in Insurance Reserves and Liabilities

i 1,610.0

i 376.1

i 1,193.1

Change in Income Taxes

( i 31.3)

i 248.2

( i 39.1)

Change in Other Accrued Liabilities

i 160.1

i 51.3

( i 10.1)

Non-cash Components of Net Investment Income

( i 120.5)

( i 237.9)

( i 211.1)

Net Realized Investment (Gain) Loss

( i 1,199.1)

i 23.2

i 39.5

Depreciation

i 113.6

i 110.1

i 101.4

Cash Related to Reinsurance Agreement

( i 1,084.6)

i —

Other, Net

i 83.5

i 81.5

i 46.6

Net Cash Provided by Operating Activities

i 597.5

i 1,741.6

i 1,536.5

Cash Flows from Investing Activities

Proceeds from Sales of Fixed Maturity Securities

i 990.8

i 955.2

i 642.5

Proceeds from Maturities of Fixed Maturity Securities

i 2,052.4

i 2,401.0

i 2,815.4

Proceeds from Sales and Maturities of Other Investments

i 237.0

i 363.5

i 454.0

Purchase of Fixed Maturity Securities

( i 3,169.6)

( i 4,022.4)

( i 3,861.7)

Purchase of Other Investments

( i 440.6)

( i 568.5)

( i 623.2)

Net Sales (Purchases) of Short-term Investments

( i 133.1)

( i 267.6)

i 200.5

Net Increase (Decrease) in Payables for Collateral on Investments

i 314.5

( i 104.1)

( i 268.1)

Acquisition of Business (Net of Cash Acquired)

i —

( i 145.4)

Net Purchases of Property and Equipment

( i 119.1)

( i 150.9)

( i 144.1)

Other, Net

i —

i 0.3

i —

Net Cash Used by Investing Activities

( i 267.7)

( i 1,393.5)

( i 930.1)

Cash Flows from Financing Activities

Short-term Debt Repayment

( i 400.0)

i —

( i 200.0)

Issuance of Long-term Debt

i 494.1

i 841.9

i 290.7

Long-term Debt Repayment

( i 80.0)

( i 493.1)

( i 60.0)

Cost Related to Early Retirement of Debt

i —

( i 25.9)

i —

Issuance of Common Stock

i 4.4

i 6.1

i 4.6

Repurchase of Common Stock

i —

( i 400.3)

( i 356.2)

Dividends Paid to Stockholders

( i 231.9)

( i 229.2)

( i 215.6)

Cash Received Related to Active Life Volatility Cover Agreement

i 62.1

i —

Other, Net

( i 65.6)

( i 57.5)

( i 53.3)

Net Cash Used by Financing Activities

( i 216.9)

( i 358.0)

( i 589.8)

Net Increase (Decrease) in Cash and Bank Deposits

i 112.9

( i 9.9)

i 16.6

Cash and Bank Deposits at Beginning of Year

i 84.1

i 94.0

i 77.4

Cash and Bank Deposits at End of Year

i 197.0

i 84.1

i 94.0

See notes to consolidated financial statements.

115

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unum Group and Subsidiaries

Note 1 - Significant Accounting Policies

i Basis of Presentation: The accompanying consolidated financial statements of Unum Group and its subsidiaries (the Company) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). Such accounting principles differ from statutory accounting principles (see Note 16). Intercompany transactions have been eliminated.

Description of Business: We are a leading provider of financial protection benefits in the United States, the United Kingdom, and Poland. Our products include disability, life, accident, critical illness, dental and vision, and other related services. We market our products primarily through the workplace.

We have i three principal operating business segments: Unum US, Unum International, and Colonial Life. Our other reporting segments are Closed Block and Corporate. See Note 13 for further discussion of our operating segments.

i Use of Estimates: The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.

Fixed Maturity Securities: Fixed maturity securities include long-term bonds and redeemable preferred stocks. Our fixed maturity securities are classified as available-for-sale and reported at fair value. Changes in the fair value of available-for-sale fixed maturity securities, except for amounts related to impairment and credit losses recognized in earnings, are reported as a component of other comprehensive income. These amounts are net of income tax and valuation adjustments to deferred acquisition costs and reserves for future policy and contract benefits which would have been recorded had the related unrealized gain or loss on these securities been realized.

Interest income is recorded as part of net investment income when earned, using an effective yield method giving effect to amortization of premium and accretion of discount. Included within fixed maturity securities are mortgage-backed and asset-backed securities. We recognize investment income on these securities using a constant effective yield based on projected prepayments of the underlying loans and the estimated economic life of the securities. Actual prepayment experience is reviewed periodically, and effective yields are recalculated when differences arise between prepayments originally projected and the actual prepayments received and currently projected. The effective yield is recalculated on a retrospective basis, and the adjustment is reflected in net investment income. For fixed maturity securities on which collection of investment income is uncertain, we discontinue the accrual of investment income and recognize investment income when interest and dividends are received. Payment terms specified for fixed maturity securities may include a prepayment penalty for unscheduled payoff of the investment. Prepayment penalties are recognized as investment income when received.

In determining when a decline in fair value below amortized cost of a fixed maturity security is a credit loss, we evaluate available information, both positive and negative, in reaching our conclusions. In particular, we consider the strength of the issuer's balance sheet, its debt obligations and near-term funding requirements, cash flow and liquidity, the profitability of its core businesses, the availability of marketable assets which could be sold to increase liquidity, its industry fundamentals and regulatory environment, and its access to capital markets. Although all available and applicable factors are considered in our analysis, our expectation of recovering the entire amortized cost basis of the security, whether we intend to sell the security, whether it is more likely than not that we will be required to sell the security before recovery of its amortized cost, and whether the security is current on principal and interest payments are the most critical factors in determining whether impairments represent credit losses. The significance of the decline in value is also an important factor, but we generally do not record an impairment loss based solely on this factor, since often other more relevant factors will impact our evaluation of a security.

For securities with a decline in fair value below amortized costs which we intend to sell or more likely than not will be required to sell before recovery in value, the amortized cost of the investment is written down to fair value through earnings, and an impairment loss is recognized in the current period. For securities that we believe are impaired and which we do not intend to sell and it is not more likely than not that we will be required to sell before recovery in value, we calculate an allowance for credit losses recognized in earnings which generally represents the difference between the amortized cost of the security and the present value of our best estimate of cash flows expected to be collected, discounted using the effective interest rate implicit in the security at the date of acquisition and limited by the difference between amortized cost and fair value of the security. For fixed maturity securities for which we have recognized an allowance for credit loss through earnings, if through subsequent evaluation there is a significant increase in expected cash flows, the allowance is reduced and is recognized as a reduction to credit losses in the current period. See Notes 2 and 3.

116

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 1 - Significant Accounting Policies - Continued

Mortgage Loans: Mortgage loans are generally held for investment and are carried at amortized cost less an allowance for expected credit losses. Interest income is accrued on the principal amount of the loan based on the loan's contractual interest rate. Prepayment penalties are recognized as investment income when received. For mortgage loans on which collection of interest income is uncertain, we discontinue the accrual of interest and recognize it in the period when an interest payment is received. We typically do not resume the accrual of interest on mortgage loans on nonaccrual status until there are significant improvements in the underlying financial condition of the borrower. We consider a loan to be delinquent if full payment is not received in accordance with the contractual terms of the loan.

We evaluate each of our mortgage loans individually for impairment and assign an internal credit quality rating based on a comprehensive rating system used to evaluate the credit risk of the loan. Although all available and applicable factors are considered in our analysis, loan-to-value and debt service coverage ratios are the most critical factors in determining impairment. We estimate an allowance for credit losses that we expect to incur over the life of our mortgage loans using a probability of default method. For each loan, we estimate the probability that the loan will default before its maturity (probability of default) and the amount of the loss if the loan defaults (loss given default). These two factors result in an expected loss percentage that is applied to the amortized cost of each loan to determine the expected credit loss. As we are the original underwriter of the mortgage loans, the amortized cost generally equals the principal amount of the loan. We measure losses on defaults of our mortgage loans as the excess amortized cost of the mortgage loan over the fair value of the underlying collateral in the event that we foreclose on the loan or over the expected future cash flows of the loan if we retain the mortgage loan until payoff. We do not purchase mortgage loans with existing credit impairments.

In estimating the probability of default, we consider historical experience, current market conditions, and reasonable and supportable forecasts about the future market conditions. We utilize our historical loan experience in combination with a large third-party industry database for a period of time that aligns with the average life of our loans based on the maturity dates of the loans and prepayment experience. Our model utilizes an industry database of the historical loss experience based on our actual portfolio characteristics such as loan-to-value, debt service coverage, collateral type, geography, and late payment history. In addition, because we actively manage our portfolio, we may extend the term of a loan in certain situations and will accordingly extend the maturity date in the estimate of probability of default. In estimating the loss given default, we primarily consider the type and value of collateral and secondarily the expected liquidation costs and time to recovery.

The primary market factors that we consider in our forecast of future market conditions are gross domestic product, unemployment rates, interest rates, inflation, commercial real estate values, household formation, and retail sales. We also forecast certain loan specific factors such as growth in the fair value and net operating income of collateral by property type. We include our estimate of these factors over a two-year period and for the remainder of the loans’ estimated lives, adjusted for estimated prepayments. Past the two-year forecast period, we revert to the historical assumptions ratably by the end of the fifth year of the loan after which we utilize only historical assumptions.

We utilize various scenarios to estimate our allowance for expected losses ranging from a base case scenario that reflects normal market conditions to a severe case scenario that reflects adverse market conditions. We will adjust our allowance each period to utilize the scenario or weighting of the scenarios that best reflects our view of current market conditions. Additions and reductions to our allowance for credit losses on mortgage loans are reported as a component of net realized investment gains and losses. See Note 3.

i Policy Loans: Policy loans are presented at unpaid balances directly related to policyholders. Interest income is accrued on the principal amount of the loan based on the loan's contractual interest rate. Included in policy loans are $ i 3,390.6 million and $ i 3,490.6 million of policy loans ceded to reinsurers at December 31, 2020 and 2019, respectively.

Other Long-term Investments: Other long-term investments are comprised primarily of tax credit partnerships, private equity partnerships, and real estate.

Tax credit partnerships in which we have invested were formed for the purpose of investing in the construction and rehabilitation of low-income housing. Because the partnerships are structured such that there is no return of principal, the primary sources of investment return from our tax credit partnerships are tax credits and tax benefits derived from passive losses on the investments, both of which may exhibit variability over the life of the investment. These partnerships are accounted for using either the proportional or the effective yield method, depending primarily on whether the tax credits are guaranteed through a letter of

117

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 1 - Significant Accounting Policies - Continued

credit, a tax indemnity agreement, or another similar arrangement. Tax credits received from these partnerships are reported in our consolidated statements of income as either a reduction of premium tax or a reduction of income tax. The amortization of the principal amount invested in these partnerships is reported as a component of either premium tax or income tax.

Our investments in private equity partnerships are passive in nature and represent funds that are primarily invested in private credit, private equity, and real assets. We account for our investments in these partnerships using either the equity method or at fair value through net income depending on the level of ownership and the degree of our influence over partnership operating and financial policies. For investments in partnerships accounted for under the equity method, we report our investments at our share of the partnership's net asset value (NAV) and record our portion of partnership earnings as a component of net investment income. For investments in partnerships accounted for at fair value through net income, we also report our investments at our share of the partnership's NAV as a practical expedient for fair value with increases or decreases recorded as a component of net investment income. Distributions received from the funds arise from income generated by the underlying investments as well as the liquidation of the underlying investments and there is generally not a public market for these investments.

Investment real estate is primarily comprised of property held for the production of income and property held for sale. Property held for the production of income is carried at cost less accumulated depreciation and any write-downs to fair value for impairment losses. Depreciation is recorded on a straight-line basis over the estimated useful life of the asset. A review for impairment is made whenever events or circumstances indicate that the carrying value may not be recoverable. An impairment loss is recognized when the carrying value of the property exceeds the expected undiscounted cash flows generated from the property, at which point the carrying value is written down to an estimated fair value. Real estate held for sale is carried at the lower of depreciated cost or fair value less estimated selling costs and is not further depreciated once classified as such.

See Notes 2 and 3 for further discussion of our other long-term investments.

Short-term Investments: Short-term investments are carried at cost. Short-term investments include investments maturing within one year of purchase, such as corporate commercial paper and U.S. Treasury bills, bank term deposits, and other cash accounts and cash equivalents earning interest.

i Cash and Bank Deposits: Cash and bank deposits include cash on hand and non-interest bearing cash and deposit accounts.

Derivative Financial Instruments: Derivative financial instruments (including certain derivative instruments embedded in other contracts) are recognized as either other long-term investments or other liabilities in our consolidated balance sheets and are reported at fair value. The accounting for a derivative depends on whether it has been designated and qualifies as part of a hedging relationship, and further, on the type of hedging relationship. To qualify for hedge accounting, at the inception of the hedging transaction, we formally document the risk management objective and strategy for undertaking the hedging transaction, as well as the designation of the hedge as either a fair value hedge or a cash flow hedge. Included in this documentation is how the hedging instrument is expected to hedge the designated risk(s) related to specific assets or liabilities on the balance sheet or to specific forecasted transactions as well as a description of the method that will be used to retrospectively and prospectively assess the hedging instrument's effectiveness.

A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk(s) of the hedged item. Hedge effectiveness is formally assessed at inception and periodically throughout the life of the designated hedging relationship, using qualitative and quantitative methods. Qualitative methods include comparison of critical terms of the derivative to the hedged item. Quantitative methods include regression or other statistical analysis of changes in fair value or cash flows associated with the hedge relationship.

Changes in the fair value of a derivative designated as a fair value hedge and changes in the fair value of the hedged item attributable to the risk being hedged are recognized in earnings as a component of net realized investment gain or loss during the period of change in fair value. For gains or losses on the derivative instrument that are excluded from the assessment of hedge effectiveness, those gains and losses are recognized in other comprehensive income or loss and amortized into earnings in the same income statement line as the related hedged item. The gain or loss on the termination of a fair value hedge is recognized in earnings as a component of net realized investment gain or loss during the period in which the termination occurs. When interest rate swaps are used in hedge accounting relationships, periodic settlements are recorded in the same income statement line as the related settlements of the hedged items.

118

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 1 - Significant Accounting Policies - Continued

Changes in the fair value of a derivative designated as a cash flow hedge are reported in other comprehensive income and reclassified into earnings and reported on the same income statement line item as the hedged item and in the same period or periods during which the hedged item affects earnings. The gain or loss on the termination of an effective cash flow hedge is reported in other comprehensive income and reclassified into earnings and reported on the same income statement line item as the hedged item and in the same period or periods during which the hedged item affects earnings.

Gains or losses on the termination of ineffective fair value or cash flow hedges are reported in earnings as a component of net realized investment gain or loss. In the event a hedged item is disposed of or the anticipated transaction being hedged is no longer likely to occur, we will terminate the related derivative and recognize the gain or loss on termination in current earnings as a component of net realized investment gain or loss. In the event a hedged item is disposed of subsequent to the termination of the hedging transaction, we reclassify any remaining gain or loss on the hedge out of accumulated other comprehensive income into earnings as a component of the same income statement line item wherein we report the gain or loss on disposition of the hedged item.

For a derivative not designated as a hedging instrument, changes in the fair value of the derivative, together with the payment of periodic fees, if applicable, are recognized in earnings as a component of net realized investment gain or loss during the period of change in fair value.

Cash flow activity from the settlement of derivative contracts is reported in the consolidated statements of cash flows as a component of proceeds from sales and maturities of other investments.

In our consolidated balance sheets, we do not offset fair value amounts recognized for derivatives executed with the same counterparty under a master netting agreement and fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral arising from those master netting agreements. See Notes 2, 3, and 4.

i Fair Value Measurement: Certain assets and liabilities are reported at fair value in our consolidated balance sheets and in our notes to our consolidated financial statements. We define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Therefore, fair value represents an exit price, not an entry price. The exit price objective applies regardless of our intent and/or ability to sell the asset or transfer the liability at the measurement date. Assets or liabilities with readily available actively quoted prices or for which fair value can be measured from actively quoted prices in active markets generally have more pricing observability and less judgment utilized in measuring fair value. When actively quoted prices are not available, fair values are based on quoted prices in markets that are not active, quoted prices for similar but not identical assets or liabilities, or other observable inputs. If observable inputs are not available, unobservable inputs and/or adjustments to observable inputs requiring management judgment are used to determine fair value. We categorize our assets and liabilities measured at estimated fair value into a three-level hierarchy, based on the significance of the inputs. The fair value hierarchy gives the highest priority to inputs which are unadjusted and represent quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). See Note 2.

i Realized Investment Gains and Losses: Realized investment gains and losses are reported as a component of revenue in the consolidated statements of income and are based upon specific identification of the investments sold. See Note 3.

Allowance for Credit Losses on Premiums Receivable: We establish an allowance for credit losses on premiums receivable, which is deducted from the gross amount of our receivable balance, to present the net amount we expect to collect on this asset. The allowance is forward-looking in nature and is calculated based on considerations regarding both historical events and future expectations. Periodic changes in the allowance are recorded through earnings.

The allowance on our premiums receivable is primarily determined using an aging analysis as well as historical lapse and delinquency rates by line of business, adjusted for key factors that may impact our future expectation of premium receipts such as changes in customer demographics, business practices, economic conditions, and product offerings. We write off premiums receivable amounts when determined to be uncollectible, which is based on various factors, including the aging of premiums receivable past the due date and specific communication with customers. At January 1, 2020 and December 31, 2020, the allowance for expected credit losses on premium receivables was $ i 23.8 million and $ i 38.8 million, respectively, on gross premium receivables of $ i 543.0 million and $ i 525.8 million, respectively. The allowance at January 1, 2020 includes amounts

119

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 1 - Significant Accounting Policies - Continued

that were previously established at December 31, 2019. The allowance increased $ i 15.0 million during the year ended December 31, 2020, primarily due to the uncertainty of collectability resulting from the impacts of COVID-19, partially offset by premium due write-offs and a decrease in the premium due balance. The primary factors considered in establishing the additional allowance were the recent increase in unemployment levels and the general uncertainty around the financial condition of some of our customers.

Deferred Acquisition Costs: Incremental direct costs associated with the successful acquisition of new or renewal insurance contracts have been deferred. Such costs include commissions, other agency compensation, certain selection and policy issue expenses, and certain field expenses. Acquisition costs that do not vary with the production of new business, such as commissions on group products which are generally level throughout the life of the policy, are excluded from deferral. Deferred acquisition costs are subject to recoverability testing at the time of policy issue and loss recognition testing in subsequent years.

Deferred acquisition costs related to non-interest sensitive policies are amortized in proportion to the premium income we expect to receive over the lives of the policies. Deferred acquisition costs related to interest sensitive policies are amortized over the lives of the policies in relation to the present value of estimated gross profits from surrender charges, mortality margins, investment returns, and expense margins. Deviations from projections result in a change to the rate of amortization in the period during which such events occur. Generally, the amortization periods for these policies approximate the estimated lives of the policies.

For certain products, policyholders can elect to modify product benefits, features, rights, or coverages by exchanging a contract for a new contract or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. These transactions are known as internal replacement transactions. Internal replacement transactions wherein the modification does not substantially change the policy are accounted for as continuations of the replaced contracts. Unamortized deferred acquisition costs from the original policy continue to be amortized over the expected life of the new policy, and the costs of replacing the policy are accounted for as policy maintenance costs and expensed as incurred. Internal replacement transactions, principally on group contracts, that result in a policy that is substantially changed are accounted for as an extinguishment of the original policy and the issuance of a new policy. Unamortized deferred acquisition costs on the original policy that was replaced are immediately expensed, and the costs of acquiring the new policy are capitalized and amortized in accordance with our accounting policies for deferred acquisition costs.

Loss recognition testing is performed on an annual basis, or more frequently if appropriate, using best estimate assumptions as to future experience as of the date of the test. Insurance contracts are grouped for each major product line within a segment when we perform the loss recognition tests. If loss recognition testing indicates that deferred acquisition costs are not recoverable, the deficiency is charged to expense.

i Goodwill: Goodwill is the excess of the amount paid to acquire a business over the fair value of the net assets acquired. We review the carrying amount of goodwill for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the carrying amount might not be recoverable. Goodwill impairment testing compares the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit to which the goodwill relates is less than the carrying amount of the reporting unit, an impairment charge is recognized for the amount by which the carrying amount exceeds the fair value of the reporting unit in an amount not to exceed the total amount of goodwill allocated to the reporting unit.

i Property and Equipment: Property and equipment is reported at cost less accumulated depreciation, which is calculated on the straight-line method over the estimated useful life. The accumulated depreciation for property and equipment was $ i 1,239.9 million and $ i 1,195.3 million as of December 31, 2020 and 2019, respectively.

i Value of Business Acquired: Value of business acquired represents the present value of future profits recorded in connection with the acquisition of a block of insurance policies. The asset is amortized based upon expected future premium income for non-interest sensitive insurance policies and estimated future gross profits from surrender charges, mortality margins, investment returns, and expense margins for interest sensitive insurance policies. The value of business acquired, which is included in other assets in our consolidated balance sheets, was $ i 83.8 million and $ i 88.7 million at December 31, 2020 and 2019, respectively. The accumulated amortization for value of business acquired was $ i 153.7 million and $ i 144.1 million as of December 31, 2020 and 2019, respectively. /

120

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 1 - Significant Accounting Policies - Continued

The amortization of value of business acquired, which is included in other expenses in the consolidated statements of income, was $ i 6.1 million, $ i 7.1 million, and $ i 6.4 million for the years ended December 31, 2020, 2019, and 2018, respectively. We periodically review the carrying amount of value of business acquired using the same methods used to evaluate deferred acquisition costs.

i Policy and Contract Benefits: Policy and contract benefits represent amounts paid and expected to be paid based on reported losses and estimates of incurred but not reported losses for non-interest sensitive life and accident and health products. For interest sensitive products, benefits are the amounts paid and expected to be paid on insured claims in excess of the policyholders' policy fund balances.

Reserves for Policy and Contract Benefits: Policy reserves represent future policy and contract benefits for claims not yet incurred. Policy reserves for non-interest sensitive life and accident and health products are determined using the net level premium method. The reserves are calculated based upon assumptions as to interest, persistency, morbidity, and mortality that were appropriate at the date of issue. Discount rate assumptions are based on actual and expected net investment returns. Persistency assumptions are based on our actual historical experience adjusted for future expectations. Claim incidence and claim resolution rate assumptions related to morbidity and mortality are based on actual experience or industry standards adjusted as appropriate to reflect our actual experience and future expectations. The assumptions vary by plan, year of issue, and policy duration and include a provision for adverse deviation.

Policy reserves for group single premium annuities are developed on a net single premium method. The reserves are calculated based on assumptions as to interest, mortality, and retirement that were appropriate at the date of issue. Mortality assumptions are based upon industry standards adjusted as appropriate to reflect our actual experience and future expectations. The assumptions vary by year of issue.

Policy reserves for interest sensitive products are principally policyholder account values.

Policy reserves require ongoing loss recognition testing. We perform loss recognition tests on our policy reserves annually, or more frequently if appropriate, using best estimate assumptions as of the date of the test, without a provision for adverse deviation. We group the policy reserves for each major product line within a segment when we perform the loss recognition tests. If the policy reserves determined using these best estimate assumptions are higher than our existing policy reserves net of any deferred acquisition cost balance, the existing policy reserves are increased or deferred acquisition costs are reduced to immediately recognize the deficiency. This becomes the new basis for policy reserves going forward, subject to future loss recognition testing.

Claim reserves represent future policy and contract benefits for claims that have been incurred or are estimated to have been incurred but not yet reported to us. Our claim reserves relate primarily to disability and long-term care policies and are calculated based on assumptions as to interest and claim resolution rates that are currently appropriate. Claim resolution rate assumptions are based on our actual experience. The interest rate assumptions used for discounting claim reserves are based on projected portfolio yield rates, after consideration for defaults and investment expenses, for the assets supporting the liabilities for the various product lines. Unlike policy reserves for which assumptions are generally established and locked in at the time of policy issuance, claim reserves are subject to revision as current claim experience and projections of future factors affecting claim experience change. Claim reserves do not include a provision for adverse deviation. See Note 6.

i Policyholders Funds: Policyholders' funds represent customer deposits plus interest credited at contract rates. We control interest rate risk by investing in quality assets which have an aggregate duration that closely matches the expected duration of the liabilities.

i Income Tax: Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. Deferred taxes have been measured using enacted statutory income tax rates and laws that are currently in effect. We record adjustments to our deferred taxes resulting from tax rate changes through income as of the date of enactment. We record deferred tax assets for tax positions taken in the U.S. and other tax jurisdictions based on our assessment of whether a position is more likely than not to be sustained upon examination based solely on its technical merits. A valuation allowance is established for deferred tax assets when it is more

121

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 1 - Significant Accounting Policies - Continued

likely than not that an amount will not be realized. We follow an aggregate portfolio approach to release disproportionate tax effects from accumulated other comprehensive income upon disposal of an entire business segment's portfolio. See Note 7.

i Short-term and Long-term Debt: Debt is generally carried at the unpaid principal balance, net of unamortized discount or premium and deferred debt issuance costs. Short-term debt consists of debt due within the next twelve months, including that portion of debt otherwise classified as long-term. The amortization of the original issue discount or premium as well as deferred debt issuance costs are recognized as a component of interest expense over the period the debt is expected to be outstanding. The carrying amount of long-term debt that is part of a fair value hedge program includes an adjustment to reflect the effect of the change in fair value attributable to the risk being hedged. Net interest settlements for fair value hedges on our long-term debt are recognized as a component of interest expense. See Note 8.

Right-of-Use Asset (ROU) and Lease Liability: ROU assets represent our right to use an underlying asset for a specified lease term and are included in other assets in our consolidated balance sheet. Lease liabilities represent the present value of lease payments that we are obligated to pay arising from a lease and are included in other liabilities in our consolidated balance sheet.

We determine if an arrangement is a lease at inception through a formal process that evaluates our right to control the use of an identified asset for a period of time in exchange for consideration. i We account for the lease and non-lease components of our building leases separately and have elected to use the available practical expedient to account for the lease and non-lease components of our equipment leases as a single component. All of our leases are classified as operating. For each operating lease, we calculate a lease liability at commencement date based on the present value of lease payments over the lease term and a corresponding ROU asset, adjusted for lease incentives. i We do not recognize right-of-use assets and lease liabilities that arise from short-term leases for any class of underlying asset.

We consider the likelihood of renewal in determining the lease terms for the calculation of the ROU asset and lease liability. As most of our leases do not provide an implicit rate of interest, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate of interest when readily determinable.

Operating lease cost is calculated on a straight-line basis over the lease term and is included in other expenses in our consolidated statements of income. We amortize the ROU asset over the lease term on a pattern determined by the difference between the straight-line lease liability expense and the accretion of the imputed interest calculated on the lease liability. See Note 15.

i Treasury Stock and Retirement of Common Stock: Treasury stock is reflected as a reduction of stockholders' equity at cost. When shares are retired, the par value is removed from common stock, and the excess of the repurchase price over par is allocated between additional paid-in capital and retained earnings. See Note 10.

Revenue Recognition: Our non-interest sensitive life and accident and health products are long-duration contracts, and premium income is recognized as revenue when due from policyholders. If the contracts are experience rated, the estimated ultimate premium is recognized as revenue over the period of the contract. The estimated ultimate premium, which is revised to reflect current experience, is based on estimated claim costs, expenses, and profit margins.

For interest sensitive products, the amounts collected from policyholders are considered deposits, and only the deductions during the period for cost of insurance, policy administration, and surrenders are included in revenue. Policyholders' funds represent funds deposited by contract holders and are not included in revenue.

i Fees from our leave management services and administrative-services only (ASO) business are reported as other income when services are rendered.

i Reinsurance: We routinely enter into reinsurance agreements with other insurance companies to spread risk and thereby limit losses from large exposures. For each of our reinsurance agreements, we determine if the agreement provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. If we determine that a reinsurance agreement does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, we record the agreement using the deposit method of accounting.

122

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 1 - Significant Accounting Policies - Continued

Reinsurance activity is accounted for on a basis consistent with the terms of the reinsurance contracts and the accounting used for the original policies issued. Premium income and benefits and change in reserves for future benefits are presented in our consolidated statements of income net of reinsurance ceded. Ceded liabilities for policy and contract benefits, future policy and contract benefits, and unearned premiums are reported on a gross basis in our consolidated balance sheets, as are ceded policy loans. Our reinsurance recoverable includes the balances due from reinsurers under the terms of the reinsurance agreements for these ceded balances as well as settlement amounts currently due.

Where applicable, gains or costs recognized on reinsurance transactions are generally deferred and amortized into earnings based upon expected future premium income for non-interest sensitive insurance policies and estimated future gross profits for interest sensitive insurance policies. Gains or costs recognized on reinsurance transactions for non-interest sensitive products for which we no longer receive premiums are generally deferred and amortized into earnings based upon expected claim reserve patterns. The cost of reinsurance included in other assets in our consolidated balance sheet at December 31, 2020 was $ i 813.0 million. The deferred gain on reinsurance included in other liabilities in our consolidated balance sheets at December 31, 2020 and December 31, 2019 was $ i 5.6 million and $ i 8.5 million, respectively.

Under ceded reinsurance agreements wherein we are not relieved of our legal liability to our policyholders, if the assuming reinsurer is unable to meet its obligations, we remain contingently liable. We evaluate the financial condition of reinsurers and monitor concentration of credit risk to minimize this exposure. We may also require assets in trust, letters of credit, or other acceptable collateral to support our reinsurance recoverable balances. We estimate an allowance for expected credit losses for our reinsurance recoverable balance using a probability of default approach which incorporates key inputs and assumptions regarding historical insurer liquidation rates, counterparty credit ratings, and collateral received. Liquidation rates are derived from rating agency studies covering domestic insurers and are based on historical liquidation trends according to their respective credit ratings. When calculating our allowance, we apply these liquidation rates to the net amount of our credit exposure, which considers collateral arrangements such as letters of credit and trust accounts. We evaluate the factors used to determine our allowance on a quarterly basis to consider material changes in our assumptions and make adjustments accordingly. At January 1, 2020 and December 31, 2020, the allowance for expected credit losses on reinsurance recoverables was $ i 1.8 million and $ i 11.7 million, respectively. The allowance increased $ i 9.9 million during the year ended December 31, 2020, primarily due to an increase in the reinsurance recoverable balance, changes in certain counterparty credit ratings, and changes in our assumptions about the recoverability of receivables from certain counterparties. See Note 12.

i Premium Tax Expense: Premium tax expense is included in other expenses in the consolidated statements of income. For the years ended December 31, 2020, 2019, and 2018, premium tax expense was $ i 175.5 million, $ i 170.1 million, and $ i 155.8 million, respectively. /

i Stock-Based Compensation: The cost of stock-based compensation is generally measured based on the grant-date fair value of the award. The Black-Scholes options valuation model is used for estimating the fair value of stock options, and the Monte-Carlo valuation model is used for estimating the fair value of performance units. Restricted stock units and stock success units are valued based on the fair value of common stock at the grant date. Stock-based awards are expensed over the requisite service period, or for performance units over the requisite service period, or remaining service period, if and when it becomes probable that the performance conditions will be satisfied, with an offsetting increase to additional paid-in capital in stockholders' equity. Forfeitures of stock-based awards are recognized as they occur. See Note 11.

i Earnings Per Share: We compute basic earnings per share by dividing net income by the weighted average number of common shares outstanding for the period. Earnings per share assuming dilution is computed by dividing net income by the weighted average number of shares outstanding for the period plus the shares representing the dilutive effect of stock-based awards. In computing earnings per share assuming dilution, only potential common shares resulting from stock-based awards that are dilutive (those that reduce earnings per share) are included. We use the treasury stock method to account for the effect of outstanding stock options and nonvested stock awards on the computation of earnings per share assuming dilution. See Note 10.

i Translation of Foreign Currency: Revenues and expenses of our foreign operations are translated at average exchange rates. Assets and liabilities are translated at the rate of exchange on the balance sheet dates. The translation gain or loss is generally reported in accumulated other comprehensive income, net of income tax. We do not provide for deferred taxes to the extent unremitted foreign earnings are deemed permanently invested.

123

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 1 - Significant Accounting Policies - Continued

i Accounting for Participating Individual Life Insurance: Participating policies issued by one of our subsidiaries prior to its 1986 conversion from a mutual to a stock life insurance company will remain participating as long as the policies remain in-force. A Participation Fund Account (PFA) was established for the benefit of all such individual participating life and annuity policies and contracts. The assets of the PFA provide for the benefit, dividend, and certain expense obligations of the participating individual life insurance policies and annuity contracts. The assets of the PFA were $ i 319.8 million and $ i 311.2 million at December 31, 2020 and 2019, respectively. /

124

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 1 - Significant Accounting Policies - Continued

Accounting Updates Adopted in 2020:

Accounting Standards Codification (ASC)

Description

Date of Adoption

Effect on Financial Statements

ASC 350 "Intangibles - Goodwill and Other"

This update eliminated the requirement to calculate the implied fair value of goodwill (the second step in the current two-step test) to measure a goodwill impairment charge. Instead, entities should perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the excess of the carrying amount over the fair value, with the loss not to exceed the total amount of goodwill allocated to that reporting unit. This guidance was applied in the period of adoption.

January 1, 2020

The adoption of this update did not have an effect on our financial position or results of operations.

ASC 820 "Fair Value Measurement"

This update amended the fair value measurement guidance by removing or clarifying certain existing disclosure requirements, while also adding new disclosure requirements. Specifically, this update removed certain disclosures related to Level 1 and Level 2 transfers and removed the discussion regarding valuation processes of Level 3 fair value measurements. The update modified guidance related to investments in certain entities that calculate net asset value to explicitly require disclosure regarding timing of liquidation of the investee's assets and timing of redemption restrictions. The update added disclosures around the changes in unrealized gains and losses in other comprehensive income for recurring Level 3 investments held at the end of the reporting period and adds disclosures regarding certain unobservable inputs on Level 3 fair value measurements. The guidance was applied both retrospectively and prospectively, depending on the specific requirement of the update.

December 31, 2018 for the removal and modification of certain disclosures and January 1, 2020 for the addition of certain disclosures.

The adoption of this update modified our disclosures but did not have an impact on our financial position or results of operations.

ASC 715 "Compensation - Retirement Benefits"

This update amends the defined benefit pension and other postretirement benefit guidance by removing or clarifying certain existing disclosure requirements, while also adding new disclosure requirements. Specifically, this update removes the requirement to disclose the effects of a one-percentage point change in the assumed healthcare cost trend and the requirement to disclose amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost of the next year. This update adds a requirement to describe the reasons for significant gains and losses related to changes in the benefit obligation for the period. The update also clarifies that the projected benefit obligation (PBO) and accumulated benefit obligation (ABO) and fair value of plan assets are to be disclosed for plans with PBOs or ABOs in excess of plan assets. The guidance is to be applied retrospectively and early adoption is permitted.

The adoption of this update modified our disclosures but did not have an impact on our financial position or results of operations.

125

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 1 - Significant Accounting Policies - Continued

Accounting Standards Codification (ASC)

Description

Date of Adoption

Effect on Financial Statements

ASC 326 "Financial Instruments - Credit Losses"

This update amended the guidance on the impairment of financial instruments. The update added an impairment model known as the current expected credit loss model that is based on expected losses rather than incurred losses and will generally result in earlier recognition of allowances for losses. The current expected credit loss model applies to financial instruments such as mortgage loans, fixed maturity securities classified as held-to-maturity, and certain receivables. The update also modified the other-than-temporary impairment model used for available-for-sale fixed maturity securities such that credit losses are recognized as an allowance rather than as a reduction in the amortized cost of the security. The reversal of previously recognized credit losses on available-for-sale fixed maturity securities is allowed under specified circumstances. Additional disclosures are also required, including information used to develop the allowance for losses. The guidance was applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. For available-for-sale fixed maturity securities, the update was applied prospectively. Other-than-temporary impairment losses recognized on available-for-sale fixed maturity securities prior to adoption of the update cannot be reversed. This guidance was applied in the period of adoption.

January 1, 2020

See the summary table below for the financial statement impacts of this adoption on our financial statement line items at January 1, 2020. In addition, see Note 3 of the "Notes to Consolidated Financial Statements" contained herein in this Item 1 for the additional disclosures required by the update.

Summary of Financial Statement Impacts of Accounting Updates Adopted in 2020:

Balance at December 31, 2019

Balance at
January 1, 2020

Effect of Change

(in millions of dollars)

Adjustments due to ASC 326

Consolidated Balance Sheets

Assets

Mortgage Loans

i 2,397.0

i 2,388.7

( i 8.3)

Reinsurance Recoverable

i 4,780.7

i 4,778.9

( i 1.8)

Accounts and Premiums Receivable

i 1,602.9

i 1,589.4

( i 13.5)

Liabilities

Deferred Income Tax

i 95.4

i 90.4

( i 5.0)

Other Liabilities

i 1,856.5

i 1,856.8

i 0.3

Stockholders' Equity

Retained Earnings

i 10,728.7

i 10,709.8

( i 18.9)

126

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 1 - Significant Accounting Policies - Continued

Accounting Updates Adopted in 2019:

Accounting Standards Codification (ASC)

Description

Date of Adoption

Effect on Financial Statements

ASC 220 "Income Statement - Reporting Comprehensive Income"

This update allowed entities to make an accounting policy election to reclassify the disproportionate tax effects arising as a result of the recognition of the enactment of the tax bill, H.R.1, An Act to Provide Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018, more commonly known as TCJA, from accumulated other comprehensive income to retained earnings. Tax effects that are disproportionate in accumulated other comprehensive income for reasons other than the TCJA may not be reclassified. This update required additional disclosures on whether an entity elects to reclassify the disproportionate tax effects and its policy for releasing tax effects from accumulated other comprehensive income.

The adoption of this update expanded certain of our disclosures but had no impact on our financial position or results of operations because we did not make the optional accounting policy election to reclassify the disproportionate tax effects resulting from the TCJA from accumulated other comprehensive income to retained earnings.

ASC 310 "Receivables - Nonrefundable Fees and Other Costs"

This update shortened the amortization period to the earliest call date for certain callable debt securities held at a premium. This update did not impact securities held at a discount.

The adoption of this update did not have a material impact on our financial position or results of operations.

ASC 718 "Compensation - Stock Compensation"

This update generally aligned the accounting guidance for share-based payments issued to non-employees with guidance for share-based payments issued to employees. Specifically, the update required non-employee share-based payments to be measured using the grant date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered rather than being remeasured through the performance completion date. Additionally, for non-employee share-based payments that contain performance conditions, the update changed the criteria regarding the recognition of compensation cost to when achievement of a performance condition is probable rather than upon actual achievement of the performance condition.

The adoption of this update did not have an impact on our financial position or results of operations.

ASC 842 "Leases"

This update changed the accounting for leases, requiring lessees to report most leases on their balance sheets, regardless of whether the lease is classified as a finance lease or an operating lease. For lessees, the initial lease liability is equal to the present value of lease payments, and a corresponding asset, adjusted for certain items, is also recorded. Expense recognition for lessees remained similar to previous accounting requirements for capital and operating leases. For lessors, the guidance modified the classification criteria and the accounting for sales-type and direct financing leases. The guidance was applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings at the beginning of the period of adoption. In addition, the package of practical expedients available to leases that commenced prior to the date of adoption was applied.

The adoption of this update resulted in the recognition of a lease liability of $122.0 million, with a corresponding right-of-use asset of $117.7 million, less an immaterial cumulative-effect decrease to retained earnings of $3.4 million related to our operating leases. There were also immaterial impacts to deferred income tax and income tax payable. This update did not have an impact on our results of operations, but it expanded our disclosures.

127

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 1 - Significant Accounting Policies - Continued

Accounting Updates Adopted in 2018:

ASC

Description

Date of Adoption

Effect on Financial Statements

ASC 230 "Statement of Cash Flows"

This update provided clarifying guidance intended to reduce the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The update addressed eight specific cash flow issues that relate to various types of transactions. The guidance was applied retrospectively.

The adoption of this update resulted in the reclassification of certain cash inflows between investing activities and operating activities within our consolidated statements of cash flows. The reclassification primarily related to cash distributions from equity method investees and the bifurcation of those distributions as either returns on investment or returns of investment which resulted in a reclassification of cash inflows from investing activities to operating activities. The remaining portion of the reclassification related to the receipt of proceeds from corporate-owned life insurance benefits which resulted in a reclassification of cash inflows from operating activities to investing activities. The adoption of this update had no effect on our financial position or results of operations.

ASC 606 "Revenue from Contracts with Customers"

These updates superseded virtually all existing guidance regarding the recognition of revenue from customers. Specifically excluded from the scope of these updates are insurance contracts, although our fee-based service products are included within the scope. Our fee-based service products, which are primarily sold in our Unum US segment, are reported in other income within our consolidated statements of income and represent less than one percent of our total revenue. The core principle of this guidance is that revenue recognition should depict the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Accordingly, we continue to recognize revenue for these fee-based service products as services are rendered.

The adoption of these updates did not have an impact on our financial position or results of operations and did not result in expanded disclosures due to the immaterial nature of our fee-based service products relative to our overall business.

128

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 1 - Significant Accounting Policies - Continued

ASC

Description

Date of Adoption

Effect on Financial Statements

ASC 715 "Compensation - Retirement Benefits"

This update required the service cost component of net periodic pension and postretirement benefit costs to be included as a component of compensation costs in an entity's statement of income. Other components of net periodic pension and postretirement benefit costs are required to be presented separately from the service cost along with a disclosure identifying the line items in which these costs are presented in the statement of income. The amendments in this update were applied retrospectively or prospectively depending on the specific requirement of the update.

The adoption of this update resulted in the reclassification of service cost from the other expenses line item to the compensation expense line item on our consolidated statements of income but had no effect on our financial position or results of operations. We elected to use the practical expedient for the retrospective application of this update.

ASC 740 "Income Taxes"

This update eliminated the exception that required the tax effect of intra-entity asset transfers other than inventory to be deferred until the transferred asset is sold to a third party or otherwise recovered through use. It required recognition of tax expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation.

The adoption of this update did not have an impact on our financial position or results of operations.

ASC 815 "Derivatives and Hedge Accounting"

This update provided targeted improvements to accounting for hedging activities for both nonfinancial and financial risk components, aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements, eases certain documentation and effectiveness assessment requirements, and enhances transparency through expanded disclosures. The amended presentation and disclosure guidance was adopted prospectively. Early adoption was permitted.

We elected to early adopt this update. The adoption of this update did not have an impact on our financial position or results of operations; however, it expanded our disclosures. This update also simplified hedge documentation requirements and expanded available hedging strategies.

ASC 825 "Financial Instruments - Overall"

This update changed the accounting and disclosure requirements for certain financial instruments. These changes include a requirement to measure equity investments, other than those that result in consolidation or are accounted for under the equity method, at fair value through net income unless the investment qualifies for certain practicability exceptions. In addition, the update clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale fixed maturity securities. Changes also included the modification of certain disclosures around the fair value of financial instruments, including the requirement for separate presentation of financial assets and liabilities by measurement category, as well as the elimination of certain disclosures around methods and significant assumptions used to estimate fair value. The guidance was applied using a modified retrospective approach through a cumulative-effect adjustment to accumulated other comprehensive income with a corresponding adjustment to retained earnings as of the beginning of the fiscal year of adoption.

The adoption of this update resulted in a cumulative-effect reduction to accumulated other comprehensive income of $17.5 million with a corresponding increase to retained earnings of $14.5 million, a decrease to other long-term investments of $3.8 million, and a decrease to deferred income tax liability of $0.8 million.

129

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 1 - Significant Accounting Policies - Continued

Accounting Updates Outstanding:

ASC

Description

Date of Adoption

Effect on Financial Statements

ASC 740 "Income Taxes"

The amendments in this update simplify the accounting for income taxes by removing certain exceptions in the guidance related to the following: 1. losses in continuing operations when there is income in other items, 2. foreign subsidiaries becoming equity method investments and vice versa, and 3. year-to-date interim period losses exceeding anticipated loss for the year. The amendments also simplify the accounting for income taxes related to the following: 1. franchise taxes partially based on income, 2. step up in the tax basis of goodwill, 3. allocation of tax expense to entities not subject to tax, 4. enacted changes in tax law or rates in interim periods, and 5. employee stock ownership programs and investments in qualified affordable housing projects accounted for using the equity method.

January 1, 2021

The adoption of this update will not have a material effect on our financial position or results of operations.

ASC 848 "Reference Rate Reform"

The amendments in this update provide optional guidance, for a limited period of time, to ease the potential burden in accounting for and recognizing the effects of reference rate reform on financial reporting. The guidance allows for various practical expedients and exceptions when applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. Specifically, the guidance provides certain practical expedients for contract modifications, fair value hedges, and cash flow hedges and also provides certain exceptions related to changes in the critical terms of a hedging relationship. The guidance also allows for a one-time election to sell or transfer debt securities that were both classified as held-to-maturity prior to January 1, 2020 and reference a rate affected by the reform.

Adoption is permitted as of the beginning of the interim period that includes March 12, 2020 (the issuance date of the update), or any date thereafter, through December 31, 2022, at which point the guidance will sunset.

We have not yet determined the impact on our financial position or results of operations if we elect to adopt this guidance.

130

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 1 - Significant Accounting Policies - Continued

ASC

Description

Date of Adoption

Effect on Financial Statements

ASC 944 "Financial Services - Insurance"

This update significantly amends the accounting and disclosure requirements for long-duration insurance contracts. These changes include a requirement to review, and if necessary, update cash flow assumptions used to measure the liability for future policy benefits for traditional and limited-payment contracts at least annually, with changes recognized in earnings. In addition, an entity will be required to update the discount rate assumption at each reporting date using a yield that is reflective of an upper-medium grade fixed-income instrument, with changes recognized in other comprehensive income. These changes result in the elimination of the provision for risk of adverse deviation and premium deficiency (or loss recognition) testing. The update also requires that an entity measure all market risk benefits associated with deposit contracts at fair value, with changes recognized in earnings except for the portion attributable to a change in the instrument-specific credit risk, which is to be recognized in other comprehensive income. This update also simplifies the amortization of deferred acquisition costs by requiring amortization on a constant level basis over the expected term of the related contracts. Deferred acquisition costs are required to be written off for unexpected contract terminations but are no longer subject to an impairment test. Significant additional disclosures will also be required, which include disaggregated rollforwards of certain liability balances and the disclosure of qualitative and quantitative information about expected cash flows, estimates, and assumptions. The application of this guidance will vary based upon the specific requirements of the update but will generally result in either a modified retrospective or full retrospective approach with changes applied as of the beginning of the earliest period presented. Early adoption is permitted.

January 1, 2023

We are currently evaluating the impact of the update and expect that the adoption may have a material impact on our financial position and results of operations. The update will also significantly expand our disclosures.

131

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 2 - Fair Values of Financial Instruments

Fair Value Measurements for Financial Instruments Carried at Fair Value

We report fixed maturity securities, which are classified as available-for-sale securities, derivative financial instruments, and unrestricted equity securities at fair value in our consolidated balance sheets. We report our investments in private equity partnerships at our share of the partnerships' net asset value per share or its equivalent (NAV) as a practical expedient for fair value. See Note 1.

The degree of judgment utilized in measuring the fair value of financial instruments generally correlates to the level of pricing observability. Financial instruments with readily available active quoted prices or for which fair value can be measured from actively quoted prices in active markets generally have more pricing observability and less judgment utilized in measuring fair value. An active market for a financial instrument is a market in which transactions for an asset or a similar asset occur with sufficient frequency and volume to provide pricing information on an ongoing basis. A quoted price in an active market provides the most reliable evidence of fair value and should be used to measure fair value whenever available. Conversely, financial instruments rarely traded or not quoted have less observability and are measured at fair value using valuation techniques that require more judgment. Pricing observability is generally impacted by a number of factors, including the type of financial instrument, whether the financial instrument is new to the market and not yet established, the characteristics specific to the transaction, and overall market conditions.

We classify financial instruments in accordance with a fair value hierarchy consisting of three levels based on the observability of valuation inputs:

•Level 1 - the highest category of the fair value hierarchy classification wherein inputs are unadjusted and represent quoted prices in active markets for identical assets or liabilities at the measurement date.

•Level 2 - valued using inputs (other than prices included in Level 1) that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument's anticipated life.

•Level 3 - the lowest category of the fair value hierarchy and reflects the judgment of management regarding what market participants would use in pricing assets or liabilities at the measurement date. Financial assets and liabilities categorized as Level 3 are generally those that are valued using unobservable inputs to extrapolate an estimated fair value.

Valuation Methodologies of Financial Instruments Measured at Fair Value

Valuation techniques used for assets and liabilities accounted for at fair value are generally categorized into three types. The market approach uses prices and other relevant information from market transactions involving identical or comparable assets or liabilities. The income approach converts future amounts, such as cash flows or earnings, to a single present amount, or a discounted amount. The cost approach is based upon the amount that currently would be required to replace the service capacity of an asset, or the current replacement cost.

We use valuation techniques that are appropriate in the circumstances and for which sufficient data are available that can be obtained without undue cost and effort. In some cases, a single valuation technique will be appropriate (for example, when valuing an asset or liability using quoted prices in an active market for identical assets or liabilities). In other cases, multiple valuation techniques will be appropriate. If we use multiple valuation techniques to measure fair value, we evaluate and weigh the results, as appropriate, considering the reasonableness of the range indicated by those results. A fair value measurement is the point within that range that is most representative of fair value in the circumstances.

The selection of the valuation method(s) to apply considers the definition of an exit price and depends on the nature of the asset or liability being valued. For assets and liabilities accounted for at fair value, we generally use valuation techniques consistent with the market approach, and to a lesser extent, the income approach. We believe the market approach provides more observable data than the income approach, considering the type of investments we hold. Our fair value measurements could differ significantly based on the valuation technique and available inputs. When using a pricing service, we obtain the vendor's pricing documentation to ensure we understand their methodologies. We periodically review and approve the selection of our

132

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 2 - Fair Values of Financial Instruments - Continued

pricing vendors to ensure we are in agreement with their current methodologies. When markets are less active, brokers may rely more on models with inputs based on the information available only to the broker. Our internal investment management professionals, which include portfolio managers and analysts, monitor securities priced by brokers and evaluate their prices for reasonableness based on benchmarking to available primary and secondary market information. In weighing a broker quote as an input to fair value, we place less reliance on quotes that do not reflect the result of market transactions. We also consider the nature of the quote, particularly whether it is a bid or market quote. If prices in an inactive market do not reflect current prices for the same or similar assets, adjustments may be necessary to arrive at fair value. When relevant market data is unavailable, which may be the case during periods of market uncertainty, the income approach can, in suitable circumstances, provide a more appropriate fair value. During 2020, we have applied valuation approaches and techniques on a consistent basis to similar assets and liabilities and consistent with those approaches and techniques used at year end 2019.

Fixed Maturity and Equity Securities

We use observable and unobservable inputs in measuring the fair value of our fixed maturity and equity securities. For securities categorized as Level 1, fair values equal active Trade Reporting and Compliance Engine (TRACE) pricing or unadjusted broker market maker prices. For securities categorized as Level 2 or Level 3, inputs that may be used in valuing each class of securities at any given time period are disclosed below. Actual inputs used to determine fair values will vary for each reporting period depending on the availability of inputs which may, at times, be affected by the lack of market liquidity.

Level 2

Level 3

Instrument

Observable Inputs

Unobservable Inputs

United States Government and Government Agencies and Authorities

Valuation Method

Principally the market approach

Not applicable

Valuation Techniques / Inputs

Prices obtained from external pricing services

States, Municipalities, and Political Subdivisions

Valuation Method

Principally the market approach

Valuation Techniques / Inputs

Prices obtained from external pricing services

Analysis of similar bonds, adjusted for comparability

Relevant reports issued by analysts and rating agencies

Audited financial statements

Foreign Governments

Valuation Method

Principally the market approach

Valuation Techniques / Inputs

Prices obtained from external pricing services

Analysis of similar bonds, adjusted for comparability

Non-binding broker quotes

Call provisions

Public Utilities

Valuation Method

Principally the market and income approaches

Valuation Techniques / Inputs

Prices obtained from external pricing services

Change in benchmark reference

133

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 2 - Fair Values of Financial Instruments - Continued

Level 2

Level 3

Instrument

Observable Inputs

Unobservable Inputs

Public Utilities - Continued

Non-binding broker quotes

Analysis of similar bonds, adjusted for comparability

Benchmark yields

Discount for size - illiquidity

Transactional data for new issuances and secondary trades

Volatility of credit

Security cash flows and structures

Lack of marketability

Recent issuance / supply

Audited financial statements

Security and issuer level spreads

Security creditor ratings/maturity/capital structure/optionality

Public covenants

Comparative bond analysis

Relevant reports issued by analysts and rating agencies

Mortgage/Asset-Backed Securities

Valuation Method

Principally the market and income approaches

Principally the market approach

Valuation Techniques / Inputs

Prices obtained from external pricing services

Analysis of similar bonds, adjusted for comparability

Non-binding broker quotes

Prices obtained from external pricing services

Security cash flows and structures

Underlying collateral

Prepayment speeds/loan performance/delinquencies

Relevant reports issued by analysts and rating agencies

Audited financial statements

All Other Corporate Bonds

Valuation Method

Principally the market and income approaches

Valuation Techniques / Inputs

Prices obtained from external pricing services

Change in benchmark reference

Non-binding broker quotes

Discount for size - illiquidity

Benchmark yields

Volatility of credit

Transactional data for new issuances and secondary trades

Lack of marketability

Security cash flows and structures

Prices obtained from external pricing services

Recent issuance / supply

Security and issuer level spreads

Security creditor ratings/maturity/capital structure/optionality

134

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 2 - Fair Values of Financial Instruments - Continued

Level 2

Level 3

Instrument

Observable Inputs

Unobservable Inputs

All Other Corporate Bonds - Continued

Public covenants

Comparative bond analysis

Relevant reports issued by analysts and rating agencies

Audited financial statements

Redeemable Preferred Stocks

Valuation Method

Principally the market approach

Valuation Techniques / Inputs

Non-binding broker quotes

Financial statement analysis

Benchmark yields

Comparative bond analysis

Call provisions

Relevant reports issued by analysts and rating agencies

Audited financial statements

Perpetual Preferred and Equity Securities

Valuation Method

Principally the market approach

Principally the market and income approaches

Valuation Techniques / Inputs

Prices obtained from external pricing services

Financial statement analysis

Non-binding broker quotes

The management of our investment portfolio includes establishing pricing policy and reviewing the reasonableness of sources and inputs used in developing pricing. We review all prices that vary between multiple pricing vendors by a threshold that is outside a normal market range for the asset type. In the event we receive a vendor's market price that does not appear reasonable based on our market analysis, we may challenge the price and request further information about the assumptions and methodologies used by the vendor to price the security. We may change the vendor price based on a better data source such as an actual trade. We also review all prices that did not change from the prior month to ensure that these prices are within our expectations. The overall valuation process for determining fair values may include adjustments to valuations obtained from our pricing sources when they do not represent a valid exit price. These adjustments may be made when, in our judgment and considering our knowledge of the financial conditions and industry in which the issuer operates, certain features of the financial instrument require that an adjustment be made to the value originally obtained from our pricing sources. These features may include the complexity of the financial instrument, the market in which the financial instrument is traded, counterparty credit risk, credit structure, concentration, or liquidity. Additionally, an adjustment to the price derived from a model typically reflects our judgment of the inputs that other participants in the market for the financial instrument being measured at fair value would consider in pricing that same financial instrument. In the event an asset is sold, we test the validity of the fair value determined by our valuation techniques by comparing the selling price to the fair value determined for the asset in the immediately preceding month end reporting period.

135

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 2 - Fair Values of Financial Instruments - Continued

these securities include risk free interest rates, risk premiums, performance of underlying collateral (if any), and other factors involving significant assumptions which may or may not reflect those of an active market.

The parameters and inputs used to validate a price on a security may be adjusted for assumptions about risk and current market conditions on a quarter to quarter basis, as certain features may be more significant drivers of valuation at the time of pricing. Changes to inputs in valuations are not changes to valuation methodologies; rather, the inputs are modified to reflect direct or indirect impacts on asset classes from changes in market conditions.

At December 31, 2020, approximately i 9.6 percent of our fixed maturity securities were valued using active trades from TRACE pricing or broker market maker prices for which there was current market activity in that specific security (comparable to receiving one binding quote). The prices obtained were not adjusted, and the assets were classified as Level 1.

The remaining i 90.4 percent of our fixed maturity securities were valued based on non-binding quotes or other observable and unobservable inputs, as discussed below:

• i 74.9 percent of our fixed maturity securities were valued based on prices from pricing services that generally use observable inputs such as prices for securities or comparable securities in active markets in their valuation techniques. These assets were classified as Level 2.

• i 10.4 percent of our fixed maturity securities were valued based on one or more non-binding broker quotes, if validated by observable market data. When only one price is available, it is used if observable inputs and analysis confirms that it is appropriate. These assets, for which we were able to validate the price using other observable market data, were classified as Level 2.

• i 5.1 percent of our fixed maturity securities were valued based on prices of comparable securities, internal models, or pricing services or other non-binding quotes with no other observable market data. These assets were classified as either Level 2 or Level 3, with the categorization dependent on whether there was other observable market data.

Derivatives

Fair values for derivatives other than embedded derivatives in modified coinsurance arrangements are based on market quotes or pricing models and represent the net amount of cash we would have paid or received if the contracts had been settled or closed as of the last day of the period. We analyze credit default swap spreads relative to the average credit spread embedded within the London Interbank Offered Rate (LIBOR)-setting syndicate in determining the effect of credit risk on our derivatives' fair values. If net counterparty credit risk for a derivative asset is determined to be material and is not adequately reflected in the LIBOR-based fair value obtained from our pricing sources, we adjust the valuations obtained from our pricing sources. For purposes of valuing net counterparty risk, we measure the fair value of a group of financial assets and financial liabilities on the basis of the price that would be received to sell a net long position or transfer a net short position for a particular risk exposure in an orderly transaction between market participants at the measurement date under current market conditions. In regard to our own credit risk component, we adjust the valuation of derivative liabilities wherein the counterparty is exposed to our credit risk when the LIBOR-based valuation of our derivatives obtained from pricing sources does not effectively include an adequate credit component for our own credit risk.

Fair values for our embedded derivative in a modified coinsurance arrangement are estimated using internal pricing models and represent the hypothetical value of the duration mismatch of assets and liabilities, interest rate risk, and third party credit risk embedded in the modified coinsurance arrangement.

We consider transactions in inactive markets to be less representative of fair value. We use all available observable inputs when measuring fair value, but when significant unobservable inputs are used, we classify these assets or liabilities as Level 3.

136

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 2 - Fair Values of Financial Instruments - Continued

Private Equity Partnerships

Our private equity partnerships represent funds that are primarily invested in private credit, private equity, and real assets, as described below. Distributions received from the funds arise from income generated by the underlying investments as well as the liquidation of the underlying investments. There is generally not a public market for these investments.

The following tables present additional information about our private equity partnerships, including commitments for additional investments which may or may not be funded:

Investment Category

Fair Value

Redemption Term / Redemption Notice

Unfunded Commitments

(in millions of dollars)

Private Credit

(a)

i 233.3

Not redeemable

i 178.9

i 40.4

Initial 2 year lock on each new investment / Quarterly after 2 year lock with 90 days notice

i 1.3

Total Private Credit

i 273.7

i 180.2

Private Equity

(b)

i 232.6

Not redeemable

i 191.0

i 9.2

Initial 5.5 year lock on each new investment / Quarterly after 5.5 year lock with 90 days notice

i 34.3

Total Private Equity

i 241.8

i 225.3

Real Assets

(c)

i 176.3

Not redeemable

i 185.2

i 55.7

Quarterly / 90 days notice

i —

Total Real Assets

i 232.0

i 185.2

Total Partnerships

i 747.5

i 590.7

137

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 2 - Fair Values of Financial Instruments - Continued

Investment Category

Fair Value

Redemption Term / Redemption Notice

Unfunded Commitments

(in millions of dollars)

Private Credit

(a)

i 223.6

Not redeemable

i 152.6

i 39.6

Initial 2 year lock on each new investment / Quarterly after 2 year lock with 90 days notice

i 0.1

Total Private Credit

i 263.2

i 152.7

Private Equity

(b)

i 149.3

Not redeemable

i 166.8

Real Assets

(c)

i 173.8

Not redeemable

i 130.6

i 30.4

Quarterly / 90 days notice

i 25.0

Total Real Assets

i 204.2

i 155.6

Total Partnerships

i 616.7

i 475.1

(a)Private Credit - The limited partnerships described in this category employ various investment strategies, generally providing direct lending or other forms of debt financing including first-lien, second-lien, mezzanine, and subordinated loans. The limited partnerships have credit exposure to corporates, physical assets, and/or financial assets within a variety of industries (including manufacturing, healthcare, energy, business services, technology, materials, and retail) in North America and, to a lesser extent, outside of North America. As of December 31, 2020, the estimated remaining life of the investments that do not allow for redemptions is approximately 37 percent in the next 3 years, 38 percent during the period from 3 to 5 years, 22 percent during the period from 5 to 10 years, and 3 percent during the period from 10 to 15 years.

(b)Private Equity - The limited partnerships described in this category employ various strategies generally investing in controlling or minority control equity positions directly in companies and/or assets across various industries (including manufacturing, healthcare, energy, business services, technology, materials, and retail), primarily in private markets within North America and, to a lesser extent, outside of North America. As of December 31, 2020, the estimated remaining life of the investments that do not allow for redemptions is approximately 20 percent in the next 3 years, 35 percent during the period from 3 to 5 years, 44 percent during the period from 5 to 10 years, and 1 percent during the period from 10 to 15 years.

(c)Real Assets - The limited partnerships described in this category employ various strategies, which include investing in the equity and/or debt financing of physical assets, including infrastructure (energy, power, water/wastewater, communications), transportation (including airports, ports, toll roads, aircraft, railcars) and real estate in North America, Europe, South America, and Asia. As of December 31, 2020, the estimated remaining life of the investments that do not allow for redemptions is approximately 12 percent in the next 3 years, 23 percent during period from 3 to 5 years, 64 percent during the period from 5 to 10 years, and 1 percent during the period from 10 to 15 years.

We record changes in our share of net asset value of the partnerships in net investment income. We receive financial information related to our investments in partnerships and generally record investment income on a one-quarter lag in accordance with our accounting policy.

138

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 2 - Fair Values of Financial Instruments - Continued

The following tables present information about financial instruments measured at fair value on a recurring basis by fair value level, based on the observability of the inputs used:

Level 1

Level 2

Level 3

NAV

Total

(in millions of dollars)

Assets

Fixed Maturity Securities

United States Government and Government Agencies and Authorities

i —

i 709.8

i —

i 709.8

States, Municipalities, and Political Subdivisions

i —

i 4,245.7

i 15.5

i —

i 4,261.2

Foreign Governments

i —

i 1,146.4

i 21.8

i —

i 1,168.2

Public Utilities

i 131.9

i 6,644.7

i 185.7

i —

i 6,962.3

Mortgage/Asset-Backed Securities

i —

i 1,026.4

i 81.3

i —

i 1,107.7

All Other Corporate Bonds

i 4,089.4

i 24,886.1

i 943.1

i —

i 29,918.6

Redeemable Preferred Stocks

i —

i 9.5

i —

i 9.5

Total Fixed Maturity Securities

i 4,221.3

i 38,668.6

i 1,247.4

i —

i 44,137.3

Other Long-term Investments

Derivatives

Foreign Exchange Contracts

i —

i 19.7

i —

i 19.7

Credit Default Swaps

i —

i 0.1

i —

i 0.1

Total Derivatives

i —

i 19.8

i —

i 19.8

Perpetual Preferred Equity Securities

i 8.4

i 15.2

i 4.7

i —

i 28.3

Private Equity Partnerships

i —

i 747.5

Total Other Long-term Investments

i 8.4

i 35.0

i 4.7

i 747.5

i 795.6

Total Financial Instrument Assets Carried at Fair Value

i 4,229.7

i 38,703.6

i 1,252.1

i 747.5

i 44,932.9

Liabilities

Other Liabilities

Derivatives

Forwards

i —

i 0.5

i —

i 0.5

Foreign Exchange Contracts

i —

i 59.2

i —

i 59.2

Embedded Derivative in Modified Coinsurance Arrangement

i —

i 39.8

i —

i 39.8

Total Derivatives

i —

i 59.7

i 39.8

i —

i 99.5

Total Financial Instrument Liabilities Carried at Fair Value

i —

i 59.7

i 39.8

i —

i 99.5

139

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 2 - Fair Values of Financial Instruments - Continued

Level 1

Level 2

Level 3

NAV

Total

(in millions of dollars)

Assets

Fixed Maturity Securities

United States Government and Government Agencies and Authorities

i 412.8

i 988.9

i —

i 1,401.7

States, Municipalities, and Political Subdivisions

i —

i 3,321.6

i 41.8

i —

i 3,363.4

Foreign Governments

i —

i 995.9

i 21.8

i —

i 1,017.7

Public Utilities

i 171.1

i 7,546.5

i 14.6

i —

i 7,732.2

Mortgage/Asset-Backed Securities

i —

i 1,444.6

i 34.1

i —

i 1,478.7

All Other Corporate Bonds

i 4,114.4

i 27,695.5

i 600.5

i —

i 32,410.4

Redeemable Preferred Stocks

i —

i 39.6

i —

i 39.6

Total Fixed Maturity Securities

i 4,698.3

i 42,032.6

i 712.8

i —

i 47,443.7

Other Long-term Investments

Derivatives

Foreign Exchange Contracts

i —

i 27.0

i —

i 27.0

Credit Default Swaps

i —

i 0.5

i —

i 0.5

Total Derivatives

i —

i 27.5

i —

i 27.5

Perpetual Preferred Equity Securities

i —

i 28.0

i 4.6

i —

i 32.6

Private Equity Partnerships

i —

i 616.7

Total Other Long-term Investments

i —

i 55.5

i 4.6

i 616.7

i 676.8

Total Financial Instrument Assets Carried at Fair Value

i 4,698.3

i 42,088.1

i 717.4

i 616.7

i 48,120.5

Liabilities

Other Liabilities

Derivatives

Interest Rate Swaps

i —

i 0.6

i —

i 0.6

Foreign Exchange Contracts

i —

i 34.0

i —

i 34.0

Embedded Derivative in Modified Coinsurance Arrangement

i —

i 22.8

i —

i 22.8

Total Derivatives

i —

i 34.6

i 22.8

i —

i 57.4

Total Financial Instrument Liabilities Carried at Fair Value

i —

i 34.6

i 22.8

i —

i 57.4

140

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 2 - Fair Values of Financial Instruments - Continued

Changes in assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are as follows:

Year Ended December 31, 2020

Fair Value Beginning
of Year

Total Realized and
Unrealized Investment
Gains (Losses)
Included in

Purchases

Sales

Level 3 Transfers

Fair Value End of
Year

Change in Unrealized
Gain (Loss) on
Securities Held at the
End of Period
included in

Earnings

OCI1

Into

Out of

OCI1

Earnings

(in millions of dollars)

Fixed Maturity Securities

States, Municipalities, and Political Subdivisions

i 41.8

i —

i 2.2

i —

( i 28.5)

i 15.5

i 1.7

i —

Foreign Governments

i 21.8

i —

i 21.8

i —

Public Utilities

i 14.6

i —

i 3.8

i —

i 175.9

( i 8.6)

i 185.7

i 3.7

i —

Mortgage/Asset-Backed Securities

i 34.1

i —

( i 3.0)

i —

( i 67.9)

i 118.1

i —

i 81.3

( i 3.5)

i —

All Other Corporate Bonds

i 600.5

i —

i 29.8

i 194.7

( i 36.1)

i 343.1

( i 188.9)

i 943.1

i 26.7

i —

Total Fixed Maturity Securities

i 712.8

i —

i 32.8

i 194.7

( i 104.0)

i 637.1

( i 226.0)

i 1,247.4

i 28.6

i —

Perpetual Preferred Equity Securities

i 4.6

i 0.1

i —

i 4.7

i —

i 0.1

Embedded Derivative in Modified Coinsurance Arrangement

( i 22.8)

( i 17.0)

i —

( i 39.8)

i —

( i 17.0)

1Other Comprehensive Income (Loss)

141

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 2 - Fair Values of Financial Instruments - Continued

Year Ended December 31, 2019

Total Realized and
Unrealized Investment
Gains (Losses) Included in

Fair Value Beginning
of Year

Earnings

Other
Comprehensive
Income or Loss

Purchases

Sales

Level 3 Transfers

Fair Value End of
Year

Into

Out of

(in millions of dollars)

Fixed Maturity Securities

States, Municipalities, and Political Subdivisions

i —

i 2.8

i 13.3

i —

i 25.7

i —

i 41.8

Foreign Governments

i 31.4

i —

i 0.6

i —

( i 10.2)

i —

i 21.8

Public Utilities

i 84.7

i —

i 0.8

i —

i 6.0

( i 76.9)

i 14.6

Mortgage/Asset-Backed Securities

i —

( i 2.7)

i —

i 36.8

i —

i 34.1

All Other Corporate Bonds

i 1,495.8

i —

( i 3.1)

i 93.0

( i 86.0)

i 190.6

( i 1,089.8)

i 600.5

Redeemable Preferred Stocks

i 21.1

i —

( i 21.1)

i —

Total Fixed Maturity Securities

i 1,633.0

i —

( i 1.6)

i 106.3

( i 96.2)

i 259.1

( i 1,187.8)

i 712.8

Perpetual Preferred Equity Securities

i 4.6

i —

i 4.6

Embedded Derivative in Modified Coinsurance Arrangement

( i 31.1)

i 8.3

i —

( i 22.8)

Realized and unrealized investment gains and losses presented in the preceding tables represent gains and losses only for the time during which the applicable financial instruments were classified as Level 3. The transfers between levels resulted primarily from a change in observability of three inputs used to determine fair values of the securities transferred: (1) transactional data for new issuance and secondary trades, (2) broker/dealer quotes and pricing, primarily related to changes in the level of activity in the market and whether the market was considered orderly, and (3) comparable bond metrics from which to perform an analysis. For fair value measurements of financial instruments that were transferred either into or out of Level 3, we reflect the transfers using the fair value at the beginning of the period. We believe this allows for greater transparency, as all changes in fair value that arise during the reporting period of the transfer are disclosed as a component of our Level 3 reconciliation.

142

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 2 - Fair Values of Financial Instruments - Continued

The table below provides quantitative information regarding the significant unobservable inputs used in Level 3 fair value measurements derived from internal models. Unobservable inputs for fixed maturity securities are weighted by the fair value of the securities. Certain securities classified as Level 3 are excluded from the table below due to limitations in our ability to obtain the underlying inputs used by external pricing sources.

Fair Value

Valuation Method

Unobservable Input

Range/Weighted Average

(in millions of dollars)

Fixed Maturity Securities

All Other Corporate Bonds - Private

i 45.7

Market Approach

Volatility of Credit

(b)

i 0.50% - i 24.90% / i 3.63%

Perpetual Preferred Equity Securities

i 4.7

Market Approach

Market Convention

(c)

Priced at Cost or Owner's Equity

Embedded Derivative in Modified Coinsurance Arrangement

( i 39.8)

Discounted Cash Flows

Projected Liability Cash Flows
Weighted Spread of Swap Curve

(d)

Actuarial Assumptions
1.0%

Fair Value

Valuation Method

Unobservable Input

Range/Weighted Average

(in millions of dollars)

Fixed Maturity Securities

All Other Corporate Bonds - Private

i 119.2

Market Approach

Lack of Marketability

Volatility of Credit

Market Convention

(a)

(b)

(c)

i 4.56% - i 4.56% / i 4.56%

i 0.35% - i 17.68% / i 2.2%

Priced at Par

Perpetual Preferred Equity Securities

i 4.6

Market Approach

Market Convention

(c)

Priced at Cost or Owner's Equity

Embedded Derivative in Modified Coinsurance Arrangement

( i 22.8)

Discounted Cash Flows

Projected Liability Cash Flows
Weighted Spread of Swap Curve

(d)

Actuarial Assumptions
0.8%

(a)Represents basis point adjustments to apply a discount due to the illiquidity of an investment

(b)Represents basis point adjustments for credit-specific factors

(c)Represents a decision to price based on par value, cost, or owner's equity when limited data is available

(d)Represents various actuarial assumptions required to derive the liability cash flows. Fair value of embedded derivative is most often driven by the change in the weighted average credit spread to the swap curve for the assets backing the hypothetical loan.

Isolated increases in unobservable inputs other than market convention will result in a lower fair value measurement, whereas isolated decreases will result in a higher fair value measurement. The unobservable input for market convention is not sensitive to input movements. The projected liability cash flows used in the fair value measurement of our Level 3 embedded derivative are based on expected claim payments. If claim payments increase, the projected liability cash flows will increase, resulting in a decrease in the fair value of the embedded derivative. Decreases in projected liability cash flows will result in an increase in the fair value of the embedded derivative.

143

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 2 - Fair Values of Financial Instruments - Continued

Fair Value Measurements for Financial Instruments Not Carried at Fair Value

The methods and assumptions used to estimate fair values of financial instruments not carried at fair value are discussed as follows:

Mortgage Loans: Fair values are estimated using discounted cash flow analyses and interest rates currently being offered for similar loans to borrowers with similar credit ratings and maturities. Loans with similar characteristics are aggregated for purposes of the calculations.

Policy Loans: Fair values for policy loans, net of reinsurance ceded, are estimated using discounted cash flow analyses and interest rates currently being offered to policyholders with similar policies. Carrying amounts for ceded policy loans, which equal $ i 3,390.6 million and $ i 3,490.6 million as of December 31, 2020 and 2019, respectively, approximate fair value and are reported on a gross basis in our consolidated balance sheets. A change in interest rates for ceded policy loans will not impact our financial position because the benefits and risks are fully ceded to reinsuring counterparties.

Miscellaneous Long-term Investments: Carrying amounts for tax credit partnerships equal the unamortized balance of our contractual commitments and approximate fair value. Our shares of FHLB common stock are carried at cost, which approximates fair value.

Long-term Debt: Fair values for long-term debt are obtained from independent pricing services or discounted cash flow analyses based on current incremental borrowing rates for similar types of borrowing arrangements.

Federal Home Loan Bank (FHLB) Funding Agreements: Funding agreements with the FHLB represent cash advances used for the purpose of investing in fixed maturity securities. Carrying amounts approximate fair value.

Unfunded Commitments to Investment Partnerships: Unfunded equity commitments represent amounts that we have committed to fund certain investment partnerships. These commitments are legally binding, subject to the partnerships meeting specified conditions. Carrying amounts of these financial instruments approximate fair value.

144

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 2 - Fair Values of Financial Instruments - Continued

The following table presents the carrying amounts and estimated fair values of our financial instruments not measured at fair value and indicates the level in the fair value hierarchy of the estimated fair value measurement based on the observability of the inputs used:

Estimated Fair Value

Level 1

Level 2

Level 3

Total

Carrying Value

(in millions of dollars)

Assets

Mortgage Loans

i —

i 2,641.8

i —

i 2,641.8

i 2,432.1

Policy Loans

i —

i 3,850.8

i 3,683.9

Other Long-term Investments

Miscellaneous Long-term Investments

i —

i 28.2

i 29.3

i 57.5

Total Financial Instrument Assets Not Carried at Fair Value

i —

i 2,670.0

i 3,880.1

i 6,550.1

i 6,173.5

Liabilities

Long-term Debt

i 2,393.1

i 1,494.3

i —

i 3,887.4

i 3,345.7

Payable for Collateral on FHLB Funding Agreements

i —

i 312.2

i —

i 312.2

Other Liabilities

Unfunded Commitments

i —

i 0.9

i —

i 0.9

Total Financial Instrument Liabilities Not Carried at Fair Value

i 2,393.1

i 1,807.4

i —

i 4,200.5

i 3,658.8

145

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 2 - Fair Values of Financial Instruments - Continued

Estimated Fair Value

Level 1

Level 2

Level 3

Total

Carrying Value

(in millions of dollars)

Assets

Mortgage Loans

i —

i 2,556.3

i —

i 2,556.3

i 2,397.0

Policy Loans

i —

i 3,911.4

i 3,779.5

Other Long-term Investments

Miscellaneous Long-term Investments

i —

i 18.5

i 58.4

i 76.9

Total Financial Instrument Assets Not Carried at Fair Value

i —

i 2,574.8

i 3,969.8

i 6,544.6

i 6,253.4

Liabilities

Long-term Debt

i 1,712.8

i 1,526.2

i —

i 3,239.0

i 2,926.9

Other Liabilities

Unfunded Commitments

i —

i 1.9

i —

i 1.9

Total Financial Instrument Liabilities Not Carried at Fair Value

i 1,712.8

i 1,528.1

i —

i 3,240.9

i 2,928.8

The carrying values of financial instruments such as short-term investments, cash and bank deposits, accounts and premiums receivable, accrued investment income, securities lending agreements, and short-term debt approximate fair value due to the short-term nature of the instruments. As such, these financial instruments are not included in the above chart.

Fair values for insurance contracts other than investment contracts are not required to be disclosed. However, the fair values of liabilities under all insurance contracts are taken into consideration in our overall management of interest rate risk, which seeks to minimize exposure to changing interest rates through the matching of investment maturities with amounts due under insurance contracts.

146

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 3 - Investments

Fixed Maturity Securities

At December 31, 2020 and 2019, all fixed maturity securities were classified as available-for-sale. The amortized cost and fair values of securities by security type are shown as follows:

Amortized
Cost

ACL1

Gross
Unrealized
Gain

Gross
Unrealized
Loss

Fair
Value

(in millions of dollars)

United States Government and Government Agencies and Authorities

i 559.0

i —

i 150.8

i —

i 709.8

States, Municipalities, and Political Subdivisions

i 3,609.9

i —

i 652.8

i 1.5

i 4,261.2

Foreign Governments

i 902.9

i —

i 266.5

i 1.2

i 1,168.2

Public Utilities

i 5,486.4

i —

i 1,481.9

i 6.0

i 6,962.3

Mortgage/Asset-Backed Securities

i 1,019.9

i —

i 88.0

i 0.2

i 1,107.7

All Other Corporate Bonds

i 24,958.8

i 6.8

i 5,013.5

i 46.9

i 29,918.6

Redeemable Preferred Stocks

i 9.6

i —

i 0.1

i 9.5

Total Fixed Maturity Securities

i 36,546.5

i 6.8

i 7,653.5

i 55.9

i 44,137.3

Amortized
Cost

Gross
Unrealized
Gain

Gross
Unrealized
Loss

Fair
Value

(in millions of dollars)

United States Government and Government Agencies and Authorities

i 1,246.1

i 156.0

i 0.4

i 1,401.7

States, Municipalities, and Political Subdivisions

i 2,863.1

i 507.6

i 7.3

i 3,363.4

Foreign Governments

i 843.5

i 175.2

i 1.0

i 1,017.7

Public Utilities

i 6,436.7

i 1,303.7

i 8.2

i 7,732.2

Mortgage/Asset-Backed Securities

i 1,377.8

i 101.3

i 0.4

i 1,478.7

All Other Corporate Bonds

i 28,273.1

i 4,211.2

i 73.9

i 32,410.4

Redeemable Preferred Stocks

i 39.0

i 0.6

i —

i 39.6

Total Fixed Maturity Securities

i 41,079.3

i 6,455.6

i 91.2

i 47,443.7

1Allowance for Credit Losses

/ /

147

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 3 - Investments - Continued

The following charts indicate the length of time our fixed maturity securities have been in a gross unrealized loss position.

Less Than 12 Months

12 Months or Greater

Fair
Value

Gross
Unrealized
Loss

Fair
Value

Gross
Unrealized
Loss

(in millions of dollars)

States, Municipalities, and Political Subdivisions

i 133.4

i 1.5

i 0.1

i —

Foreign Governments

i 20.3

i 1.2

i —

Public Utilities

i 76.3

i 3.7

i 25.4

i 2.3

Mortgage/Asset-Backed Securities

i 3.0

i 0.1

i 3.1

i 0.1

All Other Corporate Bonds

i 520.4

i 22.4

i 113.5

i 24.5

Redeemable Preferred Stocks

i 9.5

i 0.1

i —

Total Fixed Maturity Securities

i 762.9

i 29.0

i 142.1

i 26.9

Less Than 12 Months

12 Months or Greater

Fair
Value

Gross
Unrealized
Loss

Fair
Value

Gross
Unrealized
Loss

(in millions of dollars)

United States Government and Government Agencies and Authorities

i 110.2

i 0.4

i —

States, Municipalities, and Political Subdivisions

i 331.0

i 7.3

i 0.3

i —

Foreign Governments

i 69.4

i 1.0

i —

Public Utilities

i 168.3

i 2.6

i 37.0

i 5.6

Mortgage/Asset-Backed Securities

i 47.0

i 0.4

i 3.1

i —

All Other Corporate Bonds

i 579.1

i 29.1

i 379.8

i 44.8

Total Fixed Maturity Securities

i 1,305.0

i 40.8

i 420.2

i 50.4

148

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 3 - Investments - Continued

The following is a distribution of the maturity dates for fixed maturity securities. The maturity dates have not been adjusted for possible calls or prepayments.

Amortized Cost, Net of ACL

Unrealized Gain Position

Unrealized Loss Position

Gross Gain

Fair Value

Gross Loss

Fair Value

(in millions of dollars)

1 year or less

i 881.8

i 19.5

i 836.4

i 2.9

i 62.0

Over 1 year through 5 years

i 6,162.6

i 589.9

i 6,545.7

i 22.9

i 183.9

Over 5 years through 10 years

i 10,886.9

i 1,914.8

i 12,659.4

i 10.7

i 131.6

Over 10 years

i 17,588.5

i 5,041.3

i 22,089.2

i 19.2

i 521.4

i 35,519.8

i 7,565.5

i 42,130.7

i 55.7

i 898.9

Mortgage/Asset-Backed Securities

i 1,019.9

i 88.0

i 1,101.6

i 0.2

i 6.1

Total Fixed Maturity Securities

i 36,539.7

i 7,653.5

i 43,232.3

i 55.9

i 905.0

Total
Amortized Cost

Unrealized Gain Position

Unrealized Loss Position

Gross Gain

Fair Value

Gross Loss

Fair Value

(in millions of dollars)

1 year or less

i 821.5

i 14.5

i 832.6

i 0.2

i 3.2

Over 1 year through 5 years

i 6,286.2

i 456.5

i 6,423.4

i 41.7

i 277.6

Over 5 years through 10 years

i 13,570.8

i 1,688.3

i 14,881.3

i 14.6

i 363.2

Over 10 years

i 19,023.0

i 4,195.0

i 22,152.6

i 34.3

i 1,031.1

i 39,701.5

i 6,354.3

i 44,289.9

i 90.8

i 1,675.1

Mortgage/Asset-Backed Securities

i 1,377.8

i 101.3

i 1,428.6

i 0.4

i 50.1

Total Fixed Maturity Securities

i 41,079.3

i 6,455.6

i 45,718.5

i 91.2

i 1,725.2

The following chart depicts an analysis of our fixed maturity security portfolio between investment-grade and below-investment-grade categories as of December 31, 2020:

Gross Unrealized Loss

Fair Value

Gross Unrealized Gain

Amount

Percent of Total Gross Unrealized Loss

(in millions of dollars)

Investment-Grade

i 40,637.2

i 7,371.5

i 18.1

i 32.4

Below-Investment-Grade

i 3,500.1

i 282.0

i 37.8

i 67.6

Total Fixed Maturity Securities

i 44,137.3

i 7,653.5

i 55.9

i 100.0

The unrealized losses on investment-grade fixed maturity securities principally relate to changes in interest rates or changes in market or sector credit spreads which occurred subsequent to the acquisition of the securities. Below-investment-grade fixed maturity securities are generally more likely to develop credit concerns than investment-grade securities. At December 31, 2020, the unrealized losses in our below-investment-grade fixed maturity securities were generally due to credit spreads in certain industries or sectors and, to a lesser extent, credit concerns related to specific securities. For each specific security in an unrealized loss position, we believe that there are positive factors which mitigate credit concerns and that the securities for which we have not recorded a credit loss will recover in value. We have the ability and intent to continue to hold these securities to recovery of amortized cost and believe that no credit losses have occurred.

149

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 3 - Investments - Continued

As of December 31, 2020, we held i 47 individual investment-grade fixed maturity securities and i 21 individual below-investment-grade fixed maturity securities that were in an unrealized loss position, of which i 5 investment-grade fixed maturity securities and i 13 below-investment-grade fixed maturity securities had been in an unrealized loss position continuously for over one year.

In determining when a decline in fair value below amortized cost of a fixed maturity security represents a credit loss, we evaluate the following factors:

•Whether we expect to recover the entire amortized cost basis of the security

•Whether we intend to sell the security or will be required to sell the security before the recovery of its amortized cost basis

•Whether the security is current as to principal and interest payments

•The significance of the decline in value

•Current and future business prospects and trends of earnings

•The valuation of the security's underlying collateral

•Relevant industry conditions and trends relative to their historical cycles

•Market conditions

•Rating agency and governmental actions

•Bid and offering prices and the level of trading activity

•Adverse changes in estimated cash flows for securitized investments

•Changes in fair value subsequent to the balance sheet date

•Any other key measures for the related security

While determining whether a credit loss exists is a judgmental area, we utilize a formal, well-defined, and disciplined process to monitor and evaluate our fixed income investment portfolio, supported by issuer specific research and documentation as of the end of each period. The process results in a thorough evaluation of problem investments and the recording of credit losses on a timely basis for investments determined to have a credit loss. We calculate the allowance for credit losses of fixed maturity securities based on the present value of our best estimate of cash flows expected to be collected, discounted using the effective interest rate implicit in the security at the date of acquisition. When estimating future cash flows, we analyze the strength of the issuer’s balance sheet, its debt obligations and near-term funding arrangements, cash flow and liquidity, the profitability of its core businesses, the availability of marketable assets which could be sold to increase liquidity, its industry fundamentals and regulatory environment, and its access to capital markets. As of December 31, 2020, with respect to the fixed maturity securities for which an allowance for credit losses was recognized, we do not intend to sell these securities, and it is not more likely than not that we will be required to sell these securities before recovery of our estimated value.

The following table presents a rollforward of the allowance for credit losses on available-for-sale fixed maturity securities, all of which are classified as "all other corporate bonds" in the preceding tables, at December 31, 2020:


	Year Ended
	(in millions of dollars)
Balance, beginning of period	$	i —

Credit losses on securities for which credit losses were not previously recorded	i 44.5
Change in allowance due to change in intent to hold securities to maturity	( i 37.7)
Change in allowance on securities with allowance recorded in previous period	i —



Balance, end of period	$	i 6.8

At December 31, 2020, we had commitments of $ i 21.0 million to fund private placement fixed maturity securities, the amount of which may or may not be funded.

150

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 3 - Investments - Continued

Variable Interest Entities

We invest in variable interests issued by variable interest entities. These investments include tax credit partnerships, private equity partnerships, and special purpose entities. For those variable interests that are not consolidated in our financial statements, we are not the primary beneficiary because we have neither the power to direct the activities that are most significant to economic performance nor the responsibility to absorb a majority of the expected losses. The determination of whether we are the primary beneficiary is performed at the time of our initial investment and at the date of each subsequent reporting period.

As of December 31, 2020, the carrying amount of our variable interest entity investments that are not consolidated in our financial statements was $ i 776.8 million, comprised of $ i 29.3 million of tax credit partnerships and $ i 747.5 million of private equity partnerships. At December 31, 2019, the carrying amount of our variable interest entity investments that are not consolidated in our financial statements was $ i 675.1 million, comprised of $ i 58.4 million of tax credit partnerships and $ i 616.7 million of private equity partnerships. These variable interest entity investments are reported as other long-term investments in our consolidated balance sheets.

The Company invests in tax credit partnerships primarily for the receipt of income tax credits and tax benefits derived from passive losses on the investments. Amounts recognized in the consolidated statements of income are as follows:

Year Ended December 31

2020

2019

2018

(in millions of dollars)

Income Tax Credits

i 33.2

i 37.8

i 41.4

Amortization, Net of Tax

( i 21.9)

( i 25.2)

( i 28.1)

Income Tax Benefit

i 11.3

i 12.6

i 13.3

Contractually, we are a limited partner in these tax credit partnerships, and our maximum exposure to loss is limited to the carrying value of our investment, which includes $ i 0.9 million of unfunded unconditional commitments at December 31, 2020. See Note 2 for commitments to fund private equity partnerships.

Mortgage Loans

Our mortgage loan portfolio is well diversified by both geographic region and property type to reduce risk of concentration. All of our mortgage loans are collateralized by commercial real estate. When issuing a new loan, our general policy is not to exceed a loan-to-value ratio, or the ratio of the loan balance to the estimated fair value of the underlying collateral, of 75 percent. We update the loan-to-value ratios at least every three years for each loan, and properties undergo a general inspection at least every two years. Our general policy for newly issued loans is to have a debt service coverage ratio greater than 1.25 times on a normalized 25 year amortization period. We update our debt service coverage ratios annually.

We adopted new accounting guidance that requires us to estimate an allowance for expected credit losses effective January 1, 2020. We carry our mortgage loans at amortized cost less the allowance for expected credit losses. The amortized cost of our mortgage loans was $ i 2,445.2 million and $ i 2,397.0 million at December 31, 2020 and December 31, 2019, respectively. The allowance for expected credit losses was $ i 13.1 million at December 31, 2020. Interest income is accrued on the principal amount of the loan based on the loan's contractual interest rate. We report accrued interest income for our mortgage loans as accrued investment income on our consolidated balance sheets, and the amount of the accrued income was $ i 8.0 million and $ i 8.3 million at December 31, 2020 and December 31, 2019, respectively.

151

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 3 - Investments - Continued

The carrying amount of mortgage loans by property type and geographic region are presented below.

December 31

2020

2019

(in millions of dollars)

Carrying

Percent of

Carrying

Percent of

Amount

Total

Amount

Total

Property Type

Apartment

i 638.0

i 26.2

i 608.8

i 25.4

Industrial

i 654.0

i 26.9

i 623.6

i 26.0

Office

i 517.8

i 21.3

i 549.3

i 22.9

Retail

i 575.6

i 23.7

i 567.5

i 23.7

Other

i 46.7

i 1.9

i 47.8

i 2.0

Total

i 2,432.1

i 100.0

i 2,397.0

i 100.0

Region

New England

i 40.0

i 1.6

i 28.9

i 1.2

Mid-Atlantic

i 202.5

i 8.2

i 184.5

i 7.7

East North Central

i 330.4

i 13.6

i 329.2

i 13.7

West North Central

i 196.1

i 8.1

i 215.4

i 9.0

South Atlantic

i 512.0

i 21.1

i 509.2

i 21.2

East South Central

i 110.0

i 4.5

i 114.3

i 4.8

West South Central

i 257.4

i 10.6

i 246.6

i 10.3

Mountain

i 268.8

i 11.1

i 268.2

i 11.2

Pacific

i 514.9

i 21.2

i 500.7

i 20.9

Total

i 2,432.1

i 100.0

i 2,397.0

i 100.0

The risk in our mortgage loan portfolio is primarily related to vacancy rates. Events or developments, such as economic conditions that impact the ability of the borrowers to ensure occupancy of the property, may have a negative effect on our mortgage loan portfolio, particularly to the extent that our portfolio is concentrated in an affected region or property type. An increase in vacancies increases the probability of default, which would negatively affect our expected losses in our mortgage loan portfolio.

•Loan-to-value ratio

•Debt service coverage ratio based on current operating income

•Property location, including regional economics, trends and demographics

•Age, condition, and construction quality of property

•Current and historical occupancy of property

•Lease terms relative to market

•Tenant size and financial strength

•Borrower's financial strength

•Borrower's equity in transaction

•Additional collateral, if any

152

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 3 - Investments - Continued

Although all available and applicable factors are considered in our analysis, loan-to-value and debt service coverage ratios are the most critical factors in determining whether we will initially issue the loan and also in assigning values and determining impairment. We assign an overall rating to each loan using an internal rating scale of AA (highest quality) to B (lowest quality). We review and adjust, as needed, our internal credit quality ratings on an annual basis. This review process is performed more frequently for mortgage loans deemed to have a higher risk of delinquency.

Mortgage loans, sorted by the applicable credit quality indicators, are as follows:

December 31

2020

2019

(in millions of dollars)

Carrying Amount

Percent of Total

Carrying Amount

Percent of Total

Internal Rating

i 3.5

i 0.1

i —

i 510.0

i 21.0

i 485.6

i 20.3

BBB

i 1,863.0

i 76.6

i 1,911.4

i 79.7

i 39.4

i 1.6

i —

i 16.2

i 0.7

i —

Total

i 2,432.1

i 100.0

i 2,397.0

i 100.0

Loan-to-Value Ratio

<= 65%

i 1,189.4

i 48.9

i 1,215.1

i 50.7

> 65% <= 75%

i 1,000.3

i 41.1

i 1,053.0

i 43.9

> 75% <= 85%

i 155.8

i 6.4

i 91.4

i 3.8

> 85%

i 86.6

i 3.6

i 37.5

i 1.6

Total

i 2,432.1

i 100.0

i 2,397.0

i 100.0

153

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 3 - Investments - Continued

The following table presents the amortized cost of our mortgage loans by year of origination and credit quality indicators at December 31, 2020:

Prior to 2016

2016

2017

2018

2019

2020

Total

(in millions of dollars)

Internal Rating

i 3.5

i —

i 3.5

i 240.3

i 119.5

i 56.3

i 60.2

i 16.9

i 18.0

i 511.2

BBB

i 482.6

i 287.8

i 253.9

i 331.8

i 351.9

i 166.4

i 1,874.4

i 29.4

i —

i 10.5

i —

i 39.9

i 16.2

i —

i 16.2

Total Amortized Cost

i 772.0

i 407.3

i 320.7

i 392.0

i 368.8

i 184.4

i 2,445.2

Allowance for credit losses

( i 2.4)

( i 2.0)

( i 1.9)

( i 2.4)

( i 2.9)

( i 1.5)

( i 13.1)

Carrying Amount

i 769.6

i 405.3

i 318.8

i 389.6

i 365.9

i 182.9

i 2,432.1

Loan-to-Value Ratio

<=65%

i 598.5

i 257.5

i 139.0

i 77.8

i 82.8

i 37.2

i 1,192.8

>65<=75%

i 47.2

i 122.5

i 109.9

i 294.8

i 286.0

i 147.2

i 1,007.6

>75%<=85%

i 78.7

i 27.3

i 37.9

i 13.3

i —

i 157.2

>85%

i 47.6

i —

i 33.9

i 6.1

i —

i 87.6

Total Amortized Cost

i 772.0

i 407.3

i 320.7

i 392.0

i 368.8

i 184.4

i 2,445.2

Allowance for credit losses

( i 2.4)

( i 2.0)

( i 1.9)

( i 2.4)

( i 2.9)

( i 1.5)

( i 13.1)

Carrying Amount

i 769.6

i 405.3

i 318.8

i 389.6

i 365.9

i 182.9

i 2,432.1

The following table presents a rollforward of allowance for expected credit losses by loan-to-value ratio:

Year Ended December 31, 2020

Beginning of Period

Current Period Provisions

Write-Offs

Recoveries

End of Period

(in millions of dollars)

Loan-to-Value Ratio

<=65%

i 2.8

i 0.6

i —

i 3.4

>65<=75%

i 4.6

i 2.7

i —

i 7.3

>75%<=85%

i 0.5

i 0.8

i —

i 1.3

>85%

i 0.4

i 0.7

i —

i 1.1

Total

i 8.3

i 4.8

i —

i 13.1

The increase in our estimate of expected losses during the year ended December 31, 2020 is primarily due to the expected impact of COVID-19, specifically impacts to underlying commercial real estate values, and reflects market conditions at December 31, 2020.

There were i i no / troubled debt restructurings during 2020 or 2019. We had i one mortgage loan which was modified in a troubled debt restructuring during the second quarter of 2018. The loan had a principal balance of $ i 3.6 million prior to the restructuring, wherein the terms of the loan were modified to reduce monthly payments to interest-only at the current note rate and to permit a discounted payoff by September 2018. At time of restructuring, we recorded an allowance for credit losses on mortgage loans and recognized an impairment loss of $ i 0.2 million in the second quarter of 2018. The payoff of the loan did not occur in

154

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 3 - Investments - Continued

September 2018 and the loan was considered impaired as of December 31, 2018. The loan was settled during the first quarter of 2019 resulting in an additional loss of $ i 0.1 million. At December 31, 2020, we held i no mortgage loans that were greater than 90 days past due regarding principal and/or interest payments.

We had i i i no / / loan foreclosures for the years ended December 31, 2020, 2019, or 2018.

For the year ended December 31, 2020, we had i no impaired mortgage loans. Our average investment in impaired mortgage loans was $ i 0.6 million, and $ i 2.3 million for the years ended December 31, 2019 and 2018, respectively. We did not recognize any interest income during 2020, 2019 or 2018 on mortgage loans subsequent to impairment.

At December 31, 2020, we had commitments of $ i 11.4 million to fund certain commercial mortgage loans. Consistent with how we determine the estimate of current expected credit losses for our funded mortgage loans each period, we estimate expected credit losses for loans that have not been funded but we are committed to fund at the end of each period. At December 31, 2020, we had $ i 0.1 million of expected credit losses related to unfunded commitments on our consolidated balance sheets.

Investment Real Estate

Our investment real estate balance was $ i 106.3 million and $ i 90.5 million at December 31, 2020 and 2019, respectively, and the associated accumulated depreciation was $ i 97.7 million and $ i 49.8 million at December 31, 2020 and 2019, respectively. For the year ended December 31, 2020, we recognized $ i 36.6 million in impairments related to certain of our real estate held for investment. We did not recognize any impairments on investment real estate during 2019 and we recognized $ i 0.6 million in impairments in 2018.

Transfers of Financial Assets

To manage our cash position more efficiently, we may enter into repurchase agreements with unaffiliated financial institutions. We generally use repurchase agreements as a means to finance the purchase of invested assets or for short-term general business purposes until projected cash flows become available from our operations or existing investments. Our repurchase agreements are typically outstanding for less than i 30 days. We post collateral through our repurchase agreement transactions whereby the counterparty commits to purchase securities with the agreement to resell them to us at a later, specified date. The fair value of collateral posted is generally i 102 percent of the cash received.

Our investment policy also permits us to lend fixed maturity securities to unaffiliated financial institutions in short-term securities lending agreements. These agreements increase our investment income with minimal risk. Our securities lending policy requires that a minimum of i 102 percent of the fair value of the securities loaned be maintained as collateral. We may receive cash and/or securities as collateral under these agreements. Cash received as collateral is typically reinvested in short-term investments. If securities are received as collateral, we are not permitted to sell or re-post them.

As of December 31, 2020, the carrying amount of fixed maturity securities loaned to third parties under our securities lending program was $ i 96.6 million, for which we received collateral in the form of cash and securities of $ i 17.6 million and $ i 82.8 million, respectively. As of December 31, 2019, the carrying amount of fixed maturity securities loaned to third parties under our securities lending program was $ i 176.4 million, for which we received collateral in the form of securities of $ i 186.5 million. We had i i no / outstanding repurchase agreements at December 31, 2020 or 2019.

155

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 3 - Investments - Continued

The remaining contractual maturities of our securities lending agreements disaggregated by class of collateral pledged are as follows:

December 31

2020

2019

Overnight and Continuous

(in millions of dollars)

Borrowings

United States Government and Government Agencies and Authorities

i 0.1

i —

State, Municipalities, and Political Subdivisions

i 0.4

i —

Public Utilities

i 0.3

i —

All Other Corporate Bonds

i 16.8

i —

Total Borrowings

i 17.6

i —

Gross Amount of Recognized Liability for Securities Lending Transactions

i 17.6

i —

Amounts Related to Agreements Not Included in Offsetting Disclosure Contained Herein

i —

Certain of our U.S. insurance subsidiaries are members of regional FHLBs. Membership, which requires that we purchase a minimum amount of FHLB common stock on which we receive dividends, provides access to low-cost funding. Advances received from the FHLB are used for the purchase of fixed maturity securities. Additional common stock purchases may be required, based on the amount of funds we borrow from the FHLBs. i The carrying value of common stock owned, collateral posted, and advances received are as follows:

December 31

2020

2019

(in millions of dollars)

Carrying Value of FHLB Common Stock

i 28.2

i 18.5

Advances from FHLB

i 312.2

i —

Carrying Value of Collateral Posted to FHLB

Fixed Maturity Securities

i 944.0

i 182.1

Commercial Mortgage Loans

i 1,072.5

i 164.4

Total Carrying Value of Collateral Posted to FHLB

i 2,016.5

i 346.5

Offsetting of Financial Instruments

We enter into master netting agreements with each of our derivatives counterparties. These agreements provide for conditional rights of set-off upon the occurrence of an early termination event. An early termination event is considered a default, and it allows the non-defaulting party to offset its contracts in a loss position against any gain positions or payments due to the defaulting party. Under our agreements, default type events are defined as failure to pay or deliver as contractually agreed, misrepresentation, bankruptcy, or merger without assumption. See Note 4 for further discussion of collateral related to our derivative contracts.

We have securities lending agreements with unaffiliated financial institutions that post collateral to us in return for the use of our fixed maturity securities. A right of set-off exists that allows us to keep and apply collateral received in the event of default by the counterparty. Default within a securities lending agreement would typically occur if the counterparty failed to return the securities borrowed from us as contractually agreed. In addition, if we default by not returning collateral received, the counterparty has a right of set-off against our securities or any other amounts due to us.

156

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 3 - Investments - Continued

Shown below are our financial instruments that either meet the accounting requirements that allow them to be offset in our balance sheets or that are subject to an enforceable master netting arrangement or similar agreement. Our accounting policy is to not offset these financial instruments in our balance sheets. Net amounts disclosed below have been reduced by the amount of collateral pledged to or received from our counterparties.

Gross Amount

Gross Amount Not

of Recognized

Gross Amount

Net Amount

Offset in Balance Sheet

Financial

Offset in

Presented in

Financial

Cash

Net

Instruments

Balance Sheet

Instruments

Collateral

Amount

(in millions of dollars)

Financial Assets:

Derivatives

i 19.8

i —

i 19.8

( i 10.1)

( i 8.7)

i 1.0

Securities Lending

i 96.6

i —

i 96.6

( i 79.0)

( i 17.6)

i —

Total

i 116.4

i —

i 116.4

( i 89.1)

( i 26.3)

i 1.0

Financial Liabilities:

Derivatives

i 59.7

i —

i 59.7

( i 59.0)

i —

i 0.7

Securities Lending

i 17.6

i —

i 17.6

( i 17.6)

i —

Total

i 77.3

i —

i 77.3

( i 76.6)

i —

i 0.7

Gross Amount

Gross Amount Not

of Recognized

Gross Amount

Net Amount

Offset in Balance Sheet

Financial

Offset in

Presented in

Financial

Cash

Net

Instruments

Balance Sheet

Instruments

Collateral

Amount

(in millions of dollars)

Financial Assets:

Derivatives

i 27.5

i —

i 27.5

( i 4.0)

( i 23.5)

i —

Securities Lending

i 176.4

i —

i 176.4

( i 176.4)

i —

Total

i 203.9

i —

i 203.9

( i 180.4)

( i 23.5)

i —

Financial Liabilities:

Derivatives

i 34.6

i —

i 34.6

( i 31.3)

i —

i 3.3

157

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 3 - Investments - Continued

Net Investment Income

Net investment income reported in our consolidated statements of income is presented below. Certain prior period amounts have been reclassified to conform to the current period presentation.

Year Ended December 31

2020

2019

2018

(in millions of dollars)

Fixed Maturity Securities

i 2,164.0

i 2,213.6

i 2,239.7

Derivatives

i 78.7

i 73.4

i 66.1

Mortgage Loans

i 108.9

i 103.3

i 110.1

Policy Loans

i 20.0

i 19.9

i 18.6

Other Long-term Investments

Perpetual Preferred Securities1

( i 2.1)

i 5.4

( i 0.2)

Private Equity Partnerships2

i 19.8

i 31.7

i 36.0

Other

i 3.9

i 8.4

Short-term Investments

i 10.5

i 29.0

i 23.7

Gross Investment Income

i 2,403.7

i 2,480.2

i 2,502.4

Less Investment Expenses

i 30.6

i 32.1

i 35.2

Less Investment Income on Participation Fund Account Assets

i 12.4

i 12.8

i 13.5

Net Investment Income

i 2,360.7

i 2,435.3

i 2,453.7

1 The net unrealized gain (loss) recognized in net investment income for the year ended December 31, 2020 related to perpetual preferred securities still held at December 31, 2020 was $(4.6) million. The net unrealized gain (loss) recognized in net investment income for the year ended December 31, 2019 related to perpetual preferred securities still held at December 31, 2019 was $3.3 million.

2 The net unrealized gain (loss) recognized in net investment income for the year ended December 31, 2020 related to private equity partnerships still held at December 31, 2020 was $(8.7) million. The net unrealized gain (loss) recognized in net investment income for the year ended December 31, 2019 related to private equity partnerships still held at December 31, 2019 was $6.8 million. See Note 2 for further discussion of private equity partnerships.

158

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 3 - Investments - Continued

Realized Investment Gain and Loss

Realized investment gains and losses are as follows:

Year Ended December 31

2020

2019

2018

(in millions of dollars)

Fixed Maturity Securities

Gross Gains on Sales1

i 1,332.8

i 22.9

i 9.7

Gross Losses on Sales

( i 20.3)

( i 32.6)

( i 15.2)

Credit Losses

( i 53.6)

( i 25.3)

( i 17.5)

Mortgage Loans and Other Invested Assets

Gross Gains on Sales

i 1.9

i 4.6

i 0.5

Gross Losses on Sales

( i 0.3)

i —

Impairment Loss

( i 36.6)

i —

( i 1.4)

Credit Losses

( i 4.6)

i —

Embedded Derivative in Modified Coinsurance Arrangement

( i 17.0)

i 8.3

( i 15.2)

All Other Derivatives

( i 2.5)

( i 0.1)

i 0.3

Foreign Currency Transactions

( i 0.7)

Net Realized Investment Gain (Loss)

i 1,199.1

( i 23.2)

( i 39.5)

1Gross gains on sales of fixed maturity securities includes gains of $1,302.3 million as a result of the reinsurance transaction that we entered into during the fourth quarter of 2020. See Note 12 for further discussion.

159

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 4 - Derivative Financial Instruments

Purpose of Derivatives

We are exposed to certain risks relating to our ongoing business operations. The primary risks managed by using derivative instruments are interest rate risk, risk related to matching duration for our assets and liabilities, foreign currency risk, and credit risk. Historically, we have utilized current and forward interest rate swaps, current and forward currency swaps, forward benchmark interest rate locks, currency forward contracts, forward contracts on specific fixed income securities, and credit default swaps. Transactions hedging interest rate risk are primarily associated with our individual and group long-term care and individual and group disability products. All other product portfolios are periodically reviewed to determine if hedging strategies would be appropriate for risk management purposes. We do not use derivative financial instruments for speculative purposes.

Derivatives designated as cash flow hedges and used to reduce our exposure to interest rate and duration risk are as follows:

•Interest rate swaps are used to hedge interest rate risks and to improve the matching of assets and liabilities. An interest rate swap is an agreement in which we agree with other parties to exchange, at specified intervals, the difference between fixed rate and variable rate interest amounts. We use interest rate swaps to hedge the anticipated purchase of fixed maturity securities thereby protecting us from the potential adverse impact of declining interest rates on the associated policy reserves. We also use interest rate swaps to hedge the potential adverse impact of rising interest rates in anticipation of issuing fixed rate long-term debt.

•Forward benchmark interest rate locks are used to minimize interest rate risk associated with the anticipated purchase or disposal of fixed maturity securities or debt. A forward benchmark interest rate lock is a derivative contract without an initial investment where we and the counterparty agree to purchase or sell a specific benchmark interest rate fixed maturity bond at a future date at a pre-determined price.

Derivatives designated as fair value hedges and used to reduce our exposure to interest rate and duration risk are as follows:

•Interest rate swaps are used to effectively convert certain of our fixed rate securities into floating rate securities which are used to fund our floating rate long-term debt. Under these swap agreements, we receive a variable rate of interest and pay a fixed rate of interest. Additionally, we use interest rate swaps to effectively convert certain fixed rate, long-term debt into floating rate long-term debt. Under these swap agreements, we receive a fixed rate of interest and pay a variable rate of interest.

Derivatives designated as either cash flow or fair value hedges and used to reduce our exposure to foreign currency risk are as follows:

•Foreign currency interest rate swaps are used to hedge the currency risk of certain foreign currency-denominated fixed maturity securities owned for portfolio diversification. Under these swap agreements, we agree to pay, at specified intervals, fixed rate foreign currency-denominated principal and interest payments in exchange for fixed rate payments in the functional currency of the operating segment.

Derivatives not designated as hedging instruments and used to reduce our exposure to foreign currency risk and credit losses on securities owned are as follows:

•Foreign currency interest rate swaps previously designated as hedges were used to hedge the currency risk of certain foreign currency-denominated fixed maturity securities owned for portfolio diversification. These derivatives were effective hedges prior to novation to a new counterparty. In conjunction with the novation, these derivatives were de-designated as hedges. We agree to pay, at specified intervals, fixed rate foreign currency-denominated principal and interest payments in exchange for fixed rate payments in the functional currency of the operating segment. We hold offsetting swaps wherein we agree to pay fixed rate principal and interest payments in the functional currency of the operating segment in exchange for fixed rate foreign currency-denominated payments.

160

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 4 - Derivative Financial Instruments - Continued

•Credit default swaps are used as economic hedges against credit risk but do not qualify for hedge accounting. A credit default swap is an agreement in which we agree with another party to pay, at specified intervals, a fixed-rate fee in exchange for insurance against a credit event on a specific investment. If a defined credit event occurs, our counterparty may either pay us a net cash settlement, or we may surrender the specific investment to them in exchange for cash equal to the full notional amount of the swap. Credit events typically include events such as bankruptcy, failure to pay, or certain types of debt restructuring.

•Foreign currency forward contracts are used to minimize foreign currency risk. A foreign currency forward is a derivative without an initial investment where we and the counterparty agree to exchange a specific amount of currencies, at a specific exchange rate, on a specific date. We use these forward contracts to hedge the currency risk arising from foreign-currency denominated securities.

Derivative Risks

The basic types of risks associated with derivatives are market risk (that the value of the derivative will be adversely impacted by changes in the market, primarily the change in interest and exchange rates) and credit risk (that the counterparty will not perform according to the terms of the contract). The market risk of the derivatives should generally offset the market risk associated with the hedged financial instrument or liability. To help limit the credit exposure of the derivatives, we enter into master netting agreements with our counterparties whereby contracts in a gain position can be offset against contracts in a loss position. We also typically enter into bilateral, cross-collateralization agreements with our counterparties to help limit the credit exposure of the derivatives. These agreements require the counterparty in a loss position to submit acceptable collateral with the other counterparty in the event the net loss position meets or exceeds an agreed upon amount. Credit exposure on derivatives is limited to the value of those contracts in a net gain position, including accrued interest receivable less collateral held. At December 31, 2020, we had $ i 0.7 million credit exposure on derivatives. At December 31, 2019, we had i no credit exposure on derivatives. i The table below summarizes the nature and amount of collateral received from and posted to our derivative counterparties.

December 31

2020

2019

(in millions of dollars)

Carrying Value of Collateral Received from Counterparties

Cash

i 8.7

i 24.0

Carrying Value of Collateral Posted to Counterparties

Fixed Maturity Securities

i 54.0

i 28.6

See Note 3 for further discussion of our master netting agreements.

The majority of our derivative instruments contain provisions that require us to maintain specified issuer credit ratings and financial strength ratings. Should our ratings fall below these specified levels, we would be in violation of the provisions, and our derivatives counterparties could terminate our contracts and request immediate payment. The aggregate fair value of all derivative instruments with credit risk-related contingent features that were in a liability position was $ i 59.7 million and $ i 34.6 million at December 31, 2020 and 2019, respectively.

161

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 4 - Derivative Financial Instruments - Continued

Derivative Transactions

The table below summarizes, by notional amounts, the activity for each category of derivatives. The notional amounts represent the basis upon which our counterparty pay and receive amounts are calculated.

Swaps

Receive
Variable/Pay
Fixed

Receive
Fixed/Pay
Fixed

Receive
Fixed/Pay
Variable

Credit Default

Forwards

Total

(in millions of dollars)

Balance at December 31, 2017

i 48.0

i 536.5

i 250.0

i 70.0

i —

i 904.5

Additions

i —

i 78.1

i —

i 11.0

i 47.4

i 136.5

Terminations

i 48.0

i 76.4

i —

i 70.0

i 47.4

i 241.8

Balance at December 31, 2018

i —

i 538.2

i 250.0

i 11.0

i —

i 799.2

Additions

i —

i 171.3

i —

i 382.4

i 553.7

Terminations

i —

i 98.4

i —

i 373.1

i 471.5

Foreign Currency

i —

i 0.4

( i 0.4)

i —

Balance at December 31, 2019

i —

i 611.1

i 250.0

i 11.4

i 8.9

i 881.4

Additions

i —

i 113.6

i —

i 6.4

i 120.0

Terminations

i —

i 3.9

i 250.0

i —

i 3.4

i 257.3

Foreign Currency

i —

i 0.3

i —

i 0.3

Balance at December 31, 2020

i —

i 720.8

i —

i 11.7

i 11.9

i 744.4

Cash Flow Hedges

As of December 31, 2020 and 2019, we had $ i 210.2 million and $ i 213.5 million, respectively, notional amount of receive fixed, pay fixed, open current and forward foreign currency interest rate swaps to hedge fixed income foreign currency-denominated securities.

During the fourth quarter of 2020, in connection with the Closed Block individual disability reinsurance transaction, we reclassified $ i 30.7 million of deferred gains from accumulated other comprehensive income into earnings included in the net realized investment gain line item on our income statement. The deferred gains were related to previously terminated interest rate swaps designated as hedging instruments of fixed maturity securities in the Closed Block individual disability product line. See Note 12 for further discussion.

During the third quarter of 2019, we entered into a $ i 350.0 million notional forward benchmark interest rate lock in order to hedge the interest rate risk associated with the cash flows related to the tender offer and early redemption of certain of our debt securities. We terminated the interest rate lock during 2019 and recognized a loss of $ i 0.5 million that was reported with the $ i 5.3 million tender premium as a cost related to the early retirement of debt in our statement of income. See Note 8 for further discussion of the tender offer and early redemption of certain of our debt securities.

As of December 31, 2020, we expect to amortize approximately $ i 60.3 million of net deferred gains on derivative instruments during the next twelve months. This amount will be reclassified from accumulated other comprehensive income into earnings and reported on the same income statement line item as the hedged item. The income statement line items that will be affected by this amortization are net investment income and interest and debt expense. Additional amounts that may be reclassified from accumulated other comprehensive income into earnings to offset the earnings impact of foreign currency translation of hedged items are not estimable.

As of December 31, 2020, we are hedging the variability of future cash flows associated with forecasted transactions through the year 2045.

162

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 4 - Derivative Financial Instruments - Continued

Fair Value Hedges

As of December 31, 2020 and 2019, we had $ i 362.4 million and $ i 249.4 million notional amount of receive fixed, pay fixed, open current and forward foreign currency interest rate swaps to hedge fixed income foreign currency-denominated securities.

At December 31, 2019, we had $ i 250.0 million notional amount of receive fixed, pay variable interest rate swaps to hedge the changes in the fair value of certain fixed rate long-term debt which matured in the third quarter of 2020 along with the hedged debt. These swaps effectively converted the associated fixed rate long-term debt into floating rate debt and provided for a better matching of interest rates with our short-term investments, which have frequent interest rate resets similar to a floating rate security.

The following table summarizes the carrying amount of hedged assets and liabilities and the related cumulative basis adjustments related to our fair value hedges:

Carrying Amount of Hedged Assets (Liabilities)

Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets (Liabilities)

(in millions of dollars)

Fixed maturity securities:

Receive fixed functional currency interest, pay fixed foreign currency interest

i 404.5

i 239.4

i 24.4

i 1.1

Long-term Debt

i —

( i 249.2)

i —

i 0.6

For the years ended December 31, 2020, 2019, and 2018, $( i 1.8) million, $ i 2.0 million, and $ i 2.5 million respectively, of the derivative instruments' gain (loss) was excluded from the assessment of hedge effectiveness. There were i i no / instances wherein we discontinued fair value hedge accounting due to a hedged firm commitment no longer qualifying as a fair value hedge.

Derivatives not Designated as Hedging Instruments

As of December 31, 2020 and 2019, we held $ i i 148.2 / million notional amount of receive fixed, pay fixed, foreign currency interest rate swaps. These derivatives are not designated as hedges, and as such, changes in fair value related to these derivatives are reported in earnings as a component of net realized investment gain or loss.

As of December 31, 2020 and 2019, we held $ i 11.7 million and $ i 11.4 million, respectively, notional amount of single name credit default swaps. We entered into these swaps in order to mitigate the credit risk associated with specific securities owned.

As of December 31, 2020 and 2019, we held $ i 11.9 million and $ i 8.9 million, respectively, notional amount of foreign currency forwards to mitigate the foreign currency risk associated with specific securities owned.

We have an embedded derivative in a modified coinsurance arrangement for which we include in our realized investment gains and losses a calculation intended to estimate the value of the option of our reinsurance counterparty to cancel the reinsurance contract with us. However, neither party can unilaterally terminate the reinsurance agreement except in extreme circumstances resulting from regulatory supervision, delinquency proceedings, or other direct regulatory action. Cash settlements or collateral related to this embedded derivative are not required at any time during the reinsurance contract or at termination of the reinsurance contract. There are no credit-related counterparty triggers, and any accumulated embedded derivative gain or loss reduces to zero over time as the reinsured business winds down.

163

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 4 - Derivative Financial Instruments - Continued

Locations and Amounts of Derivative Financial Instruments

The following tables summarize the location and fair values of derivative financial instruments, as reported in our consolidated balance sheets.

Derivative Assets

Derivative Liabilities

Balance Sheet
Location

Fair
Value

Balance Sheet
Location

Fair
Value

(in millions of dollars)

Designated as Hedging Instruments

Cash Flow Hedges

Foreign Exchange Contracts

Other L-T Investments

i 16.4

Other Liabilities

i 9.4

Fair Value Hedges

Foreign Exchange Contracts

Other L-T Investments

i 3.3

Other Liabilities

i 26.0

Total Designated as Hedging Instruments

i 19.7

i 35.4

Not Designated as Hedging Instruments

Credit Default Swaps

Other L-T Investments

i 0.1

Other Liabilities

i —

Forwards

Other L-T Investments

i —

Other Liabilities

i 0.5

Foreign Exchange Contracts

Other L-T Investments

i —

Other Liabilities

i 23.8

Embedded Derivative in Modified Coinsurance Arrangement

Other L-T Investments

i —

Other Liabilities

i 39.8

Total Not Designated as Hedging Instruments

i 0.1

i 64.1

164

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 4 - Derivative Financial Instruments - Continued

Derivative Assets

Derivative Liabilities

Balance Sheet
Location

Fair
Value

Balance Sheet
Location

Fair
Value

(in millions of dollars)

Designated as Hedging Instruments

Cash Flow Hedges

Foreign Exchange Contracts

Other L-T Investments

i 19.4

Other Liabilities

i 6.6

Fair Value Hedges

Interest Rate Swaps

Other L-T Investments

i —

Other Liabilities

i 0.6

Foreign Exchange Contracts

Other L-T Investments

i 7.6

Other Liabilities

i 5.0

Total Fair Value Hedges

i 7.6

i 5.6

Total Designated as Hedging Instruments

i 27.0

i 12.2

Not Designated as Hedging Instruments

Credit Default Swaps

Other L-T Investments

i 0.5

Other Liabilities

i —

Foreign Exchange Contracts

Other L-T Investments

i —

Other Liabilities

i 22.4

Embedded Derivative in Modified Coinsurance Arrangement

Other L-T Investments

i —

Other Liabilities

i 22.8

Total Not Designated as Hedging Instruments

i 0.5

i 45.2

165

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 4 - Derivative Financial Instruments - Continued

The following tables summarize the location of gains and losses of derivative financial instruments designated as hedging instruments, as reported in our consolidated statements of income.

Year Ended December 31, 2020

Net Investment Income

Net Realized Investment Gain (Loss)

Interest and Debt Expense

(in millions of dollars)

Total Income and Expense Presented in the Consolidated Statements of Income of Which Hedged Items are Recorded

i 2,360.7

i 1,199.1

i 188.2

Gain (Loss) on Cash Flow Hedging Relationships

Interest Rate Swaps:

Hedged items

i 286.1

i 397.7

i 29.2

Derivatives Designated as Hedging Instruments

i 75.9

i 32.0

i 1.7

Foreign Exchange Contracts:

Hedged items

i 12.1

( i 0.1)

i —

Derivatives Designated as Hedging Instruments

i 2.5

i 0.1

i —

Gain (Loss) on Fair Value Hedging Relationships

Interest Rate Swaps:

Hedged items

i —

( i 0.6)

i 10.1

Derivatives Designated as Hedging Instruments

i —

i 0.6

( i 0.9)

Foreign Exchange Contracts

Hedged items

i 7.1

i 23.3

i —

Derivatives Designated as Hedging Instruments

i 2.8

( i 23.3)

i —

166

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 4 - Derivative Financial Instruments - Continued

Year Ended December 31, 2019

Net Investment Income

Net Realized Investment Gain (Loss)

Interest and Debt Expense

(in millions of dollars)

Total Income and Expense Presented in the Consolidated Statements of Income of Which Hedged Items are Recorded

i 2,435.3

( i 23.2)

i 177.4

Gain (Loss) on Cash Flow Hedging Relationships

Interest Rate Swaps:

Hedged items

i 294.6

( i 1.6)

i 30.4

Derivatives Designated as Hedging Instruments

i 74.3

i 9.3

i 2.4

Foreign Exchange Contracts:

Hedged items

i 14.8

i 1.4

i —

Derivatives Designated as Hedging Instruments

( i 2.0)

( i 1.4)

i —

Gain (Loss) on Fair Value Hedging Relationships

Interest Rate Swaps:

Hedged items

i —

( i 4.5)

i 14.3

Derivatives Designated as Hedging Instruments

i —

i 4.5

i 2.5

Foreign Exchange Contracts

Hedged items

i 2.9

i 3.8

i —

Derivatives Designated as Hedging Instruments

i 1.9

( i 3.8)

i —

167

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 4 - Derivative Financial Instruments - Continued

Year Ended December 31, 2018

Net Investment Income

Net Realized Investment Gain (Loss)

Interest and Debt Expense

(in millions of dollars)

Total Income and Expense Presented in the Consolidated Statements of Income of Which Hedged Items are Recorded

i 2,453.7

( i 39.5)

i 167.3

Gain (Loss) on Cash Flow Hedging Relationships

Interest Rate Swaps:

Hedged items

i 310.3

i 0.1

i 38.4

Derivatives Designated as Hedging Instruments

i 67.1

( i 0.3)

i 2.3

Foreign Exchange Contracts:

Hedged items

i 18.1

i 1.5

i —

Derivatives Designated as Hedging Instruments

( i 0.9)

( i 1.5)

i —

Gain (Loss) on Fair Value Hedging Relationships

Interest Rate Swaps:

Hedged items

i 1.0

i 0.1

i 14.3

Derivatives Designated as Hedging Instruments

( i 0.5)

( i 0.1)

i 1.8

Foreign Exchange Contracts

Hedged items

i 0.6

( i 2.7)

i —

Derivatives Designated as Hedging Instruments

i 0.5

i 2.7

i —

The following table summarizes the location of gains and losses of derivative financial instruments designated as cash flow hedging instruments, as reported in our consolidated statements of comprehensive income (loss).

Year Ended December 31

2020

2019

2018

(in millions of dollars)

Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives

Interest Rate Swaps and Forwards

i —

( i 0.1)

Foreign Exchange Contracts

( i 5.4)

( i 6.1)

i 16.9

Total

( i 5.4)

( i 6.2)

i 16.8

168

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 4 - Derivative Financial Instruments - Continued

The following table summarizes the location of gains and losses on our derivatives not designated as hedging instruments, as reported in our consolidated statements of income.

Year Ended December 31

2020

2019

2018

(in millions of dollars)

Net Realized Investment Gain (Loss)

Credit Default Swaps

( i 0.5)

( i 0.1)

( i 0.3)

Interest Rate Swaps

i —

( i 0.3)

Foreign Exchange Contracts

( i 2.0)

i —

i 0.9

Embedded Derivative in Modified Coinsurance Arrangement

( i 17.0)

i 8.3

( i 15.2)

Total

( i 19.5)

i 8.2

( i 14.9)

169

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 5 - Accumulated Other Comprehensive Income (Loss)

i i

Components of our accumulated other comprehensive income (loss), after tax, and related changes are as follows:

Net Unrealized Gain (Loss) on Securities

Net Gain on Hedges

Foreign Currency Translation Adjustment

Unrecognized Pension and Postretirement Benefit Costs

Total

(in millions of dollars)

Balances at December 31, 2017

i 607.8

i 282.3

( i 254.5)

( i 508.1)

i 127.5

Adjustment to Adopt Accounting Standard Update - Note 1

( i 17.5)

i —

( i 17.5)

Other Comprehensive Income (Loss) Before Reclassifications

( i 920.3)

i 16.8

( i 50.7)

i 43.6

( i 910.6)

Amounts Reclassified from Accumulated Other Comprehensive Income or Loss

i 17.6

( i 48.5)

i —

i 17.3

( i 13.6)

Net Other Comprehensive Income (Loss)

( i 902.7)

( i 31.7)

( i 50.7)

i 60.9

( i 924.2)

Balances at December 31, 2018

( i 312.4)

i 250.6

( i 305.2)

( i 447.2)

( i 814.2)

Other Comprehensive Income (Loss) Before Reclassifications

i 894.1

( i 0.2)

i 23.6

( i 52.0)

i 865.5

Amounts Reclassified from Accumulated Other Comprehensive Income or Loss

i 34.2

( i 62.6)

i —

i 14.4

( i 14.0)

Net Other Comprehensive Income (Loss)

i 928.3

( i 62.8)

i 23.6

( i 37.6)

i 851.5

Balances at December 31, 2019

i 615.9

i 187.8

( i 281.6)

( i 484.8)

i 37.3

Other Comprehensive Income (Loss) Before Reclassifications

i 405.6

( i 5.7)

i 20.3

( i 60.8)

i 359.4

Amounts Reclassified from Accumulated Other Comprehensive Income or Loss

i 46.2

( i 84.3)

i —

i 15.6

( i 22.5)

Net Other Comprehensive Income (Loss)

i 451.8

( i 90.0)

i 20.3

( i 45.2)

i 336.9

Balances at December 31, 2020

i 1,067.7

i 97.8

( i 261.3)

( i 530.0)

i 374.2

The net unrealized gain (loss) on securities consists of the following components:

December 31

January 1

December 31

Change for the Year Ended December 31

2020

2019

2018

2017

2020

2019

2018

(in millions of dollars)

Fixed Maturity Securities

i 7,597.6

i 6,364.4

i 2,736.5

i 5,665.2

i 5,677.3

i 1,233.2

i 3,627.9

( i 2,928.7)

Other Investments

i —

i 14.4

i —

Deferred Acquisition Costs

( i 85.1)

( i 62.7)

( i 27.9)

( i 51.4)

( i 22.4)

( i 34.8)

i 23.5

Reserves for Future Policy and Contract Benefits

( i 6,225.6)

( i 5,803.1)

( i 3,220.3)

( i 5,094.7)

( i 422.5)

( i 2,582.8)

i 1,874.4

Reinsurance Recoverable

i 200.2

i 424.7

i 261.4

i 375.8

( i 224.5)

i 163.3

( i 114.4)

Income Tax

( i 419.4)

( i 307.4)

( i 62.1)

( i 304.6)

( i 313.6)

( i 112.0)

( i 245.3)

i 242.5

Total

i 1,067.7

i 615.9

( i 312.4)

i 590.3

i 607.8

i 451.8

i 928.3

( i 902.7)

/ /

170

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 5 - Accumulated Other Comprehensive Income (Loss) - Continued

Amounts reclassified from accumulated other comprehensive income (loss) were recognized in our consolidated statements of income as follows:

Year Ended December 31

2020

2019

2018

(in millions of dollars)

Net Unrealized Gain (Loss) on Securities

Net Realized Investment Gain (Loss)

Gain (Loss) on Sales on Securities

i 1,279.7

( i 18.0)

( i 4.8)

Credit Losses on Fixed Maturity Securities

( i 53.6)

( i 25.3)

( i 17.5)

Loss on Benefits and Change in Reserves for Future Benefits

( i 1,284.5)

i —

( i 58.4)

( i 43.3)

( i 22.3)

Income Tax Benefit

( i 12.2)

( i 9.1)

( i 4.7)

Total

( i 46.2)

( i 34.2)

( i 17.6)

Net Gain on Hedges

Net Investment Income

Gain on Interest Rate Swaps and Forwards

i 74.1

i 73.6

i 65.9

Gain (Loss) on Foreign Exchange Contracts

i 2.0

i 0.8

( i 1.1)

Net Realized Investment Gain (Loss)

Gain on Interest Rate Swaps

i 32.0

i 8.8

i 0.2

Gain (Loss) on Foreign Exchange Contracts

i 0.1

( i 1.3)

( i 1.5)

Interest and Debt Expense

Loss on Interest Rate Swaps

( i 1.5)

( i 2.1)

Loss on Forward

i —

( i 0.5)

i —

i 106.7

i 79.3

i 61.4

Income Tax Expense

i 22.4

i 16.7

i 12.9

Total

i 84.3

i 62.6

i 48.5

Unrecognized Pension and Postretirement Benefit Costs

Other Expenses

Amortization of Net Actuarial Loss

( i 19.8)

( i 18.6)

( i 22.3)

Amortization of Prior Service Credit

i 0.1

i 0.2

Curtailment Gain

( i 0.1)

i —

( i 19.8)

( i 18.4)

( i 22.1)

Income Tax Benefit

( i 4.2)

( i 4.0)

( i 4.8)

Total

( i 15.6)

( i 14.4)

( i 17.3)

171

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 6 - Liability for Unpaid Claims and Claim Adjustment Expenses

i i

Changes in the liability for unpaid claims and claim adjustment expenses are as follows:

2020

2019

2018

(in millions of dollars)

Balance at January 1

i 23,076.7

i 23,149.0

i 23,222.0

Less Reinsurance Recoverable

i 2,246.8

i 2,227.3

i 2,182.0

Net Balance at January 1

i 20,829.9

i 20,921.7

i 21,040.0

Incurred Related to

Current Year

i 6,327.8

i 6,113.2

i 5,832.3

Prior Years

Interest

i 997.8

i 1,036.5

i 1,049.8

All Other Incurred

i 878.7

( i 274.1)

( i 106.2)

Foreign Currency

i 65.9

i 76.0

( i 110.7)

Total Incurred

i 8,270.2

i 6,951.6

i 6,665.2

Paid Related to

Current Year

( i 2,727.0)

( i 2,532.4)

( i 2,354.7)

Prior Years

( i 4,430.3)

( i 4,511.0)

( i 4,428.8)

Total Paid

( i 7,157.3)

( i 7,043.4)

( i 6,783.5)

Reserves Ceded Pursuant to Reinsurance Transaction

( i 6,141.5)

i —

Net Balance at December 31

i 15,801.3

i 20,829.9

i 20,921.7

Plus Reinsurance Recoverable

i 8,378.9

i 2,246.8

i 2,227.3

Balance at December 31

i 24,180.2

i 23,076.7

i 23,149.0

The majority of the net balances are related to disability claims with long-tail payouts on which interest earned on assets backing liabilities is an integral part of pricing and reserving. Interest accrued on prior year reserves has been calculated on the opening reserve balance less one-half of the year’s claim payments relative to prior years at our average reserve discount rate for the respective periods.

"Incurred Related to Prior Years - All Other Incurred" shown in the preceding chart includes the increase in benefits and change in reserves for future benefits resulting from the realization of previously unrealized investment gains and losses as a result of the Closed Block individual disability reinsurance agreement and reserve adjustments as discussed in the following paragraphs, which impact the comparability between the years presented. Excluding those adjustments, the variability exhibited year over year is primarily caused by the level of claim resolutions in the period relative to the long-term expectations reflected in the reserves. Our claim resolution rate assumption used in determining reserves is our expectation of the resolution rate we will experience over the life of the block of business and will vary from actual experience in any one period, both favorably and unfavorably.

Closed Block Individual Disability Reinsurance Transaction

In connection with the first phase of the Closed Block individual disability coinsurance agreement that closed in December 2020, we recorded a reinsurance recoverable of $ i 6,141.5 million representing the ceded reserves related to the cohort of policies on claim status as of July 1, 2020 (DLR cohort) and an increase in benefits and change in reserves for future benefits of $ i 1,284.5 million resulting from the realization of previously unrealized investment gains and losses recorded in accumulated other comprehensive income. These impacts are reflected in the chart shown above and the reconciliation shown below.

172

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 6 - Liability for Unpaid Claims and Claim Adjustment Expenses

2020 Long-term Care Reserve Increase

During the fourth quarter of 2020, we completed a review of policy reserve adequacy, which incorporated our most recent experience and included a review of all material assumptions. Based on our analysis, during the fourth quarter of 2020, we updated our interest rate and premium rate increase reserve assumptions and determined that our gross long-term care policy and claim reserves should be increased by $ i 151.5 million, of which $ i 7.0 million was related to our liability for unpaid claims and claims adjustment expenses, which can be primarily attributed to prior year incurred claims, thereby impacting the results shown in the preceding chart.

2018 Long-term Care Reserve Increase

During the third quarter of 2018, we completed our annual review of policy reserve adequacy, which incorporated our most recent experience and included a review of all assumptions. Based on our analysis, during the third quarter of 2018, we updated our reserve assumptions and determined that our policy and claim reserves should be increased by $ i 750.8 million of which, approximately $ i 236 million was related to our liability for unpaid claims and claims adjustment expenses, which can be primarily attributed to prior year incurred claims, thereby impacting the results shown in the preceding chart.

Reconciliation

A reconciliation of policy and contract benefits and reserves for future policy and contract benefits as reported in our consolidated balance sheets to the liability for unpaid claims and claim adjustment expenses is as follows:

December 31

2020

2019

2018

(in millions of dollars)

Policy and Contract Benefits

i 1,855.4

i 1,745.5

i 1,695.7

Reserves for Future Policy and Contract Benefits

i 49,653.0

i 47,780.1

i 44,841.9

Total

i 51,508.4

i 49,525.6

i 46,537.6

Less:

Life Reserves for Future Policy and Contract Benefits

i 8,371.7

i 8,435.7

i 8,330.9

Accident and Health Active Life Reserves

i 12,730.9

i 12,210.1

i 11,837.4

Adjustment Related to Unrealized Investment Gains and Losses

i 6,225.6

i 5,803.1

i 3,220.3

Liability for Unpaid Claims and Claim Adjustment Expenses

i 24,180.2

i 23,076.7

i 23,149.0

The adjustment related to unrealized investment gains and losses reflects the changes that would be necessary to policyholder liabilities if the unrealized investment gains and losses related to the corresponding available-for-sale securities had been realized. Changes in this adjustment are reported as a component of other comprehensive income or loss.

173

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 7 - Income Tax

i i

Total income tax expense (benefit) is allocated as follows:

Year Ended December 31

2020

2019

2018

(in millions of dollars)

Net Income

i 171.0

i 281.8

i 104.4

Stockholders' Equity - Accumulated Other Comprehensive Income (Loss)

Change in Net Unrealized Gain on Securities Before Adjustment

i 250.2

i 757.0

( i 614.2)

Change in Adjustment to Deferred Acquisition Costs and Reserves for Future Policy and Contract Benefits, Net of Reinsurance

( i 138.2)

( i 511.7)

i 371.7

Change in Net Gain on Hedges

( i 23.8)

( i 17.0)

( i 8.2)

Change in Foreign Currency Translation Adjustment

( i 4.3)

i 0.2

( i 0.6)

Change in Unrecognized Pension and Postretirement Benefit Costs

( i 34.8)

( i 9.3)

i 17.0

Total

i 220.1

i 501.0

( i 129.9)

A reconciliation of the income tax provision at the U.S. federal statutory rate to the income tax rate as reported in our consolidated statements of income is as follows:

Year Ended December 31

2020

2019

2018

Statutory Income Tax

i 21.0

Net Operating Loss Carryback

( i 3.8)

i —

Deemed Repatriation Tax on Foreign Earnings and Profit

i —

i 1.8

Tax Exempt Income

( i 0.8)

( i 0.5)

( i 1.3)

Tax Credits

( i 1.3)

( i 1.1)

( i 2.4)

Policyholder Reserves

i 0.7

i —

( i 2.4)

Other Items, Net

i 1.9

i 1.0

( i 0.1)

Effective Tax

i 17.7

i 20.4

i 16.6

/ /

174

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 7 - Income Tax - Continued

Our net deferred tax asset (liability) consists of the following. Certain prior year amounts have been reclassified to conform to current year reporting.


	December 31
	2020		2019
	(in millions of dollars)
Deferred Tax Asset
Reserves	$	i 1,279.6	$	i 1,154.6
Employee Benefits	i 218.7		i 201.6
Other	i 52.9		i 19.4
Gross Deferred Tax Asset	i 1,551.2		i 1,375.6
Less: Valuation Allowance	i 14.5		i 28.3
Net Deferred Tax Asset	i 1,536.7		i 1,347.3

Deferred Tax Liability
Deferred Acquisition Costs	i 185.5		i 115.6
Fixed Assets	i 74.7		i 58.5
Invested Assets	i 1,443.5		i 1,213.7
Cost of Reinsurance	i 180.4		i 10.8
Other	i 68.7		i 44.1
Gross Deferred Tax Liability	i 1,952.8		i 1,442.7
Net Deferred Tax Asset (Liability)	$	( i 416.1)	$	( i 95.4)

175

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 7 - Income Tax - Continued

Our consolidated statements of income include amounts subject to both domestic and foreign taxation. The income and related tax expense (benefit) are as follows:

Year Ended December 31

2020

2019

2018

(in millions of dollars)

Income Before Tax

Domestic

i 924.7

i 1,289.5

i 492.6

Foreign

i 39.3

i 92.6

i 135.2

Total

i 964.0

i 1,382.1

i 627.8

Current Tax Expense (Benefit)

Federal

( i 98.4)

i 273.6

i 194.6

State and Local

i 1.5

i 1.3

( i 0.6)

Foreign

( i 19.7)

( i 0.1)

i 33.4

Total

( i 116.6)

i 274.8

i 227.4

Deferred Tax Expense (Benefit)

Federal

i 250.5

( i 9.5)

( i 114.6)

State and Local

i 1.0

( i 0.1)

( i 0.2)

Foreign

i 36.1

i 16.6

( i 8.2)

Total

i 287.6

i 7.0

( i 123.0)

Total Tax Expense

i 171.0

i 281.8

i 104.4

On December 22, 2017, the U.S. Federal government enacted the TCJA, which reduced the federal corporate tax rate from 35 percent to 21 percent effective January 1, 2018. The Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (SAB 118) allowing a one-year measurement period after the enactment date of TCJA to finalize the calculation and record the related tax impacts. We finalized and recorded adjustments to our initial estimates during 2018. As a result of guidance from the Internal Revenue Service (IRS), we recorded additional deemed repatriation transition tax on accumulated foreign E&P of $ i 11.5 million, for a total of $77.9 million. We recorded no other material changes to our calculations of the impact of the TCJA during the one-year measurement period after the enactment period as allowed by SAB 118. In 2020, we recorded a tax benefit of $ i 36.5 million for 2020 tax losses that will be carried back to a 35 percent tax year pursuant to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

On July 22, 2020, the Finance Bill 2019-21 was enacted, resulting in a U.K. tax rate increase from 17 percent to 19 percent, retroactively effective April 1, 2020, which resulted in tax expense of $ i 9.3 million for the revaluation of our tax assets and liabilities, primarily deferred tax liabilities related to policyholder reserves. As of December 31, 2020, our plans for the future repatriations of cash from our foreign subsidiaries can include no more than the amount of capital above that which is required by U.K. regulatory capital requirements. The remainder of our investment in our foreign subsidiaries is indefinitely reinvested and we have not recorded any deferred taxes on the approximately $ i 0.7 billion of the excess of the U.S. GAAP carrying values over the tax basis of investments in our foreign subsidiaries.

176

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 7 - Income Tax - Continued

Our consolidated statements of income include the following changes in unrecognized tax benefits.

December 31

2020

2019

2018

(in millions of dollars)

Balance at Beginning of Year

i 241.0

i 262.2

i 1.4

Increases (Decreases) for Tax Positions Related to Prior Years

( i 21.0)

( i 21.1)

i 261.5

Lapse of the Applicable Statute of Limitations

( i 0.3)

( i 0.1)

( i 0.7)

Balance at End of Year

i 219.7

i 241.0

i 262.2

Less Tax Attributable to Temporary Items Included Above

( i 105.9)

( i 127.1)

( i 148.2)

Total Unrecognized Tax Benefits That if Recognized Would Affect the Effective Tax Rate

i 113.8

i 113.9

i 114.0

In 2018, we recorded $ i 261.1 million gross unrecognized tax benefits for a policyholder reserves position taken on our 2017 federal tax return, which if recognized, would decrease our tax expense by $112.9 million. The balances of unrecognized tax benefits for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility are $ i 105.9 million at December 31, 2020, $ i 127.1 million at December 31, 2019, and $ i 148.2 million at December 31, 2018. It is reasonably possible that this item could reverse in the next 12 months following review by the IRS. We recognize interest expense and penalties, if applicable, related to unrecognized tax benefits in tax expense. We recognized $ i 7.8 million and $ i 12.8 million of interest expense related to unrecognized tax benefits during 2020 and 2019, respectively, and a de minimis amount in 2018. The liability for net interest expense on uncertain tax positions was approximately $ i 20.6 million and $ i 12.8 million as of December 31, 2020 and 2019, respectively, and a de minimis amount in 2018.

We file federal and state income tax returns in the United States and in foreign jurisdictions. Tax years subsequent to 2014 remain subject to examination by the IRS. Tax years subsequent to 2016 remain subject to examination by the IRS for the subsidiaries not included in the consolidated tax return. All other major foreign jurisdictions remain subject to examination for tax years subsequent to 2018 with the exception of Poland for which tax years subsequent to 2014 remain subject to examination. We believe sufficient provision has been made for all potential adjustments for years that are not closed by the statute of limitations in all major tax jurisdictions and that any such adjustments would not have a material adverse effect on our financial position, liquidity, or results of operations.

We file state income tax returns in nearly every state in the United States. Tax years subsequent to 2015 remain subject to examination depending on the statute of limitation established by the various states, which is generally three to four years.

We have no accumulated federal net operating loss carryforwards as of December 31, 2020. Our federal capital loss carryforward, related to subsidiaries not included in the consolidated U.S. federal return, was $ i 0.6 million at December 31, 2020 and is expected to be utilized by the time it expires in 2022. We have net operating loss carryforwards for state and local income tax of approximately $ i 191 million, most of which is expected to expire unused between 2021 and 2040.

We record valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. Our valuation allowance was $ i 14.5 million and $ i 28.3 million at December 31, 2020 and 2019, the majority of which related to our cumulative deferred state income tax benefits. The de minimis remaining amount of our valuation allowance relates to unrealized tax losses on buildings which we own and occupy in the U.K. We recorded a decrease in our valuation allowance of $ i 13.8 million during 2020 and an increase of $ i 9.9 million in 2019, primarily in other comprehensive income.

Total income taxes paid net of refunds during 2020, 2019, and 2018 were $ i 200.0 million, $ i 35.1 million, and $ i 139.7 million, respectively.

177

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 8 - Debt

i i

Debt consists of the following:

December 31

2020

2019

Interest Rates

Maturities

(in millions of dollars)

Long-term Debt

Outstanding Principal

Senior Secured Notes issued 2007

Variable

2037

i —

i 80.0

Senior Notes issued 1998

6.750 - 7.250%

2028

i 335.8

Senior Notes issued 2002

7.375%

2032

i 39.5

Senior Notes issued 2012 and 2016

5.750%

2042

i 500.0

Senior Notes issued 2014

4.000%

2024

i 350.0

Senior Notes issued 2015

3.875%

2025

i 275.0

Senior Notes issued 2019

4.000%

2029

i 400.0

Senior Notes issued 2019

4.500%

2049

i 450.0

Senior Notes issued 2020

4.500%

2025

i 500.0

i —

Medium-term Notes issued 1990 - 1996

7.000 - 7.190%

2023 - 2028

i 20.5

Junior Subordinated Debt Securities issued 1998

7.405%

2038

i 203.7

Junior Subordinated Debt Securities issued 2018

6.250%

2058

i 300.0

Fair Value Hedge Adjustment

i —

( i 0.6)

Less:

Unamortized Net Premium

i 6.0

i 8.4

Unamortized Debt Issuance Costs

( i 34.8)

( i 35.4)

Total Long-term Debt

i 3,345.7

i 2,926.9

Short-term Debt

Outstanding Principal

Senior Notes issued 2010

5.625%

2020

i —

i 400.0

Less Unamortized Debt Issuance Costs

i —

( i 0.3)

Total Short-term Debt

i —

i 399.7

Total Debt

i 3,345.7

i 3,326.6

Collateralized debt is comprised of our senior secured notes and ranks highest in priority, followed by unsecured notes, which consist of senior notes and medium-term notes, followed by junior subordinated debt securities. The medium-term notes are non-callable and the junior subordinated debt securities are callable under limited, specified circumstances. The remaining debt is callable and may be redeemed, in whole or in part, at any time.

The aggregate contractual principal maturities are $ i 2.0 million in 2023, $ i 350.0 million in 2024, $ i 775.0 million in 2025, and $ i 2,247.5 million thereafter.

Senior Secured Notes

In 2007, Northwind Holdings, LLC (Northwind Holdings), a wholly-owned subsidiary of Unum Group, issued $ i 800.0 million of insured, senior secured notes, bearing interest at a floating rate equal to the three month LIBOR plus i 0.78% (the Northwind notes) in a private offering.

178

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 8 - Debt - Continued

Northwind Holdings made periodic principal payments on the Northwind notes of $ i 45.0 million in 2020 and $ i i 60.0 / million in both 2019 and 2018. In December 2020, Northwind Holdings redeemed the remaining $ i 35.0 million of principal on the Northwind notes, and was released of any contractual collateral requirements.

Unsecured Notes

In September 2020, our $ i 400.0 million i 5.625% senior unsecured notes matured.

In May 2020, we issued $ i 500.0 million of i 4.500% senior notes due 2025. The notes are callable at or above par and rank equally in the right of payment with all of our other unsecured and unsubordinated debt.

During 2019 we purchased and retired (i) $ i 30.3 million aggregate principal amount of our i 7.190% medium-term notes due 2028; (ii) $ i 30.0 million aggregate principal amount of our i 7.250% senior notes due 2028; and (iii) $ i 350.0 million aggregate principal amount of our i 3.000% senior notes due 2021.

In September 2019, we issued $ i 450.0 million of i 4.500% senior notes due 2049. The notes are callable at or above par and rank equally in the right of payment with all of our other unsecured and unsubordinated debt.

In June 2019, we issued $ i 400.0 million of i 4.000% senior notes due 2029. The notes are callable at or above par and rank equally in the right of payment with all of our other unsecured and unsubordinated debt.

In July 2018, our $ i 200.0 million i 7.000% senior unsecured notes matured.

Fair Value Hedges

As of December 31, 2019, we had $ i 250.0 million notional amount of an interest rate swap which effectively converted certain of our unsecured senior notes into floating rate debt. Under this agreement, we received a fixed rate of interest and paid a variable rate of interest, based off of three-month LIBOR. During 2020, the $ i 250.0 million notional amount of the interest rate swap matured in conjunction with the maturity of the hedged debt. See Note 4 for further information on the interest rate swap.

Junior Subordinated Debt Securities

In May 2018, we issued $ i 300.0 million of i 6.250% junior subordinated notes due 2058. The notes are redeemable at or above par on or after June 15, 2023 and rank equally in the right of payment with our other junior subordinated debt securities.

In 1998, Provident Financing Trust I (the Trust), a i 100 percent-owned finance subsidiary of Unum Group, issued $ i 300.0 million of i 7.405% capital securities due 2038 in a public offering. These capital securities are fully and unconditionally guaranteed by Unum Group, have a liquidation value of $ i 1,000 per capital security, and have a mandatory redemption feature under certain circumstances. In connection with the capital securities offering, Unum Group issued to the Trust i 7.405% junior subordinated deferrable interest debentures due 2038. The Trust is a variable interest entity of which Unum Group is not the primary beneficiary. Accordingly, the capital securities issued by the Trust are not included in our consolidated financial statements and our liability represents the junior subordinated debt securities owed to the trust which is recorded in long-term debt. The sole assets of the Trust are the junior subordinated debt securities. The retirement of any liquidation amount regarding the capital securities by the Trust results in a corresponding retirement of principal amount of the junior subordinated debt securities.

During 2019, the Trust purchased and retired $ i i 22.8 / million aggregate liquidation amount of the i 7.405% capital securities due 2038, which resulted in our purchase and retirement of a corresponding principal amount of our i 7.405% junior subordinated debt securities due 2038.

Cost Related to Early Retirement of Debt

During 2019, we incurred costs of $ i 27.3 million related to the early retirement of certain of our unsecured notes and junior subordinated debt securities as previously discussed.

179

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 8 - Debt - Continued

Interest Paid

Interest paid on long-term and short-term debt and related securities during 2020, 2019, and 2018 was $ i 178.1 million, $ i 172.9 million, and $ i 167.3 million, respectively.

Credit Facilities

We have access to two separate unsecured revolving credit facilities, each with a different syndicate of lenders. One of our credit facilities is under a five-year agreement and is effective through April 2024. The terms of this agreement provide for a borrowing capacity of $ i 500.0 million with an option to be increased up to $700.0 million. We may also request, on up to two occasions, that the lenders' commitment termination dates be extended by one year. The credit facility provides for the issuance of letters of credit subject to certain terms and limitations. At December 31, 2020, letters of credit totaling $0.6 million had been issued from this credit facility, but there were i no borrowed amounts outstanding.

Our other credit facility is under a three-year agreement and is effective until April 2022. The terms of this agreement provide for a borrowing capacity of $ i 100.0 million with an option to be increased up to $140.0 million. We may also request that the lenders' commitment termination dates be extended by one year. The credit facility provides for the issuance of letters of credit subject to certain terms and limitations. At December 31, 2020, there have been no letters of credit issued from the credit facility and there were i no borrowed amounts outstanding.

Note 9 - Employee Benefit Plans

Defined Benefit Pension and Other Postretirement Benefit (OPEB) Plans

We sponsor several defined benefit pension and OPEB plans for our employees, including non-qualified pension plans. The U.S. qualified and non-qualified defined benefit pension plans comprise the majority of our total benefit obligation and benefit cost. We maintain a separate defined benefit plan for eligible employees in our U.K. operation. The U.S. defined benefit pension plans were closed to new entrants on December 31, 2013, the OPEB plan was closed to new entrants on December 31, 2012, and the U.K. plan was closed to new entrants on December 31, 2002.

U.S. Pension Plan Annuity Purchases

On December 26, 2019, we purchased a group annuity contract which transferred a portion of our U.S. qualified defined benefit pension plan obligation to a third party. Under the transaction, which was funded with plan assets, we transferred the responsibility for pension benefits and annuity administration for approximately 1,900 retirees or their beneficiaries receiving less than $350 in monthly benefit payments from the plan. This transfer resulted in a reduction in our U.S. qualified defined benefit pension plan obligation of $ i 59.5 million at December 31, 2019 and is reflected in the Benefits and Expenses Paid line item within the following table regarding changes in our benefit obligation.

On January 2, 2020, in a separate transaction, we purchased a second group annuity contract which transferred an additional portion of our U.S. qualified defined benefit pension plan obligation to the same third party. Under the transaction, which was funded with plan assets, we transferred the responsibility for pension benefits and annuity administration for approximately 600 retirees or their beneficiaries receiving between $350 and $500 in monthly benefit payments from the plan. This transfer resulted in a reduction in our U.S. qualified benefit pension plan obligation of $ i 44.0 million at December 31, 2020 and is reflected in the Benefits and Expenses Paid line item within the following table regarding changes in our benefit obligation.

180

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 9 - Employee Benefit Plans - Continued

Amortization Period of Actuarial Gain or Loss and Prior Service Cost or Credit

Because all participants in the U.S. and U.K. pension plans are considered inactive, we amortize the net actuarial loss and prior service credit for these plans over the average remaining life expectancy of the plans. As of December 31, 2020, the estimate of the average remaining life expectancy of the plans was approximately i 25 years for the U.S. plan and i 31 years for U.K. plan.

The following table provides the changes in the benefit obligation and fair value of plan assets and the funded status of the plans.

Pension Benefits

U.S. Plans

U.K. Plan

OPEB

2020

2019

2020

2019

2020

2019

(in millions of dollars)

Change in Benefit Obligation

Benefit Obligation at Beginning of Year

i 2,106.9

i 1,933.3

i 256.9

i 211.0

i 127.2

i 125.9

Service Cost

i 11.0

i 10.9

i —

Interest Cost

i 73.0

i 83.3

i 4.9

i 6.1

i 4.1

i 5.3

Plan Participant Contributions

i —

i 0.1

i 0.2

Actuarial (Gain) Loss (1)

i 212.4

i 225.7

i 33.8

i 34.9

( i 0.3)

i 7.0

Benefits and Expenses Paid

( i 126.1)

( i 146.3)

( i 5.1)

( i 4.8)

( i 10.6)

( i 11.2)

Curtailment Gain

i —

( i 0.7)

i —

Change in Foreign Exchange Rates

i —

i 10.2

i 9.7

i —

Benefit Obligation at End of Year

i 2,277.2

i 2,106.9

i 300.0

i 256.9

i 120.5

i 127.2

Accumulated Benefit Obligation at December 31

i 2,277.2

i 2,106.9

i 297.5

i 253.1

N/A

Change in Fair Value of Plan Assets

Fair Value of Plan Assets at Beginning of Year

i 1,600.0

i 1,454.9

i 252.8

i 217.0

i 9.9

i 10.1

Actual Return on Plan Assets

i 227.9

i 282.7

i 36.4

i 31.0

i 0.1

i 0.2

Employer Contributions

i 9.1

i 8.7

i —

i 9.8

i 10.6

Plan Participant Contributions

i —

i 0.1

i 0.2

Benefits and Expenses Paid

( i 126.1)

( i 146.3)

( i 5.1)

( i 4.8)

( i 10.6)

( i 11.2)

Change in Foreign Exchange Rates

i —

i 10.0

i 9.6

i —

Fair Value of Plan Assets at End of Year

i 1,710.9

i 1,600.0

i 294.1

i 252.8

i 9.3

i 9.9

Underfunded Status

i 566.3

i 506.9

i 5.9

i 4.1

i 111.2

i 117.3

(1) The actuarial losses recognized for the U.S. and U.K. pension plans were primarily driven by decreases in the discount rate assumption.

181

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 9 - Employee Benefit Plans - Continued

The amounts recognized in our consolidated balance sheets for our pension and OPEB plans at December 31, 2020 and 2019 are as follows.

Pension Benefits

U.S. Plans

U.K. Plan

OPEB

2020

2019

2020

2019

2020

2019

(in millions of dollars)

Current Liability

i 8.0

i 7.7

i —

i 1.5

Noncurrent Liability

i 558.3

i 499.2

i 5.9

i 4.1

i 109.7

i 115.8

Noncurrent Asset

i —

Underfunded Status

i 566.3

i 506.9

i 5.9

i 4.1

i 111.2

i 117.3

Unrecognized Pension and Postretirement Benefit Costs

Net Actuarial Gain (Loss)

( i 767.9)

( i 695.4)

( i 70.5)

( i 63.1)

i 11.0

i 11.1

Prior Service Credit (Cost)

( i 0.6)

( i 0.7)

( i 0.2)

( i 0.3)

i 2.9

i 3.1

( i 768.5)

( i 696.1)

( i 70.7)

( i 63.4)

i 13.9

i 14.2

Income Tax

i 273.9

i 240.7

i 16.0

i 14.5

i 5.4

i 5.3

Total Included in Accumulated Other Comprehensive Income (Loss)

( i 494.6)

( i 455.4)

( i 54.7)

( i 48.9)

i 19.3

i 19.5

The following table provides the changes recognized in other comprehensive income for the years ended December 31, 2020 and 2019.

Pension Benefits

U.S. Plans

U.K. Plan

OPEB

2020

2019

2020

2019

2020

2019

(in millions of dollars)

Accumulated Other Comprehensive Income (Loss) at Beginning of Year

( i 455.4)

( i 437.3)

( i 48.9)

( i 37.3)

i 19.5

i 27.4

Net Actuarial Gain (Loss)

Amortization

i 18.7

i 20.2

i 1.1

i 0.9

i —

( i 2.5)

All Other Changes

( i 91.2)

( i 43.0)

( i 8.5)

( i 15.1)

( i 0.1)

( i 7.3)

Prior Service Credit (Cost)

Amortization

i 0.1

i —

( i 0.2)

Curtailment Gain

i —

i 0.1

i —

Change in Income Tax

i 33.2

i 4.7

i 1.5

i 2.6

i 0.1

i 2.1

Accumulated Other Comprehensive Income (Loss) at End of Year

( i 494.6)

( i 455.4)

( i 54.7)

( i 48.9)

i 19.3

i 19.5

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.

Our U.S. qualified defined benefit pension plan assets include a diversified blend of domestic, international, global, and emerging market equity securities, fixed income securities, opportunistic credit securities, real estate investments, alternative investments, and cash equivalents. Equity securities are comprised of funds and individual securities that are benchmarked against the respective indices specified below. International and global equity funds may allocate a certain percentage of assets to forward currency contracts. 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. Opportunistic credits consist of investments in funds that hold varied fixed income investments purchased at depressed values with the intention to

182

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 9 - Employee Benefit Plans - Continued

later sell those investments for a gain. Real estate investments consist primarily of funds that hold commercial real estate investments. Alternative investments, which include private equity direct investments, private equity funds of funds, and hedge funds of funds, 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, 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 i 36 percent to equity securities, i 40 percent to fixed income securities, and i 24 percent to opportunistic credits, alternative, and real estate investments.

Asset Class

Asset Type

Benchmark Indices

Equity Securities

Collective funds; Individual holdings

Standard & Poor's 500; Russell 2000 Value and Growth; Morgan Stanley Capital International (MSCI) Europe Australasia Far East Small Cap; MSCI Emerging Markets; MSCI World and World Minimum Volatility; FTSE RAFI All-World Low Volatility

Fixed Income

Individual holdings

Bloomberg Barclays Long Government/Corporate Index

Opportunistic Credits

Collective fund

Custom Index

Real Estate

Collective fund

National Council of Real Estate Investment Fund Open-end Diversified Core Equity Index

Alternative Investments (Hedge and Private Equity)

Fund of funds; Direct investments

Hedge Fund Research Institute Fund of Funds; Custom 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 LIBOR plus four and a half percent. The remaining assets in the U.K. plan are invested in leveraged interest rate and inflation gilt 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 i 65 percent diversified growth assets and i 35 percent interest rate and inflation gilt 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 undue risk concentrations in any one category.

183

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 9 - Employee Benefit Plans - Continued

The categorization of fair value measurements by input level for the invested assets in our U.S. pension plans is shown below. The carrying values of investment-related receivables and payables approximate fair value due to the short-term nature of the securities and are not included in the following chart. Investments valued using net asset value (NAV) as a practical expedient are not required to be categorized by input level, but these investments are included as follows to reconcile to total invested assets.

Quoted Prices
in Active Markets
for Identical Assets (Level 1)

Significant Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

NAV as a Practical
Expedient

Total

(in millions of dollars)

Invested Assets

Equity Securities:

U.S. Large Cap

i —

i 112.6

U.S. Small Cap

i 25.8

i —

i 33.2

i 59.0

Global

i —

i 307.9

International

i —

i 31.6

Emerging Markets

i —

i 62.3

Fixed Income Securities:

U.S. Government and Agencies

i 227.8

i —

i 227.8

Corporate

i —

i 445.6

i —

i 445.6

State and Municipal Securities

i —

i 3.7

i —

i 3.7

Opportunistic Credits

i —

i 200.4

Real Estate

i —

i 108.9

Alternative Investments:

Private Equity Direct Investments

i —

i 62.1

Private Equity Funds of Funds

i —

i 39.2

Cash Equivalents

i 46.3

i —

i 46.3

Total Invested Assets

i 299.9

i 449.3

i —

i 958.2

i 1,707.4

184

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 9 - Employee Benefit Plans - Continued

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

NAV as a Practical
Expedient

Total

(in millions of dollars)

Invested Assets

Equity Securities:

U.S. Large Cap

i —

i 95.2

U.S. Small Cap

i 23.0

i —

i 24.8

i 47.8

Global

i —

i 299.1

International

i —

i 28.3

Emerging Markets

i —

i 50.4

Fixed Income Securities:

U.S. Government and Agencies

i 199.0

i —

i 199.0

Corporate

i —

i 391.1

i —

i 391.1

State and Municipal Securities

i —

i 2.5

i —

i 2.5

Opportunistic Credits

i —

i 196.5

Real Estate

i —

i 108.4

Alternative Investments:

Private Equity Direct Investments

i —

i 57.7

Private Equity Funds of Funds

i —

i 38.4

Cash Equivalents

i 82.4

i —

i 82.4

Total Invested Assets

i 304.4

i 393.6

i —

i 898.8

i 1,596.8

Level 1 investments consist of individual holdings that are valued based on unadjusted quoted prices from active markets for identical securities. Level 2 investments consist of individual holdings that are valued using observable inputs through market corroborated pricing.

Certain equity, opportunistic credit, and real estate investments are valued based on the NAV of the underlying holdings. We made no adjustments to the NAV for 2020 or 2019. These investments have no unfunded commitments and no specific redemption restrictions.

Alternative investments are valued based on NAV in a period ranging from one month to one quarter in arrears. We evaluate the need for adjustments to the NAV based on market conditions and discussions with fund managers in the period subsequent to the valuation date and prior to issuance of the financial statements. We made no adjustments to the NAV for 2020 or 2019. The private equity direct investments and private equity funds of funds generally cannot be redeemed by investors. Distributions of capital from the sale of underlying fund assets may occur at any time, but are generally concentrated between five and i eight years from the formation of the fund.

185

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 9 - Employee Benefit Plans - Continued

The categorization of fair value measurements by input level for the invested assets in our U.K. pension plan is shown below. Investments valued using NAV as a practical expedient are not required to be categorized by input level, but these investments are included as follows to reconcile to total invested assets.

Quoted Prices
in Active
Markets for Identical Assets (Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

NAV as a Practical
Expedient

Total

(in millions of dollars)

Plan Assets

Diversified Growth Assets

i —

i 176.0

Fixed Interest and Index-linked Securities

i 116.8

i —

i 116.8

Cash Equivalents

i 1.3

i —

i 1.3

Total Plan Assets

i 118.1

i —

i 176.0

i 294.1

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

NAV as a Practical
Expedient

Total

(in millions of dollars)

Plan Assets

Diversified Growth Assets

i —

i 163.0

Fixed Interest and Index-linked Securities

i 89.6

i —

i 89.6

Cash Equivalents

i 0.2

i —

i 0.2

Total Plan Assets

i 89.8

i —

i 163.0

i 252.8

Level 1 fixed interest and index-linked securities consist of individual funds that are valued based on unadjusted quoted prices from active markets for identical securities. Diversified growth assets are valued based on the NAV of the underlying holdings. We made no adjustments to the NAV for 2020 or 2019. These investments have no unfunded commitments and no specific redemption restrictions.

186

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 9 - Employee Benefit Plans - Continued

The categorization of fair value measurements by input level for the assets in our OPEB plan is as follows:

Quoted Prices
in Active Markets
for Identical Assets
(Level 1)

Significant Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total

(in millions of dollars)

Assets

Life Insurance Contracts

i —

i 9.3

Quoted Prices
in Active Markets
for Identical Assets
(Level 1)

Significant Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total

(in millions of dollars)

Assets

Life Insurance Contracts

i —

i 9.9

The fair value is represented by the actuarial present value of future cash flows of the contracts.

Changes in our OPEB plan assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 31, 2020 and 2019 are as follows:

Year Ended December 31, 2020

Beginning
of Year

Actual Return on Plan Assets

Contributions

Net Benefits and Expenses Paid

End of Year

(in millions of dollars)

Life Insurance Contracts

i 9.9

i 0.1

i 9.9

( i 10.6)

i 9.3

Year Ended December 31, 2019

Beginning
of Year

Actual Return on Plan Assets

Contributions

Net Benefits and Expenses Paid

End of Year

(in millions of dollars)

Life Insurance Contracts

i 10.1

i 0.2

i 10.8

( i 11.2)

i 9.9

For the years ended December 31, 2020 and 2019, the actual return on plan assets relates solely to investments still held at the reporting date. There were i i i i no / / / transfers into or out of Level 3 during 2020 or 2019.

187

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 9 - Employee Benefit Plans - Continued

Measurement Assumptions

We use a December 31 measurement date for each of our plans. The weighted average assumptions used in the measurement of our benefit obligations as of December 31 and our net periodic benefit costs for the years ended December 31 are as follows:


	Pension Benefits
	U.S. Plans				U.K. Plan				OPEB
	2020		2019		2020		2019		2020		2019
Benefit Obligations
Discount Rate	i 2.90	%	i 3.60	%	i 1.40	%	i 2.00	%	i 2.60	%	i 3.40	%
Rate of Compensation Increase	N/A		N/A		i 2.80	%	i 2.90	%	N/A		N/A

Net Periodic Benefit Cost
Discount Rate	i 3.60	%	i 4.40	%	i 2.00	%	i 2.90	%	i 3.40	%	i 4.40	%
Expected Return on Plan Assets	i 7.00	%	i 7.00	%	i 4.10	%	i 4.30	%	i 5.75	%	i 5.75	%
Rate of Compensation Increase	N/A		N/A		i 2.90	%	i 3.70	%	N/A		N/A

We set the discount rate assumption annually for each of our retirement-related benefit plans at the measurement date to reflect the yield on a portfolio of high quality fixed income corporate debt instruments matched against the projected cash flows for future benefits.

Our long-term rate of return on plan assets assumption is selected from a range of probable return outcomes from an analysis of the asset portfolio. Our expectations for the future investment returns of the asset categories are based on a combination of historical market performance, evaluations of investment forecasts obtained from external consultants and economists, and current market yields. The methodology underlying the return assumption includes the various elements of the expected return for each asset class such as long-term rates of return, volatility of returns, and the correlation of returns between various asset classes. The expected return for the total portfolio is calculated based on the plan's strategic asset allocation. Investment risk is measured and monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies, and quarterly investment portfolio reviews. Risk tolerance is established through consideration of plan liabilities, plan funded status, and corporate financial condition.

Our mortality rate assumption reflects our best estimate, as of the measurement date, of the life expectancies of plan participants in order to determine the expected length of time for benefit payments. We derive our assumptions from industry mortality tables.

The expected return assumption for the life insurance reserve for our OPEB plan is based on full investment in fixed income securities with an average book yield of i 4.87 percent and i 4.74 percent in 2020 and 2019, respectively.

The rate of compensation increase assumption for our U.K. pension plan is generally based on periodic studies of compensation trends.

At December 31, 2020 and 2019, the annual rates of increase in the per capita cost of covered postretirement health care benefits assumed for the next calendar year are i i 6.50 / percent for benefits payable to both retirees prior to Medicare eligibility as well as Medicare eligible retirees. The rates are assumed to change gradually to i 5.00 percent by i 2027 for measurement at December 31, 2020 and remain at that level thereafter. The annual rates of increase in the per capita cost of covered postretirement health benefits do not apply to retirees whose postretirement health care benefits are provided through an exchange.

188

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 9 - Employee Benefit Plans - Continued

Net Periodic Benefit Cost

The following table provides the components of the net periodic benefit cost (credit) for the years ended December 31.

Pension Benefits

U.S. Plans

U.K. Plan

OPEB

2020

2019

2018

2020

2019

2018

2020

2019

2018

(in millions of dollars)

Service Cost

i 11.0

i 10.9

i 9.1

i —

Interest Cost

i 73.0

i 83.3

i 79.8

i 4.9

i 6.1

i 5.9

i 4.1

i 5.3

i 4.9

Expected Return on Plan Assets

( i 106.7)

( i 99.4)

( i 104.5)

( i 9.5)

( i 8.9)

( i 0.5)

( i 0.6)

Amortization of:

Net Actuarial Loss (Gain)

i 18.7

i 20.2

i 21.7

i 1.1

i 0.9

i 0.6

i —

( i 2.5)

i —

Prior Service Credit

i 0.1

i —

( i 0.2)

Curtailment Gain

i —

i 0.1

i —

Total Net Periodic Benefit Cost

( i 3.9)

i 15.0

i 6.1

( i 3.4)

( i 1.9)

( i 2.4)

i 3.4

i 2.0

i 4.1

The service cost component of net periodic pension and postretirement benefit cost is included as a component of compensation expense in our consolidated statements of income. All other components of net periodic pension and postretirement benefit cost are included in other expenses.

Benefit Payments

The following table provides expected benefit payments, which reflect expected future service, as appropriate.

Pension Benefits

U.S. Plans

U.K. Plan

OPEB

(in millions of dollars)

Year

Gross

Subsidy Payments

Net

2021

i 75.0

i 6.1

i 11.1

i 0.1

i 11.0

2022

i 78.4

i 6.1

i 10.5

i 0.1

i 10.4

2023

i 82.2

i 6.5

i 10.0

i 0.1

i 9.9

2024

i 86.1

i 7.0

i 9.5

i 0.1

i 9.4

2025

i 90.1

i 7.2

i 9.0

i 0.1

i 8.9

2026-2030

i 514.9

i 42.3

i 38.3

i 0.2

i 38.1

Funding Policy

The funding policy for our U.S. qualified defined benefit plan is to contribute annually an amount at least equal to the minimum annual contribution required under ERISA and other applicable laws, but generally not greater than the maximum amount that can be deducted for federal income tax purposes. i We had no regulatory contribution requirements for our U.S. qualified defined benefit plan in 2020 and made a de minimis amount of voluntary contributions during 2020. We do not expect to make any contributions in 2021. The funding policy for our U.S. non-qualified defined benefit pension plan is to contribute the amount of the benefit payments made during the year. Our expected return on plan assets and discount rate will not affect the cash contributions we are required to make to our U.S. pension plan because such contributions are determined under the minimum funding requirements as set forth in ERISA.

189

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 9 - Employee Benefit Plans - Continued

We made i no contributions to our U.K. plan during 2020, nor do we expect to make any contributions in 2021, either voluntary or those required to meet the minimum funding requirements under U.K. legislation.

Our OPEB plan represents a non-vested, non-guaranteed obligation, and current regulations do not require specific funding levels for these benefits, which are comprised of retiree life, medical, and dental benefits. It is our practice to use general assets to pay medical and dental claims as they come due in lieu of utilizing plan assets for the medical and dental benefit portions of our OPEB plan.

Defined Contribution Plans

We offer a 401(k) plan to all eligible U.S. employees under which a portion of employee contributions is matched. We match dollar-for-dollar up to i 5.0 percent of base salary and any recognized sales and performance-based incentive compensation for employee contributions into the plan. We also make an additional non-elective contribution of i 4.5 percent of earnings for all eligible employees and a separate transition contribution for eligible employees who met certain age and years of service criteria as of December 31, 2013. The separate transition contributions continued through December 31, 2020, at which point they expired. The 401(k) plan remains in compliance with ERISA guidelines and continues to qualify for a “safe harbor” from annual discrimination testing.

We also offer a defined contribution plan to all eligible U.K. employees under which a portion of employee contributions is matched. We match i two pounds for every one pound on the first i 1.0 percent of employee contributions into the plan and match additional employee contributions pound-for-pound up to i 5.0 percent of base salary. We also make an additional non-elective contribution of i 6.0 percent of base salary for all eligible employees who met certain age and years of service criteria as of March 31, 2016.

During the years ended December 31, 2020, 2019, and 2018, we recognized costs of $ i 83.4 million, $ i 77.3 million, and $ i 72.7 million, respectively, for our U.S. defined contribution plan. We recognized costs of $ i 5.0 million, $ i 4.4 million, and $ i 4.2 million in 2020, 2019, and 2018, respectively, for our U.K. defined contribution plan.

Note 10 - Stockholders' Equity and Earnings Per Common Share

Earnings Per Common Share

Net income per common share is determined as follows:

Year Ended December 31

2020

2019

2018

(in millions of dollars, except share data)

Numerator

Net Income

i 793.0

i 1,100.3

i 523.4

Denominator (000s)

Weighted Average Common Shares - Basic

i 203,642.0

i 209,728.9

i 219,635.6

Dilution for Assumed Exercises of Stock Options and Nonvested Stock Awards

i 113.3

i 125.5

i 423.0

Weighted Average Common Shares - Assuming Dilution

i 203,755.3

i 209,854.4

i 220,058.6

Net Income Per Common Share

Basic

i 3.89

i 5.25

i 2.38

Assuming Dilution

i 3.89

i 5.24

i 2.38

/ /

190

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 10 - Stockholders' Equity and Earnings Per Common Share - Continued

We compute basic earnings per share by dividing net income by the weighted average number of common shares outstanding for the period. In computing earnings per share assuming dilution, we include potential common shares that are dilutive (those that reduce earnings per share). We use the treasury stock method to account for the effect of outstanding stock options, nonvested stock success units, nonvested restricted stock units, and nonvested performance share units on the computation of diluted earnings per share. Under this method, the potential common shares from stock options, nonvested stock success units, and nonvested restricted stock units will each have a dilutive effect, as individually measured, when the average market price of Unum Group common stock during the period exceeds the exercise price of the stock options and the grant price of the nonvested stock success units and nonvested restricted stock units. Potential common shares from performance based share units will have a dilutive effect as the attainment of performance conditions is progressively achieved during the vesting period. Potential common shares not included in the computation of diluted earnings per share because the impact would be antidilutive, approximated i 1.6 million, i 1.1 million, and i 0.6 million for the years ended December 31, 2020, 2019, and 2018, respectively. See Note 11 for further discussion of our stock-based compensation plans.

Common Stock

During the second quarter of 2019, our board of directors authorized the repurchase of up to $ i 750.0 million of Unum Group's outstanding common stock through i November 23, 2020, at which point the authorization expired. This authorization replaced the previous authorization of $ i 750.0 million that was scheduled to expire on November 24, 2019. As of December 31, 2020, we did not authorize a new share repurchase program and there were i i no / remaining amounts to be repurchased under either plan at December 31, 2020.

Common stock repurchases, which are accounted for using the cost method and classified as treasury stock until otherwise retired, were as follows:

Year Ended December 31

2020

2019

2018

(in millions)

Shares Repurchased

i —

i 12.3

i 8.7

Cost of Shares Repurchased (1)

i —

i 400.4

i 350.7

(1) Includes commissions of $ i 0.4 million and $ i 0.7 million for the years ended December 31, 2019 and 2018, respectively.

Preferred Stock

Unum Group has i 25.0 million shares of preferred stock authorized with a par value of $ i 0.10 per share. i No preferred stock has been issued to date.

Note 11 - i Stock-Based Compensation

Description of Stock Plans

Under the Stock Incentive Plan of 2017 (the 2017 Plan), up to i 17 million shares of common stock are available for awards to our employees, officers, consultants, and directors. Awards may be in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance share units, and other stock-based awards. Each full-value award, defined as any award other than a stock option or stock appreciation right, is counted as i 1.76 shares. The exercise price for stock options issued cannot be less than the fair value of the underlying common stock as of the grant date. Stock options generally have a term of i eight years after the date of grant and fully vest after i three years. At December 31, 2020, approximately i 10.1 million shares were available for future grants under the 2017 Plan.

Under the Stock Incentive Plan of 2012 (the 2012 Plan), which was terminated in May 2017 for the purposes of any further grants, up to i 20 million shares of common stock were available for awards to our employees, officers, consultants, and directors. Awards could be in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance share units, and other stock-based awards. Each full-value award, defined as any award other than a stock option or stock appreciation

191

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 11 - Stock-Based Compensation - Continued

right, is counted as i 1.76 shares. Awards granted before the termination of the 2012 Plan remain outstanding in accordance with the plan's terms. Stock options generally have a term of i eight years after the date of grant and fully vest after i three years.

We issue new shares of common stock for all of our stock plan vestings and exercises.

Stock Success Units (SSUs)

Activity for SSUs classified as equity is as follows:


		Weighted Average
	Shares	Grant Date
	(000s)	Fair Value
Outstanding at December 31, 2019	i —	$	i —
Granted	i 321	i 18.78


Outstanding at December 31, 2020	i 321	i 18.78

During 2020, we issued SSUs with a weighted average grant date fair value per share of $ i 18.78. SSUs vest over a six year period, beginning at the date of grant, and the compensation cost is recognized ratably during the vesting period. SSUs are eligible for accelerated vesting at the end of the first, third, and fifth years of the service period if certain performance goals are achieved. Forfeitable dividends on SSUs are accrued in the form of cash. Compensation cost for SSUs subject to accelerated vesting due to the achievement of certain performance conditions at the end of the first, third, and fifth years of the service period is recognized over the implicit service period.

There were i no shares that vested during 2020. At December 31, 2020, we had $ i 5.7 million of unrecognized compensation cost related to SSUs that will be recognized over a weighted average period of i 2.9 years.

Performance Share Units (PSUs)

Activity for PSUs classified as equity is as follows:


		Weighted Average
	Shares	Grant Date
	(000s)	Fair Value
Outstanding at December 31, 2019	i 337	$	i 44.11
Granted	i 323	i 23.49
Vested	( i 135)	i 48.20
Forfeited	( i 8)	i 35.81
Outstanding at December 31, 2020	i 517	i 30.31

During 2020, 2019, and 2018, we issued PSUs with a weighted average grant date fair value per share of $ i 23.49, $ i 41.57, and $ i 44.19, respectively. Vesting for the PSUs occurs at the end of a three-year period and is contingent upon our achievement of prospective company performance goals and our total shareholder return relative to a board-approved peer group during the three-year period. Actual performance, including modification for relative total shareholder return, may result in the ultimate award of i 40 to i 180 percent of the initial number of PSUs issued, with the potential for no award if company performance goals are not achieved during the three-year period. Forfeitable dividend equivalents on PSUs have previously been accrued in the form of additional PSUs. Beginning with the March 1, 2020 grant, forfeitable dividends are accrued as cash.

PSU shares in the preceding table represent aggregate initial target awards and accrued dividend equivalents and do not reflect potential increases or decreases resulting from the application of the performance factor determined after the end of the performance periods. At December 31, 2020, the three-year performance period for the 2018 PSU grant was completed and the related shares vested, but the performance factor had not yet been applied. The performance factor will be applied during the first quarter of 2021, with distribution of the stock at that time. Granted and vested amounts in the preceding table also include

192

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 11 - Stock-Based Compensation - Continued

an adjustment to reflect the application of the performance factor to the 2017 PSU grant, which occurred during the first quarter of 2020.

At December 31, 2020, we had approximately $ i 6.5 million of unrecognized compensation cost related to PSUs that will be recognized over a weighted average period of i 1.6 years. The estimated compensation expense is adjusted for actual performance experience and is recognized ratably during the service period, or remaining service period, if and when it becomes probable that the performance conditions will be satisfied. Compensation cost for PSUs subject to accelerated vesting at the date of retirement eligibility is recognized over the implicit service period.

The fair value of PSUs is estimated on the date of initial grant using the Monte-Carlo simulation model. Key assumptions used to value PSUs granted during the years shown are as follows:


	Year Ended December 31
	2020		2019		2018
Expected Volatility (based on our and our peer group historical daily stock prices)	i 23	%	i 23	%	i 24	%
Expected Life (equals the performance period)	i 3 years		i 3 years		i 3 years
Risk Free Interest Rate (based on U.S. Treasury yields at the date of grant)	i 0.85	%	i 2.53	%	i 2.32	%

Restricted Stock Units (RSUs)

Activity for RSUs classified as equity is as follows:


		Weighted Average
	Shares	Grant Date
	(000s)	Fair Value
Outstanding at December 31, 2019	i 1,044	$	i 41.06
Granted	i 1,262	i 22.71
Vested	( i 626)	i 40.11
Forfeited	( i 87)	i 28.75
Outstanding at December 31, 2020	i 1,593	i 27.57

During 2020, 2019, and 2018, we issued RSUs with a weighted average grant date fair value per share of $ i 22.71, $ i 37.07, and $ i 47.76, respectively. RSUs vest over a one to three-year service period, beginning at the date of grant, and the compensation cost is recognized ratably during the vesting period. Forfeitable dividend equivalents on RSUs have previously been accrued in the form of additional RSUs. Beginning with the March 1, 2020 grant, forfeitable dividends are accrued as cash. Compensation cost for RSUs subject to accelerated vesting at the date of retirement eligibility is recognized over the implicit service period.

The total fair value of shares vested during 2020, 2019, and 2018 was $ i 25.1 million, $ i 19.5 million, and $ i 18.1 million, respectively. At December 31, 2020, we had $ i 21.2 million of unrecognized compensation cost related to RSUs that will be recognized over a weighted average period of i 0.9 years.

Cash-Settled RSUs

Activity for cash-settled RSUs classified as a liability is as follows:


		Weighted Average
	Shares	Grant Date
	(000s)	Fair Value
Outstanding at December 31, 2019	i —	$	i —
Granted	i 68	i 22.94


Outstanding at December 31, 2020	i 68	i 22.94

193

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 11 - Stock-Based Compensation - Continued

Cash-settled RSUs vest over a one to three-year service period, beginning at the date of grant, and the compensation cost is recognized ratably during the vesting period. Forfeitable dividends on cash-settled RSUs are accrued in the form of cash. Compensation cost for cash-settled RSUs subject to accelerated vesting at the date of retirement eligibility is recognized over the implicit service period.

The amount payable per unit awarded is equal to the price per share of Unum Group's common stock at settlement of the award, and as such, we measure the value of the award each reporting period based on the current stock price. The effects of changes in the stock price during the service period are recognized as compensation cost over the service period. Changes in the amount of the liability due to stock price changes after the service period are recognized as compensation cost during the period in which the changes occur. At December 31, 2020, we had $ i 1.1 million of unrecognized compensation cost related to cash-settled RSUs that will be recognized over a weighted average period of i 1.1 years.

The cash-settled RSUs have a weighted average grant date fair value per unit granted of $ i 22.94. As of December 31, 2020, i no amount of cash-settled RSUs have vested or been paid.

Stock Options

Stock option activity is summarized as follows:

Remaining

Intrinsic

Weighted Average

Contractual Term

Value

(000s)

Exercise Price

(in years)

(in millions)

Outstanding at December 31, 2019

i 74

i 24.09

Exercised

( i 13)

i 23.35

Forfeited

( i 21)

i 24.25

Outstanding at December 31, 2020

i 40

i 24.25

i 0.1

i —

Exercisable at December 31, 2020

i 40

i 24.25

i 0.1

i —

All outstanding stock options at December 31, 2020 have vested. Stock options vest over a one to three-year service period, beginning at the date of grant, and the compensation cost is recognized ratably during the vesting period. Compensation cost for stock options subject to accelerated vesting at the date of retirement eligibility is recognized over the implicit service period. At December 31, 2020, we had i no unrecognized compensation cost related to stock options.

The intrinsic value of options exercised in 2020, 2019, and 2018 was $ i 0.1 million, $ i 0.3 million, and $ i 0.7 million, respectively. There were i i i no / / stock options granted or vested in the years 2018 through 2020.

194

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 11 - Stock-Based Compensation - Continued

Expense

Compensation expense for the stock plans, as reported in our consolidated statements of income, is as follows:

Year Ended December 31

2020

2019

2018

(in millions of dollars)

Performance Share Units

i 5.6

i 5.0

i 6.8

Restricted Stock Units and Cash-Settled Restricted Stock Units

i 23.9

i 21.0

i 19.0

Stock Success Units

i 0.4

i —

Other

i 0.5

i 0.6

i 0.5

Total Compensation Expense, Before Income Tax

i 30.4

i 26.6

i 26.3

Total Compensation Expense, Net of Income Tax

i 26.1

i 22.7

i 20.9

Cash received under all share-based payment arrangements for the years ended December 31, 2020, 2019, and 2018 was $ i 4.4 million, $ i 6.1 million, and $ i 4.6 million, respectively.

Note 12 - i Reinsurance

Reinsurance activity related to both our premium income and changes in reserves for future benefits are as follows:

Year Ended December 31

2020

2019

2018

(in millions of dollars)

Direct Premium Income

i 9,621.9

i 9,576.3

i 9,171.1

Reinsurance Assumed

i 94.1

i 116.5

i 142.6

Reinsurance Ceded

( i 337.9)

( i 327.2)

( i 327.6)

Net Premium Income

i 9,378.1

i 9,365.6

i 8,986.1

Ceded Benefits and Change in Reserves for Future Benefits

i 628.8

i 650.1

i 667.2

Effective December 16, 2020, Provident Life and Accident Insurance Company, The Paul Revere Life Insurance Company and Unum Life Insurance Company of America, wholly-owned domestic insurance subsidiaries of Unum Group and collectively referred to as "the ceding companies", entered into a series of agreements (collectively referred to as the "reinsurance agreement") with Commonwealth Annuity and Life Insurance Company (Commonwealth), a subsidiary of Global Atlantic Financial Group, to reinsure on a coinsurance basis effective as of July 1, 2020 approximately 75 percent of the Closed Block individual disability business, primarily direct business written by the ceding companies. Commonwealth has established and will maintain collateralized trust accounts for the benefit of the ceding companies to secure its obligations under the relevant reinsurance agreement. As part of the agreement, additional Closed Block individual disability business consisting of direct business not ceded in December 2020 and business assumed by the ceding companies from third parties, is expected to be reinsured in the first quarter of 2021, subject to receipt of required consents and regulatory approvals and the satisfaction or waiver of other customary closing conditions and is considered the second phase of this transaction. In connection with the first phase of the coinsurance agreement that closed in December 2020, the ceding companies paid a total cash ceding commission to Commonwealth of approximately $ i 438 million and transferred additional assets consisting primarily of fixed maturity securities and cash totaling $6,669.8 million.

195

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 12 - Reinsurance - Continued

Commonwealth for the active life cohort (ALR cohort), which represents approximately five percent of the reserves ceded to Commonwealth. As part of this agreement, PLC received a payment from Commonwealth of approximately $62 million. PLC will provide similar coverage to Commonwealth related to additional business ceded as part of the second phase of the transaction. At the end of the 12-year coverage period, Commonwealth will retain the remaining incidence and claims risk on the ALR cohort of the ceded business. Under this volatility cover, annual settlements will be made equal to the difference between the actual and estimated cash flows and reserve changes during the year. Upon expiration of the 12-year period, a terminal settlement will be made based on the final disabled life reserves. As a result of the volatility cover, the reinsurance agreement covering the ALR cohort, does not pass risk transfer requirements under GAAP and is accounted for under the deposit method.

As a result of this reinsurance agreement, we recognized the following as of the date of the agreement:

•Net realized investment gains totaling $ i 1,302.3 million related to the transfer of investments.

•Increase in benefits and change in reserves for future benefits of $ i 1,284.5 million resulting from the realization of previously unrealized investment gains and losses recorded in accumulated other comprehensive income.

•Transaction costs totaling $ i 21.0 million.

•Tax benefit of $ i 36.5 million.

•Reinsurance recoverable of $ i 6,141.5 million representing the ceded reserves related to policies on claim status (DLR cohort).

•Cost of reinsurance, or the prepaid reinsurance premium, of $ i 815.7 million related to the DLR cohort.

•Deposit asset of $ i 88.2 million related to the ALR cohort.

The cost of reinsurance will be amortized over the expected run-off pattern of the ceded reserves for the DLR cohort and we recognized $ i 2.6 million in amortization expense in 2020 subsequent to the execution of the agreement. The deposit asset will be adjusted over the 12-year period of the volatility cover based on cash flows related to the ALR cohort, settlement payments as determined above, and accretion of interest and will result in an amount equal to the expected disabled life reserve for the ALR cohort at the expiration of the volatility cover. Both the cost of reinsurance and the deposit asset are reported in Other Assets within our Consolidated Balance Sheets.

As of December 31, 2020, Commonwealth accounted for approximately i 59 percent of the total reinsurance recoverable and the majority of our total cost of reinsurance. Commonwealth has an A rating by A.M. Best Company (AM Best) and has also established collateralized trust accounts for our benefit to secure its obligations. In addition, i nine other major companies, which account for approximately i 35 percent of our reinsurance recoverable at December 31, 2020, are also rated A or better by either AM Best or Standard & Poor's Ratings Services (S&P), or are fully securitized by letters of credit or investment-grade fixed maturity securities held in trust. Approximately i five percent of our reinsurance recoverable relates to business reinsured either with companies rated A- or better by AM Best or S&P, with overseas entities with equivalent ratings, or backed by letters of credit or trust agreements, or through reinsurance arrangements wherein we retain the assets in our general account. The remaining i one percent of our reinsurance recoverable is held by companies either rated below A- by AM Best or S&P, or not rated.

196

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 13 - Segment Information

We have i three principal operating business segments: Unum US, Unum International, and Colonial Life. Our other segments are Closed Block and Corporate.

The Unum US segment is comprised of group long-term and short-term disability insurance, which includes our medical stop-loss product as well as our fee-based leave management services and ASO business, group life and accidental death and dismemberment products, and supplemental and voluntary lines of business, which are comprised of individual disability, voluntary benefits, and dental and vision products. These products are marketed through our field sales personnel who work in conjunction with independent brokers and consultants.

The Unum International segment is comprised of our operations in both the United Kingdom and Poland. Our Unum UK products include insurance for group long-term disability, group life, and supplemental lines of business which include dental, individual disability, and critical illness products. Our Unum Poland products include insurance for individual and group life with accident and health riders. Unum International's products are sold primarily through field sales personnel and independent brokers and consultants.

The Colonial Life segment includes insurance for accident, sickness, and disability products, which includes our dental and vision products, life products, and cancer and critical illness products marketed to employees, on both a group and an individual basis, at the workplace through an independent contractor agency sales force and brokers.

The Closed Block segment consists of group and individual long-term care, individual disability, and other insurance products no longer actively marketed. We discontinued offering individual long-term care in 2009 and group long-term care in 2012. Individual disability in this segment generally consists of policies we sold prior to the mid-1990s and entirely discontinued selling in 2004. Other insurance products include group pension, individual life and corporate-owned life insurance, reinsurance pools and management operations, and other miscellaneous product lines.

Costs Related to Organizational Design Update

During the third quarter of 2020, we realigned certain parts of our organizational structure by shifting resources to accelerate growth, fund priority investments, and simplify and improve our business practices. In connection with this update, we incurred charges of $ i 23.3 million, which primarily consisted of employee severance and benefit costs as well as certain costs related to lease terminations and the disposal of certain fixed assets. These costs were recorded within either compensation expense or other expenses in the consolidated statements of income and were included within our Corporate segment. This update did not result in the exit or disposal of any of our lines of business and we do not expect material additional costs associated with this update in the future.

Acquisitions of Business

On November 1, 2018, we acquired i 100 percent of the shares and voting interests in i Jaimini Health, Inc. (Jaimini Health), a dental health maintenance organization. The acquisition of Jaimini Health will broaden our employee benefit dental offerings in the U.S., particularly in the state of California, and is reported in our Unum US segment.

On October 1, 2018, we acquired i 100 percent of the shares and voting interests in i Unum Poland, a financial protection benefits provider in Poland. This acquisition will expand our European presence, which we believe to be an attractive market for financial protection benefits.

On January 1, 2018, we acquired i 100 percent of the shares and voting interests in i Leavelogic, Inc (Leavelogic), a leave management technology provider. The acquisition of Leavelogic will enhance our current leave management offerings by providing tools for employers and employees to better manage the family leave process and is reported in our Unum US segment.

197

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 13 - Segment Information - Continued

Aggregate revenues for all three acquired entities totaled approximately $ i 61 million in 2017. Aggregate assets were valued at approximately $ i 344 million as of the respective acquisition dates and were primarily comprised of bonds, short-term investments, and intangible assets attributable to the value of business acquired, the value of distribution networks, and licenses. Aggregate liabilities were valued at approximately $ i 206 million as of the respective acquisition dates and were primarily comprised of outstanding claim liabilities, reserves for future claims, and income tax liabilities. The aggregate purchase price for all three transactions was approximately $ i 151 million and exceeded the fair value of the identifiable net assets by approximately $ i 13 million, which was identified as goodwill, primarily attributable to the value of adding individual and group financial protection products in Poland to our current employee benefit offerings and the value of enhancing our technology capabilities around our leave management offerings. The goodwill is not deductible for income tax purposes except upon disposition of the acquired entities. These acquisitions, the results of which are included in our consolidated financial statements for the periods subsequent to the respective dates of acquisition, did not have a material impact on revenue or results of operations for 2018.

198

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 13 - Segment Information - Continued

Segment information is as follows:

Year Ended December 31

2020

2019

2018

(in millions of dollars)

Premium Income

Unum US

Group Disability

Group Long-term Disability

i 1,828.5

i 1,823.1

i 1,766.2

Group Short-term Disability

i 799.2

i 768.8

i 706.3

Group Life and Accidental Death & Dismemberment

Group Life

i 1,640.5

i 1,662.0

i 1,583.7

Accidental Death & Dismemberment

i 163.9

i 165.7

i 156.3

Supplemental and Voluntary

Individual Disability

i 456.0

i 440.7

i 425.4

Voluntary Benefits

i 875.2

i 910.2

i 895.7

Dental and Vision

i 255.6

i 246.1

i 202.8

i 6,018.9

i 6,016.6

i 5,736.4

Unum International

Unum UK

Group Long-term Disability

i 364.9

i 353.4

i 358.9

Group Life

i 108.5

i 115.7

i 110.8

Supplemental

i 99.8

i 89.5

i 81.7

Unum Poland

i 79.6

i 71.9

i 17.4

i 652.8

i 630.5

i 568.8

Colonial Life

Accident, Sickness, and Disability

i 975.1

i 973.4

i 929.3

Life

i 376.4

i 351.6

i 328.4

Cancer and Critical Illness

i 360.5

i 360.0

i 346.1

i 1,712.0

i 1,685.0

i 1,603.8

Closed Block

Long-term Care

i 666.9

i 651.6

i 648.3

Individual Disability

i 319.6

i 374.3

i 420.8

All Other

i 7.9

i 7.6

i 8.0

i 994.4

i 1,033.5

i 1,077.1

Total Premium Income

i 9,378.1

i 9,365.6

i 8,986.1

199

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 13 - Segment Information - Continued

Unum US

Unum International

Colonial Life

Closed Block

Corporate

Total

(in millions of dollars)

Year Ended December 31, 2020

Premium Income

i 6,018.9

i 652.8

i 1,712.0

i 994.4

i —

i 9,378.1

Net Investment Income

i 720.3

i 104.6

i 155.7

i 1,370.3

i 9.8

i 2,360.7

Other Income

i 154.9

i 0.5

i 1.1

i 66.6

i 1.1

i 224.2

Adjusted Operating Revenue

i 6,894.1

i 757.9

i 1,868.8

i 2,431.3

i 10.9

i 11,963.0

Adjusted Operating Income (Loss)

i 825.4

i 76.6

i 335.4

i 241.4

( i 200.8)

i 1,278.0

Interest and Debt Expense

i —

i 3.1

i 185.1

i 188.2

Depreciation and Amortization

i 421.7

i 20.1

i 273.9

i 5.9

i 0.7

i 722.3

Year Ended December 31, 2019

Premium Income

i 6,016.6

i 630.5

i 1,685.0

i 1,033.5

i —

i 9,365.6

Net Investment Income

i 739.4

i 122.5

i 148.0

i 1,404.9

i 20.5

i 2,435.3

Other Income

i 142.8

i 0.6

i 3.4

i 71.3

i 3.1

i 221.2

Adjusted Operating Revenue

i 6,898.8

i 753.6

i 1,836.4

i 2,509.7

i 23.6

i 12,022.1

Adjusted Operating Income (Loss)

i 1,031.1

i 107.9

i 344.5

i 137.7

( i 188.6)

i 1,432.6

Interest and Debt Expense

i —

i 5.3

i 172.1

i 177.4

Depreciation and Amortization

i 422.8

i 18.7

i 276.6

i 7.7

i 1.7

i 727.5

Year Ended December 31, 2018

Premium Income

i 5,736.4

i 568.8

i 1,603.8

i 1,077.1

i —

i 8,986.1

Net Investment Income

i 778.7

i 117.2

i 151.2

i 1,377.1

i 29.5

i 2,453.7

Other Income

i 118.5

i 0.4

i 1.2

i 75.4

i 2.7

i 198.2

Adjusted Operating Revenue

i 6,633.6

i 686.4

i 1,756.2

i 2,529.6

i 32.2

i 11,638.0

Adjusted Operating Income (Loss)

i 1,014.6

i 113.9

i 335.2

i 125.5

( i 171.1)

i 1,418.1

Interest and Debt Expense

i —

i 6.9

i 160.4

i 167.3

Depreciation and Amortization

i 389.6

i 17.6

i 257.3

i 8.3

i 1.0

i 673.8

200

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 13 - Segment Information - Continued

Unum

Colonial

Unum US

International

Life

Total

(in millions of dollars)

Deferred Acquisition Costs

Year Ended December 31, 2020

Beginning of Year

i 1,223.0

i 26.4

i 1,074.6

i 2,324.0

Capitalization

i 291.5

i 12.1

i 272.6

i 576.2

Amortization

( i 341.0)

( i 7.4)

( i 257.7)

( i 606.1)

Adjustment Related to Unrealized Investment Gains and Losses

( i 4.8)

i —

( i 17.6)

( i 22.4)

Foreign Currency

i —

i 0.9

i —

i 0.9

End of Year

i 1,168.7

i 32.0

i 1,071.9

i 2,272.6

Year Ended December 31, 2019

Beginning of Year

i 1,239.4

i 20.0

i 1,050.0

i 2,309.4

Capitalization

i 334.5

i 12.8

i 311.3

i 658.6

Amortization

( i 344.0)

( i 7.1)

( i 258.8)

( i 609.9)

Adjustment Related to Unrealized Investment Gains and Losses

( i 6.9)

i —

( i 27.9)

( i 34.8)

Foreign Currency

i —

i 0.7

i —

i 0.7

End of Year

i 1,223.0

i 26.4

i 1,074.6

i 2,324.0

Year Ended December 31, 2018

Beginning of Year

i 1,205.4

i 21.3

i 957.9

i 2,184.6

Capitalization

i 344.0

i 8.1

i 315.9

i 668.0

Amortization

( i 315.1)

( i 8.2)

( i 242.2)

( i 565.5)

Adjustment Related to Unrealized Investment Gains and Losses

i 5.1

i —

i 18.4

i 23.5

Foreign Currency

i —

( i 1.2)

i —

( i 1.2)

End of Year

i 1,239.4

i 20.0

i 1,050.0

i 2,309.4


	December 31
	2020		2019
	(in millions of dollars)
Assets
Unum US	$	i 19,034.2	$	i 18,586.3
Unum International	i 4,206.2		i 3,869.1
Colonial Life	i 4,864.3		i 4,629.0
Closed Block	i 38,187.2		i 37,008.7
Corporate	i 4,333.9		i 2,920.3
Total Assets	$	i 70,625.8	$	i 67,013.4

Revenue is primarily derived from sources in the United States, the United Kingdom, and Poland. There are no material revenues or assets attributable to foreign operations other than those reported in our Unum International segment.

201

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 13 - Segment Information - Continued

We report goodwill in our Unum US, Unum International, and Colonial Life segments, which are the segments expected to benefit from the originating business combinations. At December 31, 2020 and 2019 goodwill was $ i 353.0 million and $ i 351.7 million, respectively, with $ i i 280.0 / million attributable to Unum US in each year, $ i 45.3 million and $ i 44.0 million, respectively, attributable to Unum International, and $ i i 27.7 / million attributable to Colonial Life in each year.

Stockholders' equity is allocated to the operating segments on the basis of an internal allocation formula that reflects the volume and risk components of each operating segment's business and aligns allocated equity with our target capital levels for regulatory and rating agency purposes. We modify this formula periodically to recognize changes in the views of capital requirements.

We measure and analyze our segment performance on the basis of "adjusted operating revenue" and "adjusted operating income" or "adjusted operating loss", which differ from total revenue and income before income tax as presented in our consolidated statements of income due to the exclusion of net realized investment gains and losses and amortization of the cost of reinsurance as well as certain other items specified in the reconciliations below. We believe adjusted operating revenue and adjusted operating income or loss are better performance measures and better indicators of the revenue and profitability and underlying trends in our business. These performance measures are in accordance with GAAP guidance for segment reporting, but they should not be viewed as a substitute for total revenue, income before income tax, or net income.

As previously discussed in Note 12, we have exited a substantial portion of our closed block individual disability product line through the reinsurance agreement that was executed in December 2020. As a result, we exclude the amortization of the cost of reinsurance that was recognized as a result of the exit of the business related to the DLR cohort of policies. We believe that the exclusion of the amortization of the cost of reinsurance provides a better view of our results from our ongoing businesses.

We may at other times exclude certain other items from our discussion of financial ratios and metrics in order to enhance the understanding and comparability of our operational performance and the underlying fundamentals but this exclusion is not an indication that similar items may not recur and does not replace net income or net loss as a measure of our overall profitability.

See above and Notes 6, 8, 12, and 15 for further discussion regarding the impacts of the 2018 and 2020 long-term care reserve increases, the group pension reserve increase, the impacts from of the Closed Block individual disability reinsurance transaction, the amortization of the cost of reinsurance, the net tax benefit from the reinsurance transaction, costs related to the organizational design update, the impairment loss on the ROU asset related to one of our operating leases for office space, and the cost related to the early retirement of debt.

202

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 13 - Segment Information - Continued

A reconciliation of total revenue to "adjusted operating revenue" and income before income tax to "adjusted operating income" is as follows:

Year Ended December 31

2020

2019

2018

(in millions of dollars)

Total Revenue

i 13,162.1

i 11,998.9

i 11,598.5

Excluding:

Net Realized Investment Gain (Loss)

i 1,199.1

( i i 23.2 / )

( i 39.5)

Adjusted Operating Revenue

i 11,963.0

i 12,022.1

i 11,638.0

Income Before Income Tax

i 964.0

i 1,382.1

i 627.8

Excluding:

Net Realized Investment Gains and Losses

Net Realized Investment Gain Related to Reinsurance Transaction

i 1,302.3

i —

Net Realized Investment Loss, Other

( i 103.2)

( i 23.2)

( i 39.5)

Total Net Realized Investment Gain (Loss)

i 1,199.1

( i 23.2)

( i 39.5)

Items Related to Closed Block Individual Disability Reinsurance Transaction

Change in Benefit Reserves and Transaction Costs

( i 1,305.5)

i —

Amortization of the Cost of Reinsurance

( i 2.6)

i —

Total Items Related to Closed Block Individual Disability Reinsurance Transaction

(1,308.1)

—

Long-term Care Reserve Increase

( i 151.5)

i —

( i 750.8)

Group Pension Reserve Increase

( i 17.5)

i —

Impairment Loss on ROU Asset

( i 12.7)

i —

Costs Related to Organizational Design Update

( i 23.3)

—

Costs Related to Early Retirement of Debt

i —

( i 27.3)

i —

Adjusted Operating Income

i 1,278.0

i 1,432.6

i 1,418.1

203

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 14 - Commitments and Contingent Liabilities

Contingent Liabilities

We are a defendant in a number of litigation matters that have arisen in the normal course of business, including the matters discussed below. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning our compliance with applicable insurance and other laws and regulations. Given the complexity and scope of our litigation and regulatory matters, it is not possible to predict the ultimate outcome of all pending investigations or legal proceedings or provide reasonable estimates of potential losses, except if noted in connection with specific matters.

In some of these matters, no specified amount is sought. In others, very large or indeterminate amounts, including punitive and treble damages, are asserted. There is a wide variation of pleading practice permitted in the United States courts with respect to requests for monetary damages, including some courts in which no specified amount is required and others which allow the plaintiff to state only that the amount sought is sufficient to invoke the jurisdiction of that court. Further, some jurisdictions permit plaintiffs to allege damages well in excess of reasonably possible verdicts. Based on our extensive experience and that of others in the industry with respect to litigating or resolving claims through settlement over an extended period of time, we believe that the monetary damages asserted in a lawsuit or claim bear little relation to the merits of the case, or the likely disposition value. Therefore, the specific monetary relief sought is not stated.

Unless indicated otherwise in the descriptions below, reserves have not been established for litigation and contingencies. An estimated loss is accrued when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

Claims Handling Matters

We and our insurance subsidiaries, in the ordinary course of our business, are engaged in claim litigation where disputes arise as a result of a denial or termination of benefits. Most typically these lawsuits are filed on behalf of a single claimant or policyholder, and in some of these individual actions punitive damages are sought, such as claims alleging bad faith in the handling of insurance claims. For our general claim litigation, we maintain reserves based on experience to satisfy judgments and settlements in the normal course. We expect that the ultimate liability, if any, with respect to general claim litigation, after consideration of the reserves maintained, will not be material to our consolidated financial condition. Nevertheless, given the inherent unpredictability of litigation, it is possible that an adverse outcome in certain claim litigation involving punitive damages could, from time to time, have a material adverse effect on our consolidated results of operations in a period, depending on the results of operations for the particular period.

From time to time class action allegations are pursued where the claimant or policyholder purports to represent a larger number of individuals who are similarly situated. Since each insurance claim is evaluated based on its own merits, there is rarely a single act or series of actions which can properly be addressed by a class action. Nevertheless, we monitor these cases closely and defend ourselves appropriately where these allegations are made.

Miscellaneous Matters

Similar to other insurers, we were the subject of an examination by a third party acting on behalf of a number of state treasurers concerning our compliance with the unclaimed property laws of the participating states. We cooperated fully with this examination and in the fourth quarter of 2017, we started the process to reach a Global Resolution Agreement with the third party regarding settlement of the examination, which we finalized in January of 2018. Under the terms of the agreement, the third party acting on behalf of the signatory states compared insured data to the Social Security Administration's Death Master File to identify deceased insureds and contract holders where a valid claim has not been made. During the fourth quarter of 2017, we established reserves which reflect our estimate of the liability expected to be paid as we execute on the terms of the settlement. We also are cooperating with a Delaware Market Conduct examination involving the same issue, which is currently inactive. The legal and regulatory environment around unclaimed death benefits continues to evolve. It is possible that the current settlement and/or similar investigations by other state jurisdictions may result in payments to beneficiaries, the payment of abandoned funds under state law, and/or administrative penalties, the total of which may be in excess of the reserves established.

204

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 14 - Commitments and Contingent Liabilities - Continued

Securities Class Actions: Three alleged securities class action lawsuits have been filed against Unum Group and individual defendants as follows:

•On June 13, 2018, an alleged securities class action lawsuit entitled Cynthia Pittman v. Unum Group, Richard McKenney, John McGarry, and Daniel Waxenberg was filed in the United States District Court for the Eastern District of Tennessee. The plaintiff seeks to represent purchasers of Unum Group publicly traded securities between January 31, 2018 and May 2, 2018. The plaintiff alleges the Company caused its shares to trade at artificially high levels by failing to disclose information about the rate of long-term care policy terminations and long-term care claim incidence resulting in misleading statements about capital management plans and long-term care reserves. The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and seeks compensatory damages in an amount to be proven at trial. The Company strongly denies these allegations and will vigorously defend the litigation.

•On July 13, 2018, an alleged securities class action lawsuit entitled Scott Cunningham v. Unum Group, Richard McKenney, John McGarry, and Daniel Waxenberg was filed in the United States District Court for the Eastern District of Tennessee. The allegations, class period, and damages claimed mirror those in the Pittman matter. The Company strongly denies these allegations and will vigorously defend the litigation.

•On July 25, 2018, an alleged securities class action lawsuit entitled City of Taylor Police and Fire Retirement System v. Unum Group, Richard McKenney, John McGarry, Steve Zabel, and Daniel Waxenberg was filed in the United States District Court for the Eastern District of Tennessee. The plaintiff seeks to represent purchasers of Unum Group publicly traded securities between October 27, 2016 and May 1, 2018. The allegations and damages claimed mirror those in the Pittman matter. The Company strongly denies these allegations and will vigorously defend the litigation.

On November 9, 2018, the court consolidated the Pittman, Cunningham, and City of Taylor Police and Fire Retirement System cases into one matter entitled In re Unum Group Securities Litigation, appointed a lead plaintiff and lead plaintiff’s counsel, and directed the plaintiff to file a consolidated amended complaint. On January 15, 2019, the plaintiff filed a consolidated amended complaint asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and seeks compensatory damages in an amount to be proven at trial as well as costs, expenses, and attorney’s fees. On March 18, 2019, the Company filed a motion to dismiss the consolidated amended complaint. On November 4, 2019 the court heard oral argument on the motion. On June 1, 2020, the court granted the Company's motion and dismissed the cases with prejudice. On June 26, 2020, the plaintiffs filed a notice of appeal with the Sixth Circuit Court of Appeals. The court has scheduled oral argument for March 2, 2021.

We believe the appeal and the underlying claims lack merit and reserves have not been established for these matters as we are unable to estimate a range of reasonably possible losses. However, an adverse outcome in one or more of these actions could, depending on the nature, scope, and amount of any ruling, materially adversely affect our consolidated results of operations in a period.

Note 15 - i Leases

We lease certain buildings and equipment under various noncancellable operating lease agreements. In addition, we have sub-lease agreements on a limited number of our building lease agreements. The majority of our building leases and sub-leases expire within a five to ten year period and we generally have the option to renew at the end of the lease term at the fair rental value at the time of renewal. The majority of our equipment leases expire within a one to three year period and we generally have the option to renew at the end of the lease term at the fair rental value at the time of renewal.

We do not have any lease agreements or sub-lease agreements that contain variable lease payments. In addition, we do not have lease agreements or sub-lease agreements that contain residual value guarantees or impose any financial restrictions or covenants with the lessors.

205

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 15 - Leases - Continued

Operating lease information is as follows:


	Year Ended December 31
	2020			2019
	(in millions of dollars)
Lease Cost
Operating Lease Cost	$	i 48.6		$	i 29.4
Sublease Income	( i 1.3)			( i 1.9)
Total Lease Cost	$	i 47.3		$	i 27.5

Other Information
Cash Paid for Amounts Included in the Measurement of Lease Liabilities	$	i 30.8		$	i 28.9
Weighted-Average Remaining Lease Term	i 6 years			i 7 years
Weighted-Average Discount Rate	i 4.37		%	i 4.60		%

Operating lease cost as calculated prior to the adoption of ASC 842 was $ i 29.2 million for the year ended December 31, 2018.

As of December 31, 2020, aggregate undiscounted minimum net lease payments and the reconciliation to our lease liability are as follows (in millions of dollars):


2021	$	i 25.4
2022	i 22.8
2023	i 16.5
2024	i 12.7
2025	i 9.8
2026 and Thereafter	i 34.4
Total	i 121.6
Less Imputed Interest	i 15.7
Lease Liability	$	i 105.9

The right-of-use asset was $ i 82.9 million and $ i 108.6 million at December 31, 2020 and 2019, respectively.

During 2020, we recognized an impairment loss of $ i 12.7 million on the ROU asset related to one of our operating leases for office space that we do not plan to continue using to support our general operations. The impairment loss was recorded as a result of a decrease in the fair value of the ROU asset compared to its carrying value. The fair value of the ROU asset was determined based on a discounted cash flow model utilizing estimated market rates for sub-lease rentals. The impairment loss is recorded within other expenses in the consolidated statements of income and is included within our Corporate segment.

206

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 16 - 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. In connection with a financial examination of Unum America, which closed at the end of the second quarter of 2020, the Maine Bureau of Insurance (MBOI) concluded that Unum America’s long-term care statutory reserves are deficient by $ i 2.1 billion as of December 31, 2018, the financial statement date of the examination period. The MBOI granted permission to Unum America on May 1, 2020, to phase in the additional statutory reserves over seven years beginning with year-end 2020 and ending with year-end 2026. This strengthening will be incorporated using explicitly agreed upon margins into our existing assumptions for annual statutory reserve adequacy testing. These actions will add margin to Unum America's best estimate assumptions. Our long-term care reserves and financial results reported under generally accepted accounting principles are not affected by the MBOI’s examination conclusion. We plan to fund the additional statutory reserves with expected cash flows. If the permitted practice was not granted by the MBOI to phase in these additional statutory reserves, the impact to the risk-based capital ratio would have triggered a regulatory event. The 2020 phase-in amount was recorded in the fourth quarter of 2020 and was approximately $ i 229 million. Our other 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.

Fairwind, which is domiciled in the state of Vermont, is required to follow GAAP in accordance with Vermont reporting requirements for pure captive insurance companies, 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 includes 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 $ i 287 million and $ i 194 million as of December 31, 2020 and 2019 respectively. Included in the 2020 results for Fairwind was the $229 million increase to long-term care statutory reserves assumed from Unum America. Included in the 2018 results for Fairwind was the assumed portion of the statutory impact of the 2018 long-term care reserve increase.

In December 2020, prior to entering into the reinsurance transaction with Commonwealth, Provident, Paul Revere Life, and Unum America recaptured their respective reinsurance agreements with Northwind Reinsurance Company, a wholly-owned domestic special purpose reinsurance subsidiary (Northwind Re). Northwind Re was established for the limited purpose of reinsuring risks attributable to specified policies issued or reinsured by the aforementioned companies, and has no material state prescribed accounting practices that differ from statutory accounting principles prescribed by the NAIC. See Note 12 for further discussion regarding the reinsurance transaction with Commonwealth.

207

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 16 - Statutory Financial Information - Continued

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.


	Year Ended December 31
	2020		2019		2018
	(in millions of dollars)
Combined Net Income (Loss)
Traditional U.S. Life Insurance Subsidiaries	$	i 646.8	$	i 982.1	$	i 953.0
Captive Reinsurers	$	( i 201.0)	$	( i 122.5)	$	( i 109.6)

Combined Net Gain (Loss) from Operations
Traditional U.S. Life Insurance Subsidiaries	$	i 726.2	$	i 1,027.2	$	i 959.8
Captive Reinsurers	$	( i 149.4)	$	( i 108.4)	$	( i 110.9)


	December 31
	2020		2019
	(in millions of dollars)
Combined Capital and Surplus
Traditional U.S. Life Insurance Subsidiaries	$	i 3,875.0	$	i 3,644.4
Captive Reinsurers	$	i 2,088.0	$	i 1,908.3

Solvency II, a European Union directive prescribes capital requirements and risk management standards for the European insurance industry. As derived from the most recent annual financial statements for December 31, 2019, based on Solvency II requirements, regulatory net income and own funds available of our United Kingdom insurance subsidiary, Unum Limited, were £ i 91.0 million and £ i 656.1 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, 2020 is in excess of those RBC levels.

Based on the restrictions under current law, approximately $ i 974 million is available, without prior approval by regulatory authorities, during 2021 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.

208

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 16 - Statutory Financial Information - Continued

We also have the ability to receive dividends from our foreign subsidiaries, primarily in the U.K., for which the payment may be subject to applicable insurance company regulations and capital guidance. Approximately £ i 170.0 million is considered distributable from Unum Limited during 2021, subject to local solvency standards and regulatory approval.

Deposits

At December 31, 2020 and 2019, our U.S. insurance subsidiaries had on deposit with U.S. regulatory authorities securities with a book value of $ i 135.5 million and $ i 135.2 million, respectively, held for the protection of policyholders.

209

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Unum Group and Subsidiaries

Note 17 - Quarterly Results of Operations (Unaudited)

i i

The following is a summary of our unaudited quarterly results of operations for 2020 and 2019:

2020

4th

3rd

2nd

1st

(in millions of dollars, except share data)

Premium Income

i 2,319.9

i 2,318.1

i 2,368.7

i 2,371.4

Net Investment Income

i 593.5

i 613.2

i 569.0

i 585.0

Net Realized Investment Gain (Loss)

i 1,304.9

i 4.4

i 33.8

( i 144.0)

Total Revenue

i 4,273.5

i 2,996.3

i 3,021.2

i 2,871.1

Income Before Income Tax

i 124.7

i 299.6

i 337.6

i 202.1

Net Income

i 135.4

i 231.1

i 265.5

i 161.0

Net Income Per Common Share

Basic

i 0.66

i 1.13

i 1.30

i 0.79

Assuming Dilution

i 0.66

i 1.13

i 1.30

i 0.79

2019

4th

3rd

2nd

1st

(in millions of dollars, except share data)

Premium Income

i 2,352.6

i 2,331.2

i 2,343.1

i 2,338.7

Net Investment Income

i 616.3

i 599.4

i 624.9

i 594.7

Net Realized Investment Gain (Loss)

i 9.2

( i 26.2)

( i 7.3)

i 1.1

Total Revenue

i 3,034.6

i 2,960.0

i 3,016.7

i 2,987.6

Income Before Income Tax

i 377.4

i 299.4

i 352.0

i 353.3

Net Income

i 296.2

i 242.0

i 281.2

i 280.9

Net Income Per Common Share

Basic

i 1.44

i 1.16

i 1.33

i 1.31

Assuming Dilution

i 1.44

i 1.16

i 1.33

i 1.31

Items affecting the comparability of our financial results are as follows:

•Fourth quarter of 2020 net realized investment gain of $1,302.3 million before tax and $1,028.8 million after tax, related to the transfer of investments for the Closed Block individual disability reinsurance transaction.

•Fourth quarter of 2020 impacts from the Closed Block individual disability reinsurance transaction of $1,305.5 million before tax and $1,031.3 million after tax.

•Fourth quarter of 2020 amortization of the cost of reinsurance related to the Closed Block individual disability reinsurance transaction of $2.6 million before tax and $2.0 million after tax.

•Fourth quarter of 2020 net tax benefit from the Closed Block individual disability reinsurance transaction of $36.5 million.

•Fourth quarter of 2020 reserve increases of $151.5 million and $17.5 million before tax and $119.7 million and $13.8 million after tax related to long-term care and group pension, respectively.

•Third quarter of 2020 costs related to organizational design update of $23.3 million before tax and $18.6 million after tax.

•Second quarter of 2020 impairment on ROU asset related to an operating lease for office space that we do not plan to continue using to support our general operations of $12.7 million before tax and $10.0 million after tax.

•Fourth quarter of 2019 cost related to the early retirement of debt of $2.1 million before tax and $1.7 million after tax.

•Third quarter of 2019 cost related to the early retirement of debt of $25.2 million before tax and $19.9 million after tax.

See Notes 6, 7, 8, 12, 13, and 15 for further discussion of the above items.

210

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. We evaluated those controls based on the 2013 Internal Control - Integrated Framework from the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, these officers concluded that our disclosure controls and procedures were effective as of December 31, 2020.

There have been no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended, during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management's Annual Report on Internal Control over Financial Reporting

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. The Company's internal control over financial reporting encompasses the processes and procedures management has established to (i) maintain records that, in reasonable detail, accurately and fairly reflect the Company's transactions and dispositions of assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles; (iii) provide reasonable assurance that receipts and expenditures are appropriately authorized; and (iv) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, any projection of the evaluation of effectiveness to future periods is subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We assessed the effectiveness of our internal control over financial reporting, based on criteria established in the 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and concluded that, as of December 31, 2020, we maintained effective internal control over financial reporting.

Attestation Report of the Company's Registered Public Accounting Firm

Ernst & Young LLP, the independent registered public accounting firm that audited our consolidated financial statements included herein, audited the effectiveness of our internal control over financial reporting, as of December 31, 2020, and issued the attestation report included as follows.

211

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Unum Group

Opinion on Internal Control Over Financial Reporting

We have audited Unum Group and subsidiaries’ internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Unum Group and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedules listed in the Index at Item 15(a)(2) and our report dated February 17, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying “Management’s Annual Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Chattanooga, Tennessee

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

212

ITEM 9B. OTHER INFORMATION

None

213

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

The information required by this Item with respect to directors is included under the caption "Information About the Board of Directors," sub-captions "Director Nominees" and "Summary of Director Qualifications and Experience", in our definitive proxy statement for the 2021 Annual Meeting of Shareholders and is incorporated herein by reference.

The information required by this Item with respect to our executive officers is included under the caption "Information about our Executive Officers" contained herein in Item 1 and is incorporated herein by reference.

Corporate Governance

Our internet website address is www.unum.com. We have adopted corporate governance guidelines, a code of conduct applicable to all of our directors, officers and employees, and charters for the audit, human capital, governance, risk and finance and regulatory compliance committees of our board of directors in accordance with the requirements of the New York Stock Exchange (NYSE). In addition, our board of directors has adopted a code of ethics applicable to our chief executive officer and certain senior financial officers in accordance with the requirements of the Securities and Exchange Commission. These documents are available free of charge on our website and in print at the request of any shareholder from the Office of the Corporate Secretary, Unum Group, 1 Fountain Square, Chattanooga, Tennessee, 37402, or by calling toll-free 1-800-718-8824. We will post on our website amendments to or waivers from any provision of our code of conduct and our code of ethics, as required by the rules and regulations of the Securities and Exchange Commission and the listing standards of the NYSE.

The information required by this Item with respect to compliance with Section 16(a) of the Exchange Act is included under the caption "Ownership of Company Securities", sub-caption "Delinquent Section 16(a) Reports", in our definitive proxy statement for the 2021 Annual Meeting of Shareholders and is incorporated herein by reference.

The information required by this Item with respect to a code of ethics for our chief executive officer and certain senior financial officers is included under the caption "Board and Committee Governance", sub-caption "Codes of Conduct and Ethics", in our definitive proxy statement for the 2021 Annual Meeting of Shareholders and is incorporated herein by reference.

The information required by this Item with respect to the audit committee and audit committee financial experts is included under the caption "Board and Committee Governance", sub-captions "Committees of the Board", "Committee Responsibilities" and "Audit Committee", in our definitive proxy statement for the 2021 Annual Meeting of Shareholders and is incorporated herein by reference. In addition, information relating to the procedures by which our shareholders may recommend nominees to our board of directors is included under the caption "Corporate Governance", sub-caption "Process for Selecting and Nominating Directors", in our definitive proxy statement for the 2021 Annual Meeting of Shareholders and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item with respect to executive compensation and compensation committee matters is included under the caption "Information About the Board of Directors", sub-caption "Director Compensation", under the caption "Board and Committee Governance", sub-caption "Compensation Committee Interlocks and Insider Participation", and under the captions "Compensation Discussion and Analysis", "Compensation Committee Report", and "Compensation Tables" in our definitive proxy statement for the 2021 Annual Meeting of Shareholders and is incorporated herein by reference.

214

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item with respect to security ownership of certain beneficial owners and management is included under the captions "Ownership of Company Securities" and "Security Ownership of Certain Shareholders" in our definitive proxy statement for the 2021 Annual Meeting of Shareholders and is incorporated herein by reference.

Equity Compensation Plan Information

The following table gives information as of December 31, 2020, about the common stock that may be issued under all our existing equity compensation plans.


	(a)	(b)	(c)
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights (5)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity Compensation Plans Approved by Shareholders (1)	3,392,436 (3)	$24.25	12,104,198 (6)
Equity Compensation Plans Not Approved by Shareholders (2)	36,450 (4)	N/A	11,370 (7)
Total	3,428,886	N/A	12,115,568

(1)Our shareholders have approved the following plans: (a) Stock Incentive Plan of 2007 (2007 Plan), (b) Unum Group 2020 Employee Stock Purchase Plan (ESPP), (c) Stock Incentive Plan of 2012 (2012 Plan), (d) Unum European Holding Company Limited Savings-Related Share Option Scheme 2016 (2016 SAYE), (e) Stock Incentive Plan of 2017 (2017 Plan), and (f) Unum European Holding Company Limited Savings-Related Share Option Scheme 2021 (2021 SAYE).

(2)Our shareholders have not approved the Unum Group Amended and Restated Non-Employee Director Compensation Plan of 2004 (2004 NED Plan).

(3)Includes 39,760 shares issuable upon the exercise of outstanding options, 2,084,179 performance-based restricted stock units (RSUs), 66,819 deferred share rights issuable pursuant to outstanding awards (including dividend equivalents accrued thereon), and 1,201,678 performance share units (PSUs) assuming maximum achievement. The awards shown are issuable under the 2007 Plan, the 2012 Plan, and the 2017 Plan.

(4)Consists of 33,676 deferred share rights (each representing the right to one share of common stock), and 2,774 deferred RSUs, including dividend equivalents accrued thereon, granted to non-employee directors under the 2004 NED Plan in accordance with the deferral elections of such directors in respect of cash retainers and meeting fees payable to them.

(5)RSUs, PSUs, and deferred share rights are not included in determining the weighted average exercise price in column (b) because they have no exercise price.

(6)Includes 70,139 shares and 115,635 shares available for future issuance as dividend equivalents in respect of outstanding awards under the 2007 Plan and the 2012 Plan, respectively, which were otherwise replaced by the 2017 Plan for purposes of granting new awards; 10,118,950 shares remaining available for future issuance under the 2017 Plan; 1,400,172 shares remaining available for issuance under the ESPP; 199,302 shares remaining available for future issuance under the 2016 SAYE, and 200,000 shares remaining available for future issuance under the 2021 SAYE. Any award outstanding under the 2012 Plan as of the effective date of the 2017 Plan that after such date is not issued because the award is forfeited, terminates, expires or otherwise lapses without being exercised, or is settled for cash, will be returned to the 2017 Plan. Each PSU, RSU or other full-value award under the 2017 Plan is counted as 1.76 shares.

(7)Represents number of shares available for future issuance as dividend equivalents in respect of outstanding awards under the 2004 NED Plan.

215

Below is a brief description of the equity compensation plans not approved by shareholders.

Unum Group Amended and Restated Non-Employee Director Compensation Plan of 2004

This plan provided for the payment of annual retainers and meeting fees (discontinued in May 2011) to the non-employee directors who served on our Board of Directors. Under the plan, directors made an irrevocable election each year to receive all or a portion of their retainers and meeting fees in either cash or deferred share rights. A deferred share right is a right to receive one share of common stock on the earlier of (i) the director’s separation from service as a director of the company, or (ii) another designated date at least three years after the date of the deferral election. The number of deferred share rights granted is calculated as the number of whole shares equal to (i) the dollar amount of the annual retainer and/or fees that the director elects to have paid in deferred share rights, divided by (ii) the fair market value per share on the grant date. The aggregate number of shares which can be issued under the plan is 500,000. This plan terminated in May 2010 with respect to new awards, though dividend equivalents remain available for future issuance in respect of awards that were outstanding at that time. The plan is administered by the Human Capital Committee. The plan includes provisions restricting the transferability of the deferred share rights, provisions for adjustments to the number of shares available for grants, and the number of shares subject to outstanding grants in the event of recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, or other similar corporate transaction.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this Item with respect to director independence and transactions with related persons is included under the caption "Information About the Board of Directors", sub-caption "Director Independence", and under the caption "Board and Committee Governance", sub-caption "Related Party Transactions and Policy", in our definitive proxy statement for the 2021 Annual Meeting of Shareholders and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item with respect to fees paid to Ernst & Young LLP in 2020 and 2019 and our audit committee's pre-approval policies and procedures are included under the caption "Items to Be Voted On", sub-captions "Independent Auditor Fees" and "Policy for Pre-Approval of Audit and Non-Audit Services", in our definitive proxy statement for the 2021 Annual Meeting of Shareholders and is incorporated herein by reference.

216

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

List of Documents filed as part of this report:

Page

(1)

Financial Statements

The following report and consolidated financial statements of Unum Group and Subsidiaries are included in Item 8.

107

Consolidated Balance Sheets at December 31, 2020 and 2019

110

Consolidated Statements of Income for the three years ended December 31, 2020

112

Consolidated Statements of Comprehensive Income (Loss) for the three years ended December 31, 2020

113

Consolidated Statements of Stockholders' Equity for the three years ended December 31, 2020

114

Consolidated Statements of Cash Flows for the three years ended December 31, 2020

115

Notes to Consolidated Financial Statements

116

(2)

Financial Statement Schedules

Summary of Investments - Other than Investments in Related Parties

218

II.

Condensed Financial Information of Registrant

219

III.

Supplementary Insurance Information

225

IV.

Reinsurance

227

Valuation and Qualifying Accounts

228

Schedules not referred to have been omitted as inapplicable or because they are not required by Regulation S-X.

(3)

Exhibits

Index to Exhibits

229

217

SCHEDULE I--SUMMARY OF INVESTMENTS -

OTHER THAN INVESTMENTS IN RELATED PARTIES

as of December 31, 2020

Unum Group and Subsidiaries

Type of Investment

Cost or Amortized Cost (1)

Fair Value

Amount shown on the balance sheet

(in millions of dollars)

Fixed Maturity Securities:

Bonds

United States Government and Government Agencies and Authorities

i 559.0

i 709.8

States, Municipalities, and Political Subdivisions

i 3,609.9

i 4,261.2

Foreign Governments

i 902.9

i 1,168.2

Public Utilities

i 5,486.4

i 6,962.3

Mortgage/Asset-Backed Securities

i 1,019.9

i 1,107.7

All Other Corporate Bonds

i 24,958.8

i 29,918.6

Redeemable Preferred Stocks

i 9.6

i 9.5

Total Fixed Maturity Securities

i 36,546.5

i 44,137.3

Mortgage Loans

i 2,445.2

i 2,432.1

Policy Loans

i 3,683.9

Other Long-term Investments

Derivatives

i —

i 19.8

(2)

Perpetual Preferred Equity Securities

i 32.6

i 28.3

(3)

Private Equity Partnerships

i 720.9

i 747.5

(3)

Miscellaneous Long-term Investments

i 165.2

i 164.6

Short-term Investments

i 1,470.0

Total Investments

i 45,064.3

i 52,683.5

(1)The amortized cost for fixed maturity securities and mortgage loans represents original cost reduced by repayments, write-downs from declines in fair value, amortization of premiums, and/or accretion of discounts. The amortized cost for these investments does not include allowance for expected credit losses.

(2)Derivatives are carried at fair value.

(3)The difference between amortized cost and carrying value for private equity partnerships and perpetual preferred equity securities primarily results from changes in the partnership owner's equity and the issuer's equity since acquisition, respectively.

218

SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT

Unum Group (Parent Company)

BALANCE SHEETS


	December 31
	2020		2019
	(in millions of dollars)

Assets
Fixed Maturity Securities - at fair value (amortized cost: $ i 349.5; $ i 122.3)	$	i 355.1	$	i 125.6
Other Long-term Investments	i 10.6		i 35.2
Short-term Investments	i 164.5		i 604.4
Investment in Subsidiaries	i 14,122.6		i 12,820.9
Deferred Income Tax	i 158.8		i 122.7
Other Assets	i 496.7		i 488.9
Total Assets	$	i 15,308.3	$	i 14,197.7

Liabilities and Stockholders' Equity

Liabilities
Short-term Debt	$	i —	$	i 399.7
Long-term Debt	i 3,345.7		i 2,846.9
Pension and Postretirement Benefits	i 677.5		i 624.2
Other Liabilities	i 414.1		i 361.9
Total Liabilities	i 4,437.3		i 4,232.7

Stockholders' Equity
Common Stock	i 30.7		i 30.6
Additional Paid-in Capital	i 2,376.2		i 2,348.1
Accumulated Other Comprehensive Income	i 374.2		i 37.3
Retained Earnings	i 11,269.6		i 10,728.7
Treasury Stock	( i 3,179.7)		( i 3,179.7)
Total Stockholders' Equity	i 10,871.0		i 9,965.0

Total Liabilities and Stockholders' Equity	$	i 15,308.3	$	i 14,197.7

See notes to condensed financial information.

/ /

219

SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

Unum Group (Parent Company)

STATEMENTS OF OPERATIONS

Year Ended December 31

2020

2019

2018

(in millions of dollars)

Cash Dividends from Subsidiaries

i 974.6

i 1,089.4

i 1,135.4

Other Income

i 51.7

i 63.9

i 66.6

Total Revenue

i 1,026.3

i 1,153.3

i 1,202.0

Interest and Debt Expense

i 187.1

i 173.2

i 161.4

Cost Related to Early Retirement of Debt

i —

i 27.3

i —

Other Expenses

i 51.1

i 53.4

Total Expenses

i 238.2

i 253.9

i 214.8

Income of Parent Company Before Income Tax

i 788.1

i 899.4

i 987.2

Income Tax Benefit

( i 15.3)

( i 21.5)

( i 1.7)

Income of Parent Company

i 803.4

i 920.9

i 988.9

Equity in Undistributed Earnings (Loss) of Subsidiaries

( i 10.4)

i 179.4

( i 465.5)

Net Income

i 793.0

i 1,100.3

i 523.4

Other Comprehensive Income (Loss), Net of Tax

i 336.9

i 851.5

( i 924.2)

Comprehensive Income (Loss)

i 1,129.9

i 1,951.8

( i 400.8)

See notes to condensed financial information.

220

SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

Unum Group (Parent Company)

STATEMENTS OF CASH FLOWS

Year Ended December 31

2020

2019

2018

(in millions of dollars)

Cash Provided by Operating Activities

i 964.0

i 1,000.0

i 1,052.1

Cash Flows from Investing Activities

Proceeds from Maturities of Fixed Maturity Securities

i 138.8

i 16.6

i 52.5

Proceeds from Sales and Maturities of Other Investments

i 46.6

i 5.6

i —

Purchase of Fixed Maturity Securities

( i 384.7)

i —

( i 47.9)

Purchase of Other Investments

( i 22.0)

i —

( i 22.3)

Net Sales (Purchases) of Short-term Investments

i 440.6

( i 309.0)

i 192.6

Cash Distributions to Subsidiaries

( i 965.5)

( i 389.0)

( i 530.8)

Net Purchases of Property and Equipment

( i 81.6)

( i 85.9)

( i 73.2)

Acquisition of Business

i —

( i 146.1)

Cash Used by Investing Activities

( i 827.8)

( i 761.7)

( i 575.2)

Cash Flows from Financing Activities

Short-term Debt Repayment

( i 400.0)

i —

( i 200.0)

Issuance of Long-term Debt

i 494.1

i 841.9

i 290.7

Long-term Debt Repayment

i —

( i 433.1)

i —

Cost Related to Early Retirement of Debt

i —

( i 25.9)

i —

Issuance of Common Stock

i 4.4

i 6.1

i 4.6

Repurchase of Common Stock

i —

( i 400.3)

( i 356.2)

Dividends Paid to Stockholders

( i 231.9)

( i 229.2)

( i 215.6)

Other, Net

( i 1.4)

( i 3.7)

( i 9.3)

Cash Used by Financing Activities

( i 134.8)

( i 244.2)

( i 485.8)

Increase (Decrease) in Cash

i 1.4

( i 5.9)

( i 8.9)

See notes to condensed financial information.

221

SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

Unum Group (Parent Company)

NOTES TO CONDENSED FINANCIAL INFORMATION

Note 1 - Basis of Presentation

The accompanying condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto of Unum Group and subsidiaries.

Note 2 - Debt

Debt consists of the following:

December 31

2020

2019

Interest Rates

Maturities

(in millions of dollars)

Long-term Debt

Outstanding Principal

Senior Notes issued 1998

6.750 - 7.250%

2028

i 335.8

Senior Notes issued 2002

7.375%

2032

i 39.5

Senior Notes issued 2012 and 2016

5.750%

2042

i 500.0

Senior Notes issued 2014

4.000%

2024

i 350.0

Senior Notes issued 2015

3.875%

2025

i 275.0

Senior Notes issued 2019

4.000%

2029

i 400.0

Senior Notes issued 2019

4.500%

2049

i 450.0

Senior Notes issued 2020

4.500%

2025

i 500.0

i —

Medium-term Notes issued 1990 - 1996

7.000 - 7.190%

2023 - 2028

i 20.5

Junior Subordinated Debt Securities issued 1998

7.405%

2038

i 203.7

Junior Subordinated Debt Securities issued 2018

6.250%

2058

i 300.0

Fair Value Hedge Adjustment

i —

( i 0.6)

Less:

Unamortized Net Premium

i 6.0

i 8.4

Unamortized Debt Issuance Costs

( i 34.8)

( i 35.4)

Total Long-term Debt

i 3,345.7

i 2,846.9

Short-term Debt

Outstanding Principal

Senior Notes issued 2010

5.625%

2020

i —

i 400.0

Less Unamortized Debt Issuance Costs

i —

( i 0.3)

Total Short-term Debt

i —

i 399.7

Total Debt

i 3,345.7

i 3,246.6

The medium-term notes are non-callable. The junior subordinated debt securities are callable under limited, specified circumstances. The remaining debt is callable and may be redeemed, in whole or in part, at any time. The aggregate contractual principal maturities are $ i 2.0 million in 2023, $ i 350.0 million in 2024, $ i 775.0 million in 2025, and $ i 2,247.5 million thereafter.

222

SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

Unum Group (Parent Company)

NOTES TO CONDENSED FINANCIAL INFORMATION - CONTINUED

Unsecured Notes

In September 2020, our $ i 400.0 million i 5.625% senior unsecured notes matured.

In July 2018, our $ i 200.0 million i 7.000% senior unsecured notes matured.

Fair Value Hedges

Junior Subordinated Debt Securities

In 1998, Provident Financing Trust I (the Trust), a i 100 percent-owned finance subsidiary of Unum Group, issued $ i 300.0 million of i 7.405% capital securities due 2038 in a public offering. These capital securities are fully and unconditionally guaranteed by Unum Group, have a liquidation value of $ i 1,000 per capital security, and have a mandatory redemption feature under certain circumstances. In connection with the capital securities offering, Unum Group issued to the Trust i 7.405% junior subordinated deferrable interest debentures due 2038. The Trust is a variable interest entity of which Unum Group is not the primary beneficiary. Accordingly, the capital securities issued by the Trust are not included in the consolidated financial statements of Unum Group and subsidiaries and our liability represents the junior subordinated debt securities owed to the trust which is recorded in long-term debt. The sole assets of the Trust are the junior subordinated debt securities. The retirement of any liquidation amount regarding the capital securities by the Trust results in a corresponding retirement of principal amount of the junior subordinated debt securities.

Cost Related to Early Retirement of Debt

During 2019, we incurred costs of $ i 27.3 million related to the early retirement of certain of our unsecured notes and junior subordinated debt securities as previously discussed.

223

Interest Paid

Interest paid on long-term and short-term debt and related securities during 2020, 2019, and 2018 was $ i 176.6 million, $ i 168.4 million, and $ i 161.4 million, respectively.

Credit Facilities

We have access to two separate unsecured revolving credit facilities, each with a different syndicate of lenders. One of our credit facilities is under a five-year agreement and is effective through April 2024. The terms of this agreement provide for a borrowing capacity of $ i 500.0 million with an option to be increased up to $700.0 million. We may also request, on up to two occasions, that the lenders' commitment termination dates be extended by one year. The credit facility provides for the issuance of letters of credit subject to certain terms and limitations. At December 31, 2020, letters of credit totaling $0.6 million had been issued from this credit facility, but there were i no borrowed amounts outstanding.

224

SCHEDULE III--SUPPLEMENTARY INSURANCE INFORMATION

Unum Group and Subsidiaries

Segment

Deferred Acquisition Costs

Reserves for Future Policy Contract Benefits

Unearned Premiums

Policy and Contract Benefits

(in millions of dollars)

Unum US

i 1,168.7

i 11,681.4

i 44.0

i 1,191.2

Unum International

i 32.0

i 2,794.2

i 123.3

i 175.6

Colonial Life

i 1,071.9

i 2,628.5

i 36.9

i 217.2

Closed Block

i —

i 32,548.9

i 145.1

i 271.4

Total

i 2,272.6

i 49,653.0

i 349.3

i 1,855.4

Unum US

i 1,223.0

i 11,367.8

i 46.0

i 1,117.5

Unum International

i 26.4

i 2,566.6

i 129.9

i 157.3

Colonial Life

i 1,074.6

i 2,477.2

i 36.8

i 189.4

Closed Block

i —

i 31,368.5

i 151.2

i 281.3

Total

i 2,324.0

i 47,780.1

i 363.9

i 1,745.5

225

SCHEDULE III--SUPPLEMENTARY INSURANCE INFORMATION (Continued)

Unum Group and Subsidiaries

Segment

Premium Income

Net Investment Income1

Benefits and Change in Reserves for Future Benefits2

Amortization of Deferred Acquisition Costs

All Other Expenses3

Premiums Written4

(in millions of dollars)

Unum US

i 6,018.9

i 720.3

i 4,138.7

i 341.0

i 1,589.0

i 4,088.6

Unum International

i 652.8

i 104.6

i 500.9

i 7.4

i 173.0

i 456.0

Colonial Life

i 1,712.0

i 155.7

i 906.5

i 257.7

i 369.2

i 1,252.4

Closed Block

i 994.4

i 1,370.3

i 3,426.8

i —

i 240.2

i 979.3

Corporate

i —

i 9.8

i —

i 247.7

i —

Total

i 9,378.1

i 2,360.7

i 8,972.9

i 606.1

i 2,619.1

Unum US

i 6,016.6

i 739.4

i 4,022.1

i 344.0

i 1,501.6

i 4,073.9

Unum International

i 630.5

i 122.5

i 469.8

i 7.1

i 168.8

i 443.7

Colonial Life

i 1,685.0

i 148.0

i 865.0

i 258.8

i 368.1

i 1,249.6

Closed Block

i 1,033.5

i 1,404.9

i 2,139.3

i —

i 232.7

i 1,020.8

Corporate

i —

i 20.5

i —

i 239.5

i —

Total

i 9,365.6

i 2,435.3

i 7,496.2

i 609.9

i 2,510.7

December 31, 2018

Unum US

i 5,736.4

i 778.7

i 3,856.5

i 315.1

i 1,447.4

i 3,873.0

Unum International

i 568.8

i 117.2

i 419.8

i 8.2

i 144.5

i 455.5

Colonial Life

i 1,603.8

i 151.2

i 824.9

i 242.2

i 353.9

i 1,277.3

Closed Block

i 1,077.1

i 1,377.1

i 2,919.2

i —

i 235.7

i 1,065.7

Corporate

i —

i 29.5

i —

i 203.3

i —

Total

i 8,986.1

i 2,453.7

i 8,020.4

i 565.5

i 2,384.8

1 Net investment income is allocated based upon segmentation. Each segment has its own specifically identified assets and receives the investment income generated by those assets.

2 Included in 2020 and 2018 are reserve increases of $151.5 million and $750.8 million, respectively in the Closed Block segment related to our long-term care business, as well as a reserve increase of $17.5 million in 2020 related to our group pension Closed Block business. Also included in 2020 is an increase in benefits and change in reserves for future benefits of $1,284.5 million in 2020 resulting from the recognition of the adjustment related to unrealized investment gains and losses previously recognized in accumulated other comprehensive income related to the Closed Block individual disability reinsurance transaction.

3 Includes commissions, interest and debt expense, cost related to early retirement of debt, deferral of acquisition costs, compensation expense, and other expenses. Where not directly attributable to a segment, expenses are generally allocated based on activity levels, time information, and usage statistics. Included in 2020 is the amortization of the cost of reinsurance of $2.6 million and transaction costs of $21.0 million related to the Closed Block individual disability reinsurance transaction. Also included in 2020 is a ROU asset impairment of $12.7 million related to one of our operating leases for office space that we do not plan to continue using to support general operations and costs related to organizational design updates of $23.3 million in Corporate.

4 Excludes life insurance.

226

SCHEDULE IV--REINSURANCE

Unum Group and Subsidiaries

Gross Amount

Ceded to Other Companies

Assumed from Other Companies

Net Amount

Percentage Amount Assumed to Net

(in millions of dollars)

Year Ended December 31, 2020

Life Insurance in Force

i 979,755.7

i 41,550.9

i 896.4

i 939,101.2

i 0.1

Premium Income:

Life Insurance

i 2,536.8

i 141.9

i 8.0

i 2,402.9

i 0.3

Accident, Health, and Other Insurance

i 7,085.1

i 196.0

i 86.1

i 6,975.2

i 1.2

Total

i 9,621.9

i 337.9

i 94.1

i 9,378.1

i 1.0

Year Ended December 31, 2019

Life Insurance in Force

i 990,371.0

i 41,669.8

i 1,018.4

i 949,719.6

i 0.1

Premium Income:

Life Insurance

i 2,549.7

i 137.2

i 8.2

i 2,420.7

i 0.3

Accident, Health, and Other Insurance

i 7,026.6

i 190.0

i 108.3

i 6,944.9

i 1.6

Total

i 9,576.3

i 327.2

i 116.5

i 9,365.6

i 1.2

Year Ended December 31, 2018

Life Insurance in Force

i 937,300.8

i 40,902.8

i 1,089.3

i 897,487.3

i 0.1

Premium Income:

Life Insurance

i 2,442.1

i 138.2

i 8.7

i 2,312.6

i 0.4

Accident, Health, and Other Insurance

i 6,729.0

i 189.4

i 133.9

i 6,673.5

i 2.0

Total

i 9,171.1

i 327.6

i 142.6

i 8,986.1

i 1.6

227

SCHEDULE V--VALUATION AND QUALIFYING ACCOUNTS

Unum Group and Subsidiaries

Description

Balance at Beginning of Year3

Additions Charged to Costs and Expenses

Additions Charged to Other Accounts1

Deductions2

Balance at End of Year

(in millions of dollars)

Year Ended December 31, 2020

Real Estate reserve (deducted from other long-term investments)

i 0.3

i —

i 0.3

i —

Allowance for expected credit losses (deducted from accounts and premiums receivable)

i 23.8

i 34.2

i 0.1

i 19.3

i 38.8

Allowance for expected credit losses (deducted from reinsurance recoverable)

i 1.8

i 10.1

i —

i 0.2

i 11.7

Year Ended December 31, 2019

Real Estate reserve (deducted from other long-term investments)

i 1.5

i —

i 1.2

i 0.3

Allowance for doubtful accounts (deducted from accounts and premiums receivable)

i 9.9

i 5.3

i 0.1

i 6.9

i 8.4

Year Ended December 31, 2018

Real Estate reserve (deducted from other long-term investments)

i 4.2

i 0.6

i —

i 3.3

i 1.5

Allowance for doubtful accounts (deducted from accounts and premiums receivable)

i 6.4

i 5.6

i —

i 2.1

i 9.9

1 Additions charged to other accounts are comprised of amounts related to fluctuations in the foreign currency exchange rate.

2 Deductions include amounts deemed to reduce exposure of expected losses on premium and accounts receivables and reinsurance recoverable, probable losses on Real Estate reserve, amounts deemed uncollectible, and amounts related to fluctuations in the foreign currency exchange rate.

3 ASC 326 "Financial Instruments - Credit Losses" was adopted resulting in a beginning balance adjustment of $13.5 million to Allowance for expected credit losses (deducted from accounts and premiums receivable) and the now separately reported $1.8 million beginning balance for Allowance for expected credit losses (deducted from reinsurance recoverable).

Certain items not reported above include the allowance for expected credit losses on mortgage loans, the allowance for credit losses on fixed maturity securities, and the deferred tax asset valuation allowance. See Notes 3 and 7 of the "Notes to Consolidated Financial Statements" contained herein in Item 8 for a discussion of these items.

228

INDEX TO EXHIBITS

With regard to applicable cross-references in this report, our current, quarterly and annual reports dated on or after May 1, 2003 are filed with the Securities and Exchange Commission under File No. 1-11294 and such reports dated prior to May 1, 2003 are filed with the Securities and Exchange Commission under File No. 1-11834, except as otherwise noted below. Our registration statements have the file numbers noted wherever such statements are identified below.


(2.1)						Master Transaction Agreement, dated December 16, 2020, by and among Provident Life and Accident Insurance Company, The Paul Revere Life Insurance Company, Unum Life Insurance Company of America and Commonwealth Annuity and Life Insurance Company (incorporated by reference to Exhibit 2.1 of Unum Group’s Form 8-K filed on December 17, 2020).

(2.2)						Reinsurance Agreement, dated December 17, 2020, by and between Provident Life and Accident Insurance Company and Commonwealth Annuity and Life Insurance Company (incorporated by reference to Exhibit 2.1 of Unum Group’s Form 8-K filed on December 22, 2020). **

(2.3)						Reinsurance Agreement, dated December 17, 2020, by and between The Paul Revere Life Insurance Company and Commonwealth Annuity and Life Insurance Company (incorporated by reference to Exhibit 2.2 of Unum Group’s Form 8-K filed on December 22, 2020). **

(2.4)						Reinsurance Agreement, dated December 17, 2020, by and between Unum Life Insurance Company of America and Commonwealth Annuity and Life Insurance Company (incorporated by reference to Exhibit 2.3 of Unum Group’s Form 8-K filed on December 22, 2020). **

(3.1)						Amended and Restated Certificate of Incorporation of Unum Group, effective May 24, 2018 (incorporated by reference to Exhibit 3.1 of our Form 8-K filed on May 25, 2018).

(3.2)						Amended and Restated Bylaws of Unum Group, effective February 18, 2020 (incorporated by reference to Exhibit 3.1 of Unum Group’s Form 8-K filed on February 24, 2020).

(4.1)						Indenture for Senior Debt Securities dated as of March 9, 2001 (incorporated by reference to Exhibit 4.1 of our Registration Statement on Form S-3 (Registration No. 333-100953) filed on November 1, 2002).

(4.2)						Second Supplemental Indenture, dated as of June 18, 2002, between Unum Group and JPMorgan Chase Bank, as Trustee (incorporated by reference to Exhibit 4.2 of our Form 8-K filed on June 21, 2002).

(4.3)						Indenture for Senior Debt Securities, dated as of August 23, 2012, between Unum Group and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.2 of our Form 8-K filed on August 23, 2012).

(4.4)						First Supplemental Indenture for Senior Debt Securities, between Unum Group and The Bank of New York Mellon Trust Company, N.A. dated as of August 20, 2020 (incorporated by reference to Exhibit 4.4 to Unum Group’s Registration Statement on Form S-3ASR (Registration No. 333-248208) filed on August 20, 2020).

(4.5)						Form of 5.75% Senior Note due 2042 (incorporated by reference to Exhibit 4.1 of our Form 8-K filed on August 23, 2012).

(4.6)						Form of 4.000% Senior Note due 2024 (incorporated by reference to Exhibit 4.1 of our Form 8-K filed on March 14, 2014).

(4.7)						Form of 3.875% Senior Note due 2025 (incorporated by reference to Exhibit 4.1 of our Form 8-K filed on November 5, 2015).

(4.8)						Indenture for Subordinated Debt Securities, dated as of May 29, 2018, between Unum Group and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.2 of Unum Group’s Form 8-K filed on May 29, 2018).

(4.9)						Form of 6.250% Junior Subordinated Notes due 2058 (incorporated by reference to Exhibit 4.1 of Unum Group's Form 8-K filed on May 29, 2018).

(4.10)						Form of 4.000% Senior Notes due 2029 (incorporated by reference to Exhibit 4.1 of Unum Group's Form 8-K filed on June 13, 2019).

(4.11)						Form of 4.500% Senior Notes due 2049 (incorporated by reference to Exhibit 4.1 of Unum Group's Form 8-K filed on September 11, 2019).

(4.12)						Form of 4.500% Senior Notes due 2025 (incorporated by reference to Exhibit 4.1 of Unum Group’s Form 8-K filed on May 21, 2020).

(4.13)						Description of the Company’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.

229


Certain instruments defining the rights of holders of long-term debt securities of our company and our subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. We hereby undertake to furnish to the Securities and Exchange Commission, upon request, copies of any such instruments.

(10.1)						Agreement between Provident Companies, Inc. and certain subsidiaries and American General Corporation and certain subsidiaries dated as of December 8, 1997 (incorporated by reference to Exhibit 10.18 of Provident Companies Inc.'s Form 10-Q for fiscal quarter ended September 30, 1998).

(10.2)						Form of Change in Control Severance Agreement, effective April 25, 2011 (incorporated by reference to Exhibit 10.3 of our Form 10-K for the fiscal year ended December 31, 2014). *

(10.3)						Form of Change in Control Severance Agreement, effective January 1, 2015 (incorporated by reference to Exhibit 10.4 of our Form 10-K for the fiscal year ended December 31, 2014). *

(10.4)						Form of Change in Control Severance Agreement, effective August 14, 2018 (incorporated by reference to Exhibit 10.5 of our Form 10-K for the fiscal year ended December 31, 2018). *

(10.5)						Unum Group Supplemental Pension Plan, as amended and restated effective January 1, 2010 (incorporated by reference to Exhibit 10.6 of our Form 10-K for the fiscal year ended December 31, 2013). *

(10.6)						First Amendment to the Unum Group Supplemental Pension Plan, effective as of June 17, 2013 (incorporated by reference to Exhibit 10.7 of our Form 10-K for the fiscal year ended December 31, 2013). *

(10.7)						Second Amendment to the Unum Group Supplemental Pension Plan, effective as of December 31, 2013 (incorporated by reference to Exhibit 10.8 of our Form 10-K for the fiscal year ended December 31, 2013). *

(10.8)						Third Amendment to the Unum Group Supplemental Pension Plan, effective as of January 1, 2013 (incorporated by reference to Exhibit 10.8 of our Form 10-K for the fiscal year ended December 31, 2015). *

(10.9)						Fourth Amendment to the Unum Group Supplemental Pension Plan, effective as of January 1, 2021. *

(10.10)						Administrative Reinsurance Agreement between Provident Life and Accident Insurance Company and Reassure America Life Insurance Company dated to be effective July 1, 2000 (incorporated by reference to Exhibit 10.1 of our Form 8-K filed on March 2, 2001).

(10.11)						Unum Group Amended and Restated Non-Employee Director Compensation Plan of 2004, as amended (incorporated by reference to Exhibit 10.19 of our Form 10-K for the fiscal year ended December 31, 2008). *

(10.12)						California Settlement Agreement (incorporated by reference to Exhibit 10.1 of our Form 8-K filed on October 3, 2005).

(10.13)						Amendment to Regulatory Settlement Agreement (incorporated by reference to Exhibit 10.2 of our Form 8‑K filed on October 3, 2005).

(10.14)						Unum Group Stock Incentive Plan of 2007, as amended (incorporated by reference to Exhibit 10.26 of our Form 10-K for the fiscal year ended December 31, 2008). *

(10.15)						Severance Pay Plan for Executive Vice Presidents (EVPs) (incorporated by reference to Exhibit 10.15 of Unum Group’s Form 10-K for the fiscal year ended December 31, 2019). *

(10.16)						Unum Group Stock Incentive Plan of 2012 (incorporated by reference to Appendix A of our Definitive Proxy Statement on Schedule 14A filed on April 12, 2012). *

(10.17)						Form of Nonqualified Stock Option Agreement for awards under the Unum Group Stock Incentive Plan of 2012 (incorporated by reference to Exhibit 10.3 of our Form 10-Q filed on May 2, 2013). *

(10.18)						Unum Group Non-Qualified Defined Contribution Retirement Plan, effective January 1, 2014 (incorporated by reference to Exhibit 10.31 of our Form 10-K for the fiscal year ended December 31, 2013). *

(10.19)						First Amendment to Unum Group Non-Qualified Defined Contribution Retirement Plan, effective as of January 1, 2019. *

(10.20)						Second Amendment to Unum Group Non-Qualified Defined Contribution Retirement Plan, effective as of January 1, 2020. *

(10.21)						Amended and Restated Credit Agreement, dated as of April 29, 2019, among Unum Group, as Borrower, the Lenders named therein, and Wells Fargo Bank, National Association, as Administrative Agent, L/C Agent, Fronting Bank and Swingline Lender (incorporated by reference to Exhibit 10.1 of our form 10-Q filed on July 31, 2019).

(10.22)						Letter Agreement with Richard P. McKenney, dated January 30, 2015 (incorporated by reference to Exhibit 10.1 of our Form 8-K filed on February 3, 2015). *

(10.23)						Severance Agreement between Unum Group and Richard P. McKenney, dated effective as of April 1, 2015 (incorporated by reference to Exhibit 10.2 of our Form 8-K filed on February 3, 2015). *

230



(10.24)						Amended and Restated Aircraft Time-Sharing Agreement between Unum Group and Richard P. McKenney, dated as of August 9, 2019. (incorporated by reference to Exhibit 10.1 of our Form 10-Q filed on October 30, 2019).

(10.25)						Unum Group Stock Incentive Plan of 2017 (incorporated by reference to Exhibit A of Unum Group's definitive proxy statement on Schedule 14A filed on April 13, 2017). *

(10.26)						Form of Restricted Stock Unit Agreement with Non-Employee Director for awards under the Unum Group Stock Incentive Plan of 2017 (incorporated by reference to Exhibit 10.2 of Unum Group's Form 8-K filed on May 25, 2017). *

(10.27)						Form of Restricted Stock Unit Agreement with Employee in U.S. for awards in 2018 under the Unum Group Stock Incentive Plan of 2017 (incorporated by reference to Exhibit 10.35 of Unum Group's Form 10-K for the fiscal year ended December 31, 2017). *

(10.28)						Form of Restricted Stock Unit Agreement with Employee in U.K. for awards in 2018 under the Unum Group Stock Incentive Plan of 2017 (incorporated by reference to Exhibit 10.36 of Unum Group's Form 10-K for the fiscal year ended December 31, 2017). *

(10.29)						Form of Performance Share Unit Agreement with Employee in U.S. for awards in 2018 under the Unum Group Stock Incentive Plan of 2017. (incorporated by reference to Exhibit 10.37 of Unum Group's Form 10-K for the fiscal year ended December 31, 2017). *

(10.30)						Form of Performance Share Unit Agreement with Employee in U.K. for awards in 2018 under the Unum Group Stock Incentive Plan of 2017 (incorporated by reference to Exhibit 10.38 of Unum Group's Form 10-K for the fiscal year ended December 31, 2017). *

(10.31)						Form of Restricted Stock Unit Agreement with Employee in U.S. for awards in 2019 under the Unum Group Stock Incentive Plan of 2017 (incorporated by reference to Exhibit 10.37 of Unum Group’s Form 10-K for the fiscal year ended December 31, 2018). *

(10.32)						Form of Restricted Stock Unit Agreement with Employee in U.K. for awards in 2019 under the Unum Group Stock Incentive Plan of 2017 (incorporated by reference to Exhibit 10.38 of Unum Group’s Form 10-K for the fiscal year ended December 31, 2018). *

(10.33)						Form of Performance Share Unit Agreement with Employee in U.S. for awards in 2019 under the Unum Group Stock Incentive Plan of 2017 (incorporated by reference to Exhibit 10.39 of Unum Group’s Form 10-K for the fiscal year ended December 31, 2018). *

(10.34)						Form of Performance Share Unit Agreement with Employee in U.K. for awards in 2019 under the Unum Group Stock Incentive Plan of 2017 (incorporated by reference to Exhibit 10.40 of Unum Group’s Form 10-K for the fiscal year ended December 31, 2018). *

(10.35)						Form of Restricted Stock Unit Agreement with Employee in U.S. for awards in 2020 under the Unum Group Stock Incentive Plan of 2017 (incorporated by reference to Exhibit 10.37 of Unum Group’s Form 10-K for the fiscal year ended December 31, 2019). *

(10.36)						Form of Cash-Settled Restricted Stock Unit Agreement with Employee in U.S. for awards in 2020 under the Unum Group Stock Incentive Plan of 2017 (incorporated by reference to Exhibit 10.38 of Unum Group’s Form 10-K for the fiscal year ended December 31, 2019). *

(10.37)						Form of Restricted Stock Unit Agreement with Employee in U.K. for awards in 2020 under the Unum Group Stock Incentive Plan of 2017 (incorporated by reference to Exhibit 10.39 of Unum Group’s Form 10-K for the fiscal year ended December 31, 2019). *

(10.38)						Form of Performance Share Unit Agreement with Employee in U.S. for awards in 2020 under the Unum Group Stock Incentive Plan of 2017 (incorporated by reference to Exhibit 10.1 of Unum Group’s Form 10-Q filed on May 5, 2020). *

(10.39)						Form of Performance Share Unit Agreement with Employee in U.K. for awards in 2020 under the Unum Group Stock Incentive Plan of 2017 (incorporated by reference to Exhibit 10.2 of Unum Group’s Form 10-Q filed on May 5, 2020). *

(10.40)						Annual Incentive Plan of Unum Group, as amended and restated effective January 1, 2020. *

(10.41)						Unum Group 2020 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 of Unum Group’s Form 8-K filed on June 2, 2020). *

231



(10.42)						Form of Success Incentive Plan Cash Success Unit and Stock Success Unit Agreement with Employee in U.S. (incorporated by reference to Exhibit 10.1 of Unum Group's Form 8-K filed on August 26, 2020). *

(10.43)						Form of Success Incentive Plan Cash Success Unit and Stock Success Unit Agreement with Employee in U.K. (incorporated by reference to Exhibit 10.2 of Unum Group's Form 8-K filed on August 26, 2020). *

(10.44)						Form of Restricted Stock Unit Agreement with Executive in U.S. for awards in 2021 under the Unum Group Stock Incentive Plan of 2017. *

(10.45)						Form of Restricted Stock Unit Agreement with Executive in U.K. for awards in 2021 under the Unum Group Stock Incentive Plan of 2017. *

(21)						Subsidiaries of the Registrant .

(23)						Consent of Independent Registered Public Accounting Firm.

(24)						Power of Attorney.

(31.1)						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(31.2)						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(32.1)						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(32.2)						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(101)						The following financial statements from Unum Group's Annual Report on Form 10-K for the year ended December 31, 2020, filed on February 17, 2021, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Stockholders' Equity, (v) Consolidated Statements of Cash Flows, (vi) the Notes to Consolidated Financial Statements, (vii) Financial Statement Schedules.

(104)						Cover Page Interactive Data File (embedded within the Inline XBRL document).

___________

*						Management contract or compensatory plan required to be filed as an exhibit to this form pursuant to Item 15(c) of Form 10-K.

**						Certain confidential information contained in this exhibit has been omitted because it (i) is not material and (ii) would likely cause competitive harm to Unum Group or its subsidiaries if it were to be publicly disclosed.

232

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			Unum Group
			(Registrant)
			By:			/s/ *Richard P. McKenney*
						Richard P. McKenney
						President and Chief Executive Officer
			Date:			February 17, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name

Title

Date

/s/ Richard P. McKenney

President and Chief Executive Officer

Richard P. McKenney

and a Director (principal executive officer)

/s/ Steven A. Zabel

Executive Vice President, Chief Financial Officer

Steven A. Zabel

(principal financial officer)

/s/ Cherie A. Pashley

Senior Vice President, Chief Accounting Officer

Cherie A. Pashley

(principal accounting officer)

233

Name

Title

Date

Director

Theodore H. Bunting, Jr.

Director

Susan L. Cross

Director

Susan D. DeVore

Director

Joseph J. Echevarria

Director

Cynthia L. Egan

Director

Kevin T. Kabat

Director

Timothy F. Keaney

Director

Gloria C. Larson

Director

Ronald P. O'Hanley

Director

Francis J. Shammo

* By: /s/ J. Paul Jullienne