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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): January 24, 1996
UNUM Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-9254 01-0405657
(State or other jurisdiction (Commission (IRS Employer
of incorporation or organization) File Number) Identification
2211 Congress Street, Portland, Maine 04122
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (207) 770-2211
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UNUM Corporation
Form 8-K
Table of Contents
ITEM 5. OTHER EVENTS
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
SIGNATURE
EXHIBIT NO. 99
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ITEM 5. OTHER EVENTS
On January 24, 1996, the Registrant's ("the Company") wholly-owned subsidiary,
UNUM Life Insurance Company of America ("UNUM America") entered into an
agreement for the sale of its group tax-sheltered annuity ("TSA") business to
The Lincoln National Life Insurance Company ("the Purchaser"), a part of
Lincoln National Corporation, and to a new New York insurance subsidiary of the
Purchaser. The agreement also contemplates that the Registrant's wholly-owned
subsidiary, First UNUM Life Insurance Company ("First UNUM"), will enter into
a similar agreement with the Purchaser's New York insurance subsidiary. The
sale, which is subject to regulatory approvals, involves approximately 1,700
group contractholders and assets under management of $3.1 billion as of
December 31, 1995. The agreement initially contemplates the reinsurance of
these contracts under an indemnity reinsurance arrangement. These contracts
will then be reinsured pursuant to an assumption reinsurance arrangement upon
consent of the TSA contractholders and/or participants ("Novation"). The
purchase price (ceding commission) at closing is expected to be approximately
$70 million. It is anticipated that it will take several months (perhaps six to
nine months) to obtain the necessary approvals and otherwise close the sale.
There is no guarantee that the sale will close.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
not applicable
(B) PRO FORMA FINANCIAL INFORMATION
These unaudited pro forma financial statements have been prepared by the Company
based upon available information and assumptions deemed appropriate to reflect
the indemnity and assumption reinsurance arrangements. The accompanying
unaudited pro forma condensed balance sheet as of December 31, 1995, reflects
the financial position of the Company as reported and as adjusted as though the
sale of the tax sheltered annuity business ("TSA") had been consummated at
December 31, 1995. The accompanying unaudited pro forma consolidated statements
of income for the year ended December 31, 1995, reflect the results of
operations of the Company as though the sale of the TSA business had occurred on
January 1, 1995.
These unaudited pro forma financial statements are not necessarily indicative of
what the actual financial position or results of operations of the Company would
have been had the sale occurred on the dates indicated, nor does it purport to
indicate the future financial position or results of operations of the Company.
Actual values will vary from the amounts shown in the pro forma financial
statements, subject to the actual results of operations for the TSA business and
certain post-closing adjustments.
The unaudited pro forma financial statements should be read in conjunction with
the Company's historical consolidated financial statements and notes thereto
previously filed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, and the Quarterly Report on Form 10-Q for the nine months
ended September 30, 1995.
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<TABLE>
UNUM CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 31, 1995
UNAUDITED - DOLLARS IN MILLIONS
<CAPTION>
Historical Pro Forma Pro Forma As Pro Forma Proforma
Adjustments Adjusted Adjustments As Adjusted
at Closing before Assuming 100% after 100%
Novation Novation Novation
<S> <C> <C> <C> <C> <C>
Assets
Investments
Fixed maturities -
available for sale $9,135.4 $(2,783.3) (a) $6,352.1 $6,352.1
Policy loans 219.2 219.2 $(106.8) (f) 112.4
Other investments 2,337.9 2,337.9 2,337.9
Total investments 11,692.5 (2,783.3) 8,909.2 (106.8) 8,802.4
Cash, accrued investment
income and premiums due 475.3 71.6 (b) 546.9 546.9
Deferred policy acquisition
costs 1,142.3 (32.5) (c) 1,109.8 1,109.8
Deposit with Purchaser -- 2,783.3 (a) 2,783.3 (2,783.3) (f) --
Other assets 945.5 945.5 945.5
Separate account assets 532.2 532.2 (329.4) (g) 202.8
Total assets $14,787.8 $39.1 $14,826.9 $(3,219.5) $11,607.4
Liabilities
Future policy benefits $1,718.7 $1,718.7 $1,718.7
Unpaid claims and claim
expenses 4,856.4 4,856.4 4,856.4
Other policyholder funds 3,840.3 3,840.3 $(2,957.7) (f) 882.6
Income taxes 412.7 $6.1 (c) 418.8 31.4 (h) 450.2
Other liabilities 540.8 33.0 (b,d,e) 573.8 (22.0) (h) 551.8
Notes payable 583.8 583.8 583.8
Separate account liabilities 532.2 532.2 (329.4) (g) 202.8
Total liabilities 12,484.9 39.1 12,524.0 (3,277.7) 9,246.3
Stockholders' Equity
Common stock 10.0 10.0 10.0
Additional paid-in capital 1,088.2 1,088.2 1,088.2
Unrealized gains, net 213.1 213.1 213.1
Unrealized foreign currency
translation adjustment (23.1) (23.1) (23.1)
Retained earnings 1,713.2 1,713.2 58.2 (h) 1,771.4
3,001.4 3,001.4 58.2 3,059.6
Less treasury and restricted
stock 698.5 698.5 698.5
Total stockholders' equity 2,302.9 2,302.9 58.2 2,361.1
Total liabilities and
stockholders' equity $14,787.8 $39.1 $14,826.9 $(3,219.5) $11,607.4
</TABLE>
See notes to unaudited condensed pro forma balance sheet.
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UNUM CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
The pro forma adjustments to the December 31, 1995, condensed balance sheet have
been prepared to demonstrate the effect of the transaction before and after
novation of the tax sheltered annuity business to the Purchaser. Upon novation,
UNUM's balance sheet will no longer reflect amounts related to the TSA business.
Novations will occur over a time frame which management cannot reasonably
determine at this time.
Pro Forma Balance Sheet Adjustments at Closing
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(a) Records the sale of available for sale fixed maturity securities and
transfer of the proceeds to the Purchaser. The transfer to the Purchaser is
equal to the statutory reserves for the TSA business less the amount for policy
loans related to the TSA business at December 31, 1995. The actual proceeds for
the sale will most likely be financed through the liquidation of a combination
of available for sale fixed maturity securities and short-term investments.
These unaudited pro forma financial statements assume that the sale of
securities does not result in the realization of investment gains or losses.
Realized gains and losses may be recognized when the invested assets are
actually sold, dependent upon market conditions.
(b) Records cash received and a deferred gain of $71.6 million for the
estimated purchase price (ceding commission) calculated at December 31, 1995.
(c) Records the write-off of deferred policy acquisition costs of $32.5 million
and a deferred tax asset of $6.1 million related to the TSA business.
(d) Records estimated expenses associated with the transaction of $11.0
million. UNUM may be required to pay additional costs for severance of certain
employees. These costs have not been included in these pro forma financial
statements since the amounts cannot be reasonably estimated at this time.
(e) Records the recognition of $49.6 million of the $71.6 million deferred gain
to offset expenses described in (c) and (d) above.
Pro Forma Balance Sheet Adjustments Assuming 100% Novation
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(f) Records release of TSA liabilities of $2,957.7 million and corresponding
deposit of $2,783.3 million and policy loans of $106.8 million.
(g) Records transfer of Separate Account assets and liabilities to Purchaser.
(h) Recognition of remaining deferred gain with related tax into income.
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<TABLE>
UNUM CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
UNAUDITED - DOLLARS IN MILLIONS, EXCEPT PER COMMON SHARE DATA
<CAPTION>
Historical Historical Pro Forma Pro Forma Pro Forma as
Consolidated TSA Adjustments Adjustments Adjusted
Business at Closing Assuming After
(Note a) (Note b) 100% 100%
Novation Novation
(Note c)
<S> <C> <C> <C> <C> <C>
Revenues
Premiums $3,018.2 $(7.3) $3,010.9
Investment income 806.3 (214.7) 591.6
Net realized
investment gains 225.1 (18.6) 206.5
Fees and other income 73.3 (7.0) $49.6 $22.0 137.9
Total revenues 4,122.9 (247.6) 49.6 22.0 3,946.9
Benefits and expenses
Benefits to policyholders 2,493.0 (13.7) (67.6) 2,411.7
Interest credited 227.4 (167.4) 60.0
Operating expenses 728.2 (29.1) 11.0 710.1
Commissions 369.9 (6.7) 363.2
Increase in deferred
policy acquisition costs (114.7) 3.3 32.5 (78.9)
Interest expense 37.2 -- 37.2
Total benefits and
expenses 3,741.0 (213.6) 43.5 (67.6) 3,503.3
Income before income taxes 381.9 (34.0) 6.1 89.6 443.6
Income taxes
Current 98.6 (1.2) 31.4 128.8
Deferred 2.2 (1.7) 6.1 6.6
Total income taxes 100.8 (2.9) 6.1 31.4 135.4
Net Income $281.1 $(31.1) -- $58.2 $308.2
Net income per common share $3.87 ($0.43) -- $0.80 $4.24
Weighted average 72,676,788 72,676,788
common shares
outstanding
</TABLE>
See notes to unaudited pro forma statement of income.
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UNUM CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA STATEMENT OF INCOME
(a) Eliminates the historical results of operations for the TSA business for
the year ended December 31, 1995.
(b) Records the write-off of deferred policy acquisition costs and deferred
income taxes and records the estimated costs of the transaction offset by the
recognition of $49.6 million of the deferred gain.
(c) Assuming 100% novation, records the release of TSA liabilities of $2,957.7
million for the corresponding deposit of $2,783.3 million and policy loans of
$106.8 million along with the recognition of the remaining deferred gain of
$22.0 million, less applicable income tax expense. Actual novations will occur
over a time frame which management cannot reasonably determine at this time.
NOTE: The unaudited pro forma statement of income assumes that the sale of
available for sale fixed maturity securities by UNUM to finance the proceeds to
the Purchaser does not result in the realization of investment gains or losses.
The actual proceeds for the sale will most likely be financed through the
liquidation of a combination of available for sale fixed maturity securities and
short-term investments. Realized gains and losses may be recognized when the
invested assets are actually sold, dependent upon market conditions.
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(C) EXHIBIT
Exhibit No.
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99 Press Release Dated January 24, 1996
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UNUM Corporation
By: /s/ Robert W. Crispin
---------------------------------
Robert W. Crispin
Executive Vice President
and Chief Financial Officer
Date: February 16, 1996
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EXHIBIT NO. 99
PRESS RELEASE DATED JANUARY 24, 1996
LINCOLN LIFE TO BUY UNUM'S TAX-SHELTERED BUSINESS
FORT WAYNE, IN: Jan. 24 1996 -- The Lincoln National Life Insurance Company, a
part of Lincoln National Corporation, announced today that it has reached a
definitive agreement to acquire the group tax-sheltered annuity business from
UNUM Life Insurance Company of America and First UNUM Life Insurance Company of
New York, affiliates of UNUM Corporation.
The acquisition, which is subject to regulatory approvals, involves about
1,700 group contracts and has assets under management of $3.2 billion. The
purchase price is approximately $70 million.
UNUM America announced its intention last fall to withdraw from the tax-
sheltered annuity business. Tax-sheltered annuities are a tax-deferred
retirement plan available to employees of institutions which are tax-exempt
under section 501(c)(3) of the Internal Revenue Code and certain educational
institutions.
"This transaction further solidifies Lincoln Life's position as the leader
in the annuity business where we enjoy a reputation of high customer
satisfaction, growth and financial strength," said John Boscia, president of
Lincoln Life. With this transaction, Lincoln Life's tax-qualified annuity
assets under management will exceed $32 billion.
"This acquisition is a perfect strategic fit for Lincoln Life which is
committed to further building its annuity business," Boscia said.
James F. Orr III, chairman and chief executive officer of UNUM Corporation,
said, "As an asset accumulation vehicle, tax-sheltered annuities are not a
strategic fit with UNUM's core disability and special risk businesses. This
agreement supports our decision last year to find a buyer that is financially
strong, committed to the annuity business and known for providing quality
service. Between now and closing, we will maintain our commitment to our tax-
sheltered annuity customers by providing quality service and sound management.
Following the sale, we will continue to sharpen the focus of our operations
and make the very best use of our capital and other resources," Orr said.
"Including the purchase price of approximately $70 million, we expect to
generate approximately $160 million in capital from this transaction. Plans for
the use of this capital may include repaying debt, investing in existing or new
businesses and buying back UNUM stock."
Included in the agreement is the sale of the tax-sheltered annuity business
written by UNUM America and First UNUM in New York state. Lincoln Life said
that it intends to establish a subsidiary in New York and has met with state
regulators to discuss its plans.
Boscia and Orr said they expected the transaction will be completed by late
summer. Approximately 215 positions within UNUM directly support the group tax-
sheltered annuity business, including about 185 in Portland, Maine, headquarters
of UNUM. Lincoln Life said its intent is to maintain a presence in Portland for
at least a year after closing and at related field locations for at least six
months after closing.
Lincoln Life, the nation's 11th largest life insurance company, is an
affiliate of Lincoln National Corporation (NYSE: LNC) which owns and operates
financial services businesses that provide individual life insurance, annuities,
pensions, property-casualty insurance, life-health reinsurance, mutual funds and
investment services. LNC, which has its headquarters in Fort Wayne, has assets
of more than $60 billion and annual revenues of more than $6 billion.
UNUM Life Insurance Company of America is an affiliate of the Portland,
Maine based UNUM Corporation (NYSE: UNM), North America's leading provider of
disability insurance products and services, and a provider of employee benefits
and long term care insurance. The corporation also markets special risk
products and is a leading reinsurer of long term disability and other specialty
insurance business. UNUM and its affiliates have offices in the United States,
Canada, the United Kingdom and the Pacific Rim. UNUM Corporation assets at the
end of the third quarter totaled $14.1 billion.
For further information, contact:
MEDIA:
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Scott Bushnell
Lincoln National Corporation
219/455-7512
Diane Cantello
UNUM Corporation
207/770-4495
ANALYSTS:
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Daniel Weber
Lincoln National Corporation
219/455-2336
Kent Mohnkern
UNUM Corporation
207/770-4392
