<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A No. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 COMMISSION FILE NUMBER 1-9254
UNUM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 01-0405657
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
2211 CONGRESS STREET, PORTLAND, MAINE 04122
(Address of principal executive offices) (Zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (207) 770-2211
NONE
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
-- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT JUNE 30, 1996
COMMON STOCK, $0.10 PAR VALUE 73,270,408 SHARES
<PAGE>
UNUM CORPORATION AND SUBSIDIARIES
FORM 10-Q/A No. 1
INDEX
Page
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations 3
Part II.Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
<PAGE>
UNUM Corporation and Subsidiaries
Form 10-Q/A No. 1
June 30, 1996
Items 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Consolidated Financial
Statements (Unaudited) and Notes to Consolidated Financial Statements
(Unaudited) included elsewhere in the Form 10-Q.
Revenues for UNUM for second quarter 1996 were $989.3 million as compared with
$1,156.1 million for second quarter 1995. For the six months ended June 30,
1996, revenues were $1,991.9 million as compared with $2,111.2 million for the
same period in 1995. The decrease in revenues was primarily attributable to
decreased realized investment gains resulting from the sale of the common stock
portfolio in the second quarter of 1995.
Net income for the quarter ended June 30, 1996, was $73.9 million, or $1.01 per
share, as compared with net income of $88.9 million, or $1.22 per share, for the
same quarter in 1995. For the six months ended June 30, 1996, net income was
$146.0 million, or $1.99 per share, as compared with net income of $152.3
million, or $2.10 per share, for the same period in 1995.
PREMIUMS:
- ---------
Premiums for the three months and six months ended June 30, 1996, and 1995, are
summarized by segment in the table below. For the three months ended June 30,
1996, and 1995, claim block acquisitions generated one-time premium in the
Disability Insurance segment of $0.7 million and $10.0 million, respectively,
for group long term disability ("group LTD"). For the six months ended June
30, 1996, and 1995, the Disability Insurance segment reported one-time block
acquisition premium of $2.0 million and $23.2 million, respectively, for group
LTD, and $4.3 million in 1995 for long term care insurance. Additionally, the
non-disability reinsurance operations, included in the Special Risk Insurance
segment, reported a block acquisition of $10.5 million for the six months ended
June 30, 1996. Management intends to pursue additional claim block acquisitions
in the future.
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
(Dollars in millions) 1996 1995 Change 1996 1995 Change
- -------------------------------------------------------------------
Disability Insurance
Group LTD $ 265.9 $ 264.4 0.6% $ 534.8 $ 530.1 0.9%
UNUM Limited 33.9 32.7 3.7 66.2 58.7 12.8
Individual
Disability 85.5 87.2 (1.9) 173.2 176.5 (1.9)
Group Short Term
Disability 38.6 33.0 17.0 75.2 64.8 16.0
Other Disability
Insurance 34.6 35.4 (2.3) 72.4 73.6 (1.6)
- --------------------------------------------------------------------------
Total 458.5 452.7 1.3 921.8 903.7 2.0
Special Risk Insurance
Group Life 98.5 85.9 14.7 195.5 171.8 13.8
Other Special Risk
Products 74.2 66.3 11.9 156.7 139.6 12.2
- ---------------------------------------------------------------------------
Total 172.7 152.2 13.5 352.2 311.4 13.1
Colonial Products 124.6 118.6 5.1 246.0 234.8 4.8
Retirement Products 5.3 5.7 (7.0) 10.4 13.3 (21.8)
- ----------------------------------------------------------------------
Total premiums $ 761.1 $ 729.2 4.4% $1,530.4$1,463.2 4.6%
=====================================================================
RECONCILIATION OF INCOME (LOSS) BEFORE INCOME TAXES TO PRETAX OPERATING INCOME
- ------------------------------------------------------------------------------
(LOSS):
- -------
Pretax operating income (loss) consists of income (loss) before income taxes
exclusive of realized investment gains (losses) and certain special items
discussed below.
Realized Investment Gains
During the second quarter of 1995, UNUM sold virtually all of the common stock
portfolio of its United States subsidiaries, primarily due to consideration of
statutory capital requirements associated with investment in common stocks, and
to increase future investment income. The sale of the common stock portfolio
contributed to the total pretax realized investment gains of $208.1 million for
the three months ended June 30, 1995. UNUM reinvested the
proceeds from the sale of the common stock portfolio primarily in investment
grade fixed income assets, which decreased the required amount of statutory
capital for regulatory purposes and increased investment income. Dependent on
capital considerations and market conditions, UNUM may invest in equity
securities in the future.
Special Items
Reserves for certain disability products are discounted using an interest rate
which is a composite yield of assets matched with each product. As a result of
the sale of the common stock portfolio, which had partially supported these
disability reserves, and the subsequent reinvestment of the proceeds primarily
in investment grade fixed income assets at yields below the average portfolio
yield, certain reserve discount rates were lowered during second quarter 1995.
The effect of lowering these discount rates was an increase to the reserve
liabilities and benefits to policyholders reported in the Disability Insurance
segment of $128.6 million and a decrease in net income of $83.6 million, or
$1.15 per share, for the three months and six months ended June 30, 1995.
During the second quarter of 1995, UNUM increased the group LTD reserves for
incurred but not reported ("IBNR") claims and benefits to policyholders reported
in the Disability Insurance segment by $38.4 million, which decreased net income
by $25.0 million, or $0.35 per share, for the three months and six months ended
June 30, 1995. IBNR reserves, which are established to fund anticipated case
reserves for claims which have been incurred but not reported to UNUM, are
actuarially established based on various factors, including incidence levels and
claims severity. The increased IBNR reserves were based on management's
judgment that claims currently incurred but not yet reported would reflect
increased levels of claims incidence and severity. It is not possible to
predict whether future incidence levels or claims severity will be consistent
with UNUM's assumptions, or will improve or deteriorate; however, as of June 30,
1996, management believes that the increased IBNR reserve levels continue to be
adequate.
During the second quarter of 1995, UNUM recorded an additional charge for costs
associated with the previously announced decision to discontinue the individual
disability non-cancellable product and organizational changes within UNUM Life
Insurance Company of America which increased operating expenses in the
Consolidated Statement of Income by $5.0 million and decreased
net income by $3.2 million, or $0.04 per share, for the three months and six
months ended June 30, 1995.
<PAGE>
<TABLE>
Pretax operating income (loss) for the four business segments and Corporate for
the three months and six months ended June 30, 1996, and 1995, were as follows:
<CAPTION>
Disability Special Risk Colonial Retirement Consolidated
(Dollars in millions) Insurance Insurance Products Products Corporate UNUM
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended June 30, 1996:
- ---------------------------------
Income (loss) before income
taxes $68.3 $19.3 $23.5 $ 2.6 $ (7.7) $106.0
Realized investment gains
(losses) (1.7) -- (0.1) (1.7) 0.3 (3.2)
- --------------------------------------------------------------------------------------------------------------------
PRETAX OPERATING INCOME (LOSS) $70.0 $19.3 $23.6 $ 4.3 $ (8.0) $109.2
====================================================================================================================
Three Months Ended June 30, 1995:
- ---------------------------------
Income (loss) before income
taxes $ 55.2 $15.9 $29.7 $26.3 $(6.5) $120.6
Realized investment gains
(losses) 176.6 3.2 9.6 19.0 (0.3) 208.1
- ----------------------------------------------------------------------------------------------------------------
(121.4) 12.7 20.1 7.3 (6.2) (87.5)
Add back special items:
Disability reserve increases 128.6 -- -- -- -- 128.6
Group LTD IBNR increase 38.4 -- -- -- -- 38.4
Other charges 2.9 1.1 -- 1.0 -- 5.0
- -----------------------------------------------------------------------------------------------------------------
PRETAX OPERATING INCOME (LOSS)
EXCLUDING SPECIAL ITEMS $ 48.5 $13.8 $20.1 $ 8.3 $(6.2) $ 84.5
=================================================================================================================
Six Months Ended June 30, 1996:
- -------------------------------
Income (loss) before income
taxes $132.6 $38.3 $42.2 $ 8.9 $(13.3) $208.7
Realized investment gains
(losses) 0.1 0.4 0.2 (0.8) 0.4 0.3
- -----------------------------------------------------------------------------------------------------------------
PRETAX OPERATING INCOME (LOSS) $132.5 $37.9 $42.0 $ 9.7 $(13.7) $208.4
===================================================================================================================
Six Months Ended June 30, 1995:
- -------------------------------
Income (loss) before income
taxes $106.0 $32.9 $46.8 $33.0 $(12.7) $206.0
Realized investment gains
(losses) 184.7 3.4 10.3 20.8 (0.2) 219.0
- -----------------------------------------------------------------------------------------------------------------
(78.7) 29.5 36.5 12.2 (12.5) (13.0)
Add back special items:
Disability reserve increases 128.6 -- -- -- -- 128.6
Group LTD IBNR increase 38.4 -- -- -- -- 38.4
Other charges 2.9 1.1 -- 1.0 -- 5.0
- ------------------------------------------------------------------------------------------------------------------
PRETAX OPERATING INCOME (LOSS)
EXCLUDING SPECIAL ITEMS $91.2 $30.6 $36.5 $13.2 $(12.5) $159.0
===================================================================================================================
</TABLE>
<PAGE>
PRETAX OPERATING INCOME:
- ------------------------
Pretax operating income excludes realized investment gains (losses) and
certain special items as previously defined. UNUM reported increased pretax
operating income for the three months and six months ended June 30, 1996, as
compared with the same periods in 1995. The increases were primarily
attributable to positive results from management's continued focus on risk
management programs and from improved claims experience, both of which lowered
the benefit ratios for certain disability businesses reported in the Disability
Insurance segment and the group life business reported in the Special Risk
Insurance segment. Additionally, increased investment income caused by the
reinvestment of the proceeds from the sale of the common stock portfolio in
second quarter 1995, as previously discussed, favorably affected pretax
operating income during both periods. Partially offsetting these increases were
increased expenses and higher benefit ratios in certain other disability
businesses.
PRETAX OPERATING INCOME BY SEGMENT:
- -----------------------------------
The following sections discuss the results of the four business segments and
Corporate for the three months and six months ended June 30, 1996, and 1995.
Within these business segment discussions, reference is made to pretax operating
income (loss), which excludes realized investment gains (losses) and certain
special items as previously defined.
Disability Insurance Segment:
The Disability Insurance segment reported increased pretax operating income for
the three months ended June 30, 1996, as compared with the same period in 1995.
The increase was primarily attributable to lower benefit ratios at UNUM Limited
and in group LTD and increased investment income. Partially offsetting these
increases were higher benefit ratios in certain other disability businesses
including individual disability, association group disability and disability
reinsurance. Increased operating expenses also negatively affected pretax
operating income.
For the six months ended June 30, 1996, the Disability Insurance segment
reported increased pretax operating income, as compared with the same period in
1995. The increase was primarily attributable to increased investment
income and lower benefit ratios at UNUM Limited and in group LTD. Partially
offsetting these increases were increased operating expenses and higher benefit
ratios in certain other disability businesses including individual disability,
association group disability and disability reinsurance.
Pretax operating income for group LTD was favorably affected by increased
investment income and a lower benefit ratio for the three months and six months
ended June 30, 1996, as compared with the same period in 1995. The lower
benefit ratio was primarily the result of continued improvements in claims
incidence and higher claim recoveries, which management primarily attributes to
risk management programs, partially offset by an increased average claim size.
Management continues to monitor claim trends in group LTD and responds by
periodically adjusting prices on selected new and inforce business, refining
underwriting guidelines and strengthening risk management programs. The level
of future earnings of the group LTD product will be a function of various
factors, including but not limited to, the effectiveness of these continuing
actions over time.
For the three months and six months ended June 30, 1996, UNUM Limited's pretax
operating income was favorably affected by a lower benefit ratio in its group
long term disability business, as compared with the corresponding periods in
1995. The lower benefit ratio was primarily attributable to a continued focus
on strengthening risk management programs and improved new claims experience.
Management believes the risk management actions contributed more favorably to
earnings in the second quarter 1996, as compared with previous quarters, and
that the level of future earnings for UNUM Limited will be a function of various
factors, including but not limited to, the effectiveness of these continuing
actions over time.
Pretax operating income for individual disability was favorably affected by
increased investment income partially offset by a higher benefit ratio for the
three and six month periods ended June 30, 1996, as compared with the same
period in 1995. The higher benefit ratio was primarily attributable to an
increased level of claims incidence and decreased premium growth, resulting from
the transition out of the non-cancellable individual disability product to the
new guaranteed renewable Life Long Disability Protection product, which has now
been approved in all 50 states. During 1994, UNUM increased individual
disability reserves for existing claims by $83.3 million and strengthened
reserves for estimated future losses by $109.1 million. These increased
reserves reflected management's expectations of morbidity trends for the
existing non-cancellable individual disability business. It is not possible to
predict whether morbidity trends will be consistent with UNUM's assumptions;
however, as of June 30, 1996, management believes that the strengthened reserve
levels continue to be adequate.
The pretax operating income for the association group disability business was
adversely affected by the continuation of unfavorable claims experience for the
three months and six months ended June 30, 1996. To address the current claims
environment, management continues to evaluate underwriting standards and risk
management programs.
Management expects the reserve discount rate for certain disability products
will further decline, since current cash flows are invested in high quality
assets at current yields, which are below the composite yield of the existing
assets purchased in prior years. UNUM periodically adjusts prices on both
existing and new business in an effort to mitigate the impact of the current
interest rate environment.
Special Risk Insurance Segment:
The Special Risk Insurance segment reported an increase in pretax operating
income for the three months and six months ended June 30, 1996, as compared with
the same periods in 1995. The increases were primarily due to favorable claims
experience in the group life business, increased investment income, and premium
growth primarily driven by higher sales levels. These increases were partially
offset by a higher benefit ratio in certain reinsurance pools and reduced fee
income from the reinsurance underwriting management operations. Due to the
nature of the risks underwritten and the relative size of the blocks of
businesses, several of the Special Risk Insurance segment's products can exhibit
claims variability.
Colonial Products Segment:
The Colonial Products segment reported increased pretax operating income for the
three months and six months ended June 30, 1996, as compared with the same
periods in 1995. The increases were primarily attributable to increased
investment income and favorable claims experience in the accident and sickness
and life product lines, partially offset by unfavorable claims experience in the
cancer line. In addition, continued premium growth, reflecting higher sales
levels, contributed to increased operating income. Colonial continues to
reinsure a majority of the mortality risk on new and inforce universal life
business which negatively affects reported premium growth.
Retirement Products Segment:
Pretax operating income decreased for the three months and six months ended June
30, 1996, as compared with the same periods in 1995, primarily due to continued
losses from the runoff of those products no longer actively marketed by UNUM and
lower interest spread margins on tax sheltered annuities ("TSA") as assets are
shifted to lower yielding, highly liquid, instruments in anticipation of the
sale of the TSA business. Management expects this asset shift will further
reduce interest spread margins on tax sheltered annuities through the effective
date of the sale. A reduction in operating expenses partially offset these
decreases.
During the first quarter of 1996, UNUM Life Insurance Company of America and
First UNUM Life Insurance Company entered into an agreement for the sale of
their respective group TSA businesses to The Lincoln National Life Insurance
Company ("Lincoln Life"), a part of Lincoln National Corporation, and to a new
New York insurance subsidiary of Lincoln Life. It is anticipated that the
necessary approvals will be obtained and closing of the sale will occur before
the end of 1996; however, there is no guarantee that the sale will close.
Including the expected purchase price of approximately $70 million, management
expects to generate up to $160 million of statutory capital from this
transaction, which would be available to repurchase UNUM common stock.
The reduced asset base under management for guaranteed investment contracts
("GICs"), deposit administration contracts ("DAs") and 401(k) plans has resulted
in lower revenues from investment income and reduced amounts of interest
credited. Management expects continued decreases in the amounts of investment
income and interest credited as the related GICs, DAs and 401(k) contracts
mature or terminate. Management expects future earnings for these closed blocks
of businesses to decline, reflecting their run-off nature.
Corporate:
Increased international development costs and higher interest expense, partially
offset by increased investment income, were the primary drivers of the increased
operating loss in Corporate for the three months ended June 30, 1996, as
compared with the same period in 1995. Also included in operating expenses were
certain costs incurred for the planned merger of Commercial Life Insurance
Company into UNUM Life Insurance Company of America.
The increased operating loss in Corporate for the six months ended June 30,
1996, as compared with the same period in 1995, was primarily the result of
increased interest expense and international development costs partially offset
by increased investment income.
INVESTMENTS:
- ------------
At June 30, 1996, the composition of UNUM's $11.4 billion of invested assets was
79.0% fixed maturities, 10.0% mortgage loans, 2.0% real estate, and 9.0% other
invested assets.
Fixed Maturities
At June 30, 1996, and December 31, 1995, the fixed maturity portfolio included
$143.1 million and $139.4 million of below investment grade bonds (below "Baa"),
which represented 1.6% and 1.5% of the fixed maturity portfolio, respectively.
These bonds had associated amortized cost values of $140.6 million and $133.8
million, respectively. Virtually all of the nonconvertible, below investment
grade bonds were purchased at investment grade, but were subsequently
downgraded. UNUM had no fixed maturities delinquent 60 days or more at June 30,
1996, or December 31, 1995.
Mortgages
The percentage of mortgage loans delinquent 60 days or more on a contract
delinquency basis was 0.2% at June 30, 1996, and December 31, 1995. Management
expects a modest level of additional delinquencies and impaired loans in the
future. Management believes the allowance provided on mortgage loans as of June
30, 1996, is adequate to cover probable losses. Impaired mortgage loans as of
June 30, 1996, are not expected to have a significant effect on UNUM's results
of operations, liquidity, or capital resources.
Real Estate
At June 30, 1996, real estate held for sale amounted to $31.4 million compared
with $35.5 million at December 31, 1995, and was included in other assets in the
Consolidated Balance Sheets. Given the current real estate environment,
additional foreclosures are anticipated, but at a reduced level from the early
1990s. Current and anticipated real estate acquired through foreclosure is not
expected to have a significant effect on UNUM's results of operations,
liquidity, or capital resources.
LIQUIDITY AND CAPITAL RESOURCES:
- -------------------------------
UNUM's businesses produce positive cash flows which are invested primarily in
intermediate, fixed maturity investments intended to reflect the nature of
anticipated cash obligations of insurance benefit payments and insurance
contract maturities and to optimize investment returns at appropriate risk
levels. Unexpected cash requirements and liquidity needs can be met through
UNUM's investment portfolio of fixed maturities classified as available for
sale, equity securities, cash, and short-term investments. To facilitate the
expected sale of the TSA business later in 1996, management expects to liquidate
certain assets, primarily fixed maturities, and accumulate cash and short-term
investments.
From time to time, dividend payments, which may be subject to approval by
insurance regulatory authorities, are made from UNUM's affiliates and insurance
subsidiaries to UNUM Corporation. These dividends, along with other funds, are
used to service the needs of UNUM Corporation including: debt service, common
stock dividends, stock repurchase, administrative costs and corporate
development. Net statutory operating income, which excludes realized investment
gains net of tax, is one of the major determinants of an insurance company's
dividend capacity to its parent in the following fiscal year. Statutory
accounting rules and practices, which differ in certain respects from generally
accepted accounting principles, are mandated by regulators in an insurance
company's state of domicile. In the first six months of 1996, UNUM's insurance
subsidiaries domiciled in the United States reported net statutory operating
income of approximately $88 million, as compared with approximately $67 million
for the same period of 1995.
Cash flow requirements are also supported by a committed revolving credit
facility totaling $500 million, which expires on October 1, 1999. UNUM's
commercial paper program is supported by the revolving credit facility and is
available for general liquidity needs, capital expansion, acquisitions, and
stock repurchase. The committed revolving credit facility contains certain
covenants which, among other provisions, require maintenance of certain levels
of stockholders' equity and limits on level of debt.
On July 16, 1996, UNUM filed an omnibus shelf registration with the Securities
and Exchange Commission, which became effective August 2, 1996, relating to $500
million of securities (including debt securities, preferred stock, common stock
and other securities). UNUM plans to file a prospectus supplement to establish
a $250 million medium-term note program under the shelf registration.
At June 30, 1996, UNUM had short-term and long-term debt totaling $115.9 million
and $442.6 million, respectively. At June 30, 1996, approximately $408 million
was available for additional financing under the existing revolving credit
facility. Upon its effective date, the new shelf registration provided UNUM
with the availability of $500 million of investment grade debt instruments for
additional financing. Contingent upon market conditions and corporate needs,
management may refinance short-term notes payable for longer term securities.
During the second quarter of 1996, UNUM acquired approximately 150,000 shares of
its common stock in the open market at an aggregate cost of $8.8 million. At
June 30, 1996, approximately 2.5 million shares of common stock remained
authorized for stock repurchase.
RATINGS:
- --------
In August 1996, Moody's Investors Service ("Moody's") assigned the following
prospective ratings to UNUM Corporation's July 16, 1996, shelf registration:
senior debt at "(P)A1" (Upper-Medium Quality), subordinated debt at "(P)A2"
(Upper-Medium Quality), cumulative preferred stock at "(P)"a1"" (Upper-Medium
Quality), and non-cumulative preferred stock at "(P)"a2"" (Upper-Medium
Quality).
In August 1996, Standard & Poor's Corporation ("S&P") assigned a preliminary
senior debt rating of "A+" (Strong) to the July 16, 1996, shelf registration.
In addition, S&P affirmed UNUM Corporation's senior debt (medium-term notes
program), monthly income debt securities, and commercial paper ratings at "A+"
(Strong), "A" (Strong) and "A-1" (Strong), respectively.
In June 1996, Moody's assigned a financial strength rating of "Aa2"
(Excellent) to Commercial Life Insurance Company ("Commercial Life"), based on
UNUM Corporation's plan to merge Commercial Life into UNUM Life Insurance
Company of America ("UNUM America"), which has a financial strength rating of
"Aa2". The merger will be effective December 31, 1996, subject to regulatory
approvals.
In April 1996, A.M. Best Company ("Best's") affirmed UNUM America's financial
strength rating at "A++" (Superior), the highest rating assigned by Best's.
Additionally, Best's affirmed First UNUM Life Insurance Company and Colonial
Life & Accident Insurance Company at "A+" (Superior). Best's affirmed
Commercial Life's at "A" (Excellent) in May 1995.
In February 1996, S&P affirmed the claims paying ability ratings of UNUM America
and First UNUM Life Insurance Company at "AA" (Excellent) and Colonial Life &
Accident Insurance Company at "AA-" (Excellent). S&P assigned a claims paying
ability rating of "AA" (Excellent) to Commercial Life based on UNUM
Corporation's plan to merge Commercial Life into UNUM America, which has a
claims paying ability rating of "AA". The merger will be effective December
31, 1996, subject to regulatory approvals.
LITIGATION:
- ----------
In the normal course of its business operations, UNUM is involved in litigation
from time to time with claimants, beneficiaries and others, and a number of
lawsuits were pending at June 30, 1996. In some instances, these proceedings
include claims for punitive damages and similar types of relief in unspecified
or substantial amounts, in addition to amounts for alleged contractual liability
or other compensatory damages. In the opinion of management, the ultimate
liability, if any, arising from this litigation is not expected to have a
material adverse effect on the consolidated financial position or the
consolidated operating results of UNUM.
On December 29, 1993, UNUM filed suit in the United States District Court for
the District of Maine, seeking a federal income tax refund. The suit is based
on a claim for a deduction in certain prior tax years, for $652 million in cash
and stock distributed to policyholders in connection with the 1986 conversion of
Union Mutual Life Insurance Company to a stock company. UNUM has fully paid,
and provided for in prior years' financial statements, the tax at issue in this
litigation. On May 23, 1996, the District Court issued its decision that the
distribution in question was not a deductible expenditure. UNUM believes its
claims are meritorious, and has appealed the decision to the Court of Appeals
for the First Circuit. The ultimate recovery, if any, cannot be determined at
this time.
NEW ACCOUNTING PRONOUNCEMENT:
- -----------------------------
In June 1996, the Financial Accounting Standards Board issued Financial
Accounting Standard ("FAS") No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," which establishes
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities. The statement provides guidance for
recognition or derecognition of assets and liabilities, focusing on the concepts
of control and extinguishment. UNUM is required to adopt FAS 125 on January 1,
1997. UNUM has not yet determined what effect the adoption of FAS 125 will have
on its results of operations or financial position.
<PAGE>
UNUM Corporporation and Subsidiaries
Form 10-Q/A No. 1
June 30, 1996
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Page
(a) Exhibit Index
15.1 Letter re: Unaudited interim financial information 14
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant with the Securities and
Exchange Commission during the quarter ended June 30, 1996.
<PAGE>
SIGNATURES
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 thereunto duly authorized.
Date August 14, 1996 /s/ ROBERT W. CRISPIN
-------------------- -----------------------------
Robert W. Crispin
Executive Vice President and
Chief Financial Officer
Date August 14, 1996 /s/ STEPHEN D. ROBERTS
-------------------- ------------------------------
Stephen D. Roberts
Vice President and
Corporate Controller
<PAGE>
EXHIBIT 15.1
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
We are aware that our report dated July 24, 1996, on our review of
interim financial information of UNUM Corporation for the three-month and
six-month periods ended June 30, 1996, and 1995, (the interim financial
information) has been included in the Company's quarterly report on Form 10-Q.
We are also aware that Item 2 of the interim financial information has been
amended pursuant to Form 10-Q/A No. 1.
/s/ COOPERS & LYBRAND L.L.P.
August 14, 1996
