Unum 2007 Annual Report Download - page 117

Unum 2007 Annual Report 115
Northwind Re reinsured the risks attributable to specified individual disability insurance policies issued by or reinsured by Provident
Life and Accident Insurance Company, Unum Life Insurance Company of America (Unum America), and The Paul Revere Life Insurance
Company (collectively, the ceding insurers) pursuant to separate reinsurance agreements between Northwind Re and each of the ceding
insurers. Assets held in the Northwind funding sub account will not be available to fund payments of principal or interest on the
Northwind notes.
Northwind Holdings’ ability to meet its obligations to pay principal, interest, and other amounts due on the Northwind notes will
be dependent principally on its receipt of dividends from Northwind Re. The ability of Northwind Re to pay such dividends will depend
on its satisfaction of applicable regulatory requirements and the performance of the reinsured policies.
Recourse for the payment of principal, interest, and other amounts due on the Northwind notes is limited to the collateral for the
Northwind notes and the other assets, if any, of Northwind Holdings. The collateral consists of a first priority, perfected security interest in
(a) the debt service coverage account (Northwind DSCA) that is required to be maintained in accordance with the indenture pursuant to
which the Northwind notes were issued (the Northwind indenture), (b) the capital stock of Northwind Re and the dividends and distributions
on such capital stock, and (c) Northwind Holdings’ rights under the transaction documents related to the Northwind notes to which
Northwind Holdings is a party. At December 31, 2007 the amounts in the Northwind DSCA was $43.7 million. None of Unum Group, the
ceding insurers, Northwind Re, or any other affiliate of Northwind Holdings is an obligor or guarantor with respect to the Northwind notes.
Northwind Holdings is required to repay a portion of the outstanding principal under the Northwind notes at par on the quarterly
scheduled payment dates under the Northwind notes in an amount equal to the lesser of (i) a targeted amortization amount as defined
in the Northwind indenture and (ii) the amount of the remaining available funds in the Northwind DSCA minus an amount equal to the
minimum balance that is required to be maintained in the Northwind DSCA under the Northwind indenture, provided that Northwind
Holdings has sufficient funds available to pay its other expenses, including interest payments on the Northwind notes, and to maintain
the minimum balance in the Northwind DSCA as required under the Northwind indenture.
In November 2006, Tailwind Holdings, LLC (Tailwind Holdings), a wholly-owned subsidiary of Unum Group, issued $130.0 million of
insured, senior, secured notes due 2036 (the Tailwind notes) in a private offering. The Tailwind notes bear interest at a floating rate equal
to the three-month LIBOR plus 0.35%. Tailwind Holdings contributed the $130.0 million proceeds from the issuance of the Tailwind notes
to Tailwind Reinsurance Company (Tailwind Re), the sole subsidiary of Tailwind Holdings, as a capital contribution. Tailwind Re deposited
the funds in a funding sub account (the Tailwind Re funding sub account). No further deposits will be made into the Tailwind Re funding
sub account.
Tailwind Re reinsured Unum America’s liability with respect to certain specified long-term disability claims incurred between January 1,
1999 and December 31, 2001 that were in payment status on January 1, 2006 pursuant to a reinsurance agreement between Tailwind Re
and Unum America. Assets held in the Tailwind Re funding sub account will not be available to fund payments of principal or interest on
the Tailwind notes, but will be held solely to satisfy any obligations of Tailwind Re to Unum America under the reinsurance agreement.
Tailwind Holdings’ ability to meet its obligations to pay principal, interest, and other amounts due on the Tailwind notes will be
dependent principally on its receipt of dividends from Tailwind Re. The ability of Tailwind Re to pay such dividends will depend on its
satisfaction of applicable regulatory requirements and the performance of the reinsured claims.
Recourse for the payment of principal, interest, and other amounts due on the Tailwind notes is limited to the collateral for the Tailwind
notes and the other assets, if any, of Tailwind Holdings. The collateral consists of a first priority, perfected security interest in (a) the debt
service coverage account (Tailwind DSCA) that is required to be maintained in accordance with the indenture pursuant to which the
Tailwind notes were issued (the Tailwind indenture), (b) the capital stock of Tailwind Re and the dividends and distributions on such capital
stock, and (c) Tailwind Holdings’ rights under the transaction documents related to the Tailwind notes to which Tailwind Holdings is a
party. At December 31, 2007 the amounts in the Tailwind DSCA was $12.5 million. None of Unum Group, Unum America, Tailwind Re,
or any other affiliate of Tailwind Holdings is an obligor or guarantor with respect to the Tailwind notes.