Description of Stock Plans

Under the stock incentive plan of 2012 (the 2012 Plan), up to 20 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 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 eight years after the date of grant and vest after three years. At December 31, 2013, approximately 18.31 million shares were available for future grants under the 2012 Plan.

Under the stock incentive plan of 2007 (the 2007 Plan), which was terminated in May 2012 for purposes of any further grants, up to 35 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 right, is counted as 2.7 shares. Awards granted before the termination of the 2007 Plan remain outstanding in accordance with the plan's terms. Stock options generally have a term of eight years after the date of grant and vest after three years.

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

Performance Share Units (PSUs)

In February 2013, we issued approximately 0.1 million PSUs with a grant date fair value of $25.26, all of which were outstanding and nonvested at December 31, 2013. 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 particular peer group during the three-year period. Forfeitable dividend equivalents on PSUs are accrued in the form of additional PSUs. The weighted average grant date fair value per share for PSU grants and dividends during 2013 was $25.26.

At December 31, 2013, we had approximately $2.1 million of unrecognized compensation cost related to PSUs that will be recognized over a weighted average period of 2.0 years. The expense and unrecognized compensation cost assume the performance goals are attained at 100 percent. Actual performance, including modification for relative total shareholder return, may result in 0 to 180 percent of the PSUs ultimately being earned. Compensation expense recognized for the PSUs is adjusted quarterly based on actual performance measure results.

We estimated the fair value on the date of initial grant for the PSUs using the Monte-Carlo simulation model. The following assumptions were used to value the grant:


•	Expected volatility of 35 percent, based on our historical daily stock prices and those for components of our peer group.


•	Expected life of 3.0 years, which equals the performance period.


•	Expected dividend yield of 2.17 percent, assuming continuous reinvestment of the dividends, based on the plan's provisions.


•	Risk free interest rate of 0.38 percent, based on the yield of U.S. Treasury bonds at the date of grant.

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, 2012	1,403		$	23.57
Granted	731		24.68
Vested	(790	)	23.12
Forfeited	(22	)	24.22
Outstanding at December 31, 2013	1,322		24.35

During 2013, 2012, and 2011, we issued RSUs with a weighted average grant date fair value per share of $24.68, $22.96, and $26.13, 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 are accrued in the form of additional RSUs. Compensation cost for RSUs subject to accelerated vesting upon retirement is recognized over the implicit service period.

The total fair value of shares vested during 2013, 2012, and 2011 was $18.3 million, $19.5 million, and $19.2 million, respectively. At December 31, 2013, we had $10.6 million of unrecognized compensation cost related to RSUs that will be recognized over a weighted average period of 0.8 years.

Cash-Settled Awards

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



			Weighted Average
	Shares		Grant Date
	(000s)		Fair Value
Outstanding at December 31, 2012	207		$	23.72
Granted	60		24.22
Vested	(102	)	23.29
Outstanding at December 31, 2013	165		24.09

Cash-settled awards 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 cash-settled awards are accrued in the form of additional units. Compensation cost for cash-settled awards subject to accelerated vesting upon retirement 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.

The weighted average grant date fair value per unit for cash-settled awards granted during 2013, 2012, and 2011 was $24.22, $23.23, and $26.22, respectively. The total fair value of cash-settled awards vested during 2013, 2012, and 2011 was $2.4 million, $1.5 million, and $0.7 million, respectively, and the total fair value of cash-settled awards paid during 2013, 2012, and 2011 was $2.5 million, $1.5 million, and $0.9 million, respectively. There is no unrecognized compensation cost related to the cash-settled awards, other than future changes in the liability due to future stock price changes, as the units do not require additional future service.

Stock Options

Stock option activity is summarized as follows:



					Remaining	Intrinsic
	Shares		Weighted Average		Contractual Term	Value
	(000s)		Exercise Price		(in years)	(in millions)
Outstanding at December 31, 2012	1,691		$	20.98
Granted	103		24.25
Exercised	(399	)	21.15
Outstanding at December 31, 2013	1,395		21.17		4.2	$	19.4

Exercisable at December 31, 2013	1,041		$	20.15	3.5	$	15.5

All outstanding stock options at December 31, 2013 are expected to vest. 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 upon retirement is recognized over the implicit service period.

The total intrinsic value of options exercised during 2013, 2012, and 2011 was $4.4 million, $0.6 million, and $3.9 million, respectively. The total fair value of options that vested during 2013, 2012, and 2011 was $2.4 million, $2.3 million, and $2.7 million, respectively. At December 31, 2013, we had $0.6 million of unrecognized compensation cost related to stock options that will be recognized over a weighted average period of 0.7 years.

The weighted average grant date fair value of options granted during 2013, 2012, and 2011 was $9.77, $9.78, and $11.73, respectively. We estimated the fair value on the date of grant using the Black-Scholes valuation model. The following assumptions were used to value the 2013, 2012, and 2011 grants:


•	Expected volatility of 52 percent, 52 percent, and 53 percent, respectively, based on our historical daily stock prices.


•	Expected life of 6.0 years, 6.0 years, and 5.5 years, respectively, based on historical average years to exercise.


•	Expected dividend yield of 2.14 percent, 1.80 percent, and 1.41 percent, respectively, based on the dividend rate at the date of grant.


•	Risk free interest rate of 1.12 percent, 1.13 percent, and 2.37 percent, respectively, based on the yield of U.S. Treasury bonds at the date of grant.

Expense

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



	Year Ended December 31
	2013		2012		2011
	(in millions of dollars)
Performance Share Units	$	1.1	$	—	$	—
Restricted Stock Units and Cash-Settled Awards	21.0		20.9		19.6
Stock Options	1.0		2.7		2.7
Other	0.5		0.6		1.2
Total Compensation Expense, Before Income Tax	$	23.6	$	24.2	$	23.5

Total Compensation Expense, Net of Income Tax	$	15.6	$	15.6	$	15.3

Cash received under all share-based payment arrangements for the years ended December 31, 2013, 2012, and 2011 was $11.4 million, $4.9 million, and $14.8 million, respectively.