Stock-Based Compensation

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 fully vest after three years. At December 31, 2016, approximately 14.2 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 fully vest after three years.

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

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, 2015	383		$	35.05
Granted	219		28.41
Vested	(167	)	34.79
Forfeited	(6	)	32.54
Outstanding at December 31, 2016	429		31.80

During 2016, 2015, and 2014, we issued PSUs with a weighted average grant date fair value per share of $28.41, $35.13, and $34.72, 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 40 to 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 are accrued in the form of additional PSUs.

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 performance factor determined after the end of the performance periods. At December 31, 2016, the three-year performance period for the 2014 PSU grant was completed, but the performance factor had not yet been applied. Vested amounts in the preceding table represent vested PSUs for which the 2014 through 2016 performance factor will be applied during the first quarter of 2017, with distribution of the stock thereafter.

At December 31, 2016, we had approximately $7.4 million of unrecognized compensation cost related to PSUs that will be recognized over a weighted average period of 1.5 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
	2016		2015		2014
Expected Volatility (based on our and our peer group historical daily stock prices)	22	%	22	%	31	%
Expected Life (equals the performance period)	3.0 years		3.0 years		3.0 years
Risk Free Interest Rate (based on U.S. Treasury yields at the date of grant)	0.88	%	0.91	%	0.65	%

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, 2015	866		$	32.40
Granted	632		28.80
Vested	(587	)	31.22
Forfeited	(33	)	30.64
Outstanding at December 31, 2016	878		30.66

During 2016, 2015, and 2014, we issued RSUs with a weighted average grant date fair value per share of $28.80, $34.08, and $33.77, 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 at the date of retirement eligibility is recognized over the implicit service period.

The total fair value of shares vested during 2016, 2015, and 2014 was $18.3 million, $21.4 million, and $19.8 million, respectively. At December 31, 2016, we had $13.0 million of unrecognized compensation cost related to RSUs that will be recognized over a weighted average period of 0.9 years.

Cash-Settled Awards

There were no outstanding cash-settled awards at December 31, 2016 and 2015. All cash-settled awards were fully vested at December 31, 2015. Fully vested awards not distributed in 2015 were paid in 2016.

The amount paid per unit awarded was equal to the price per share of Unum Group's common stock at settlement of the award, and as such, we measured 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 were recognized as compensation cost over the service period. Changes in the amount of the liability due to stock price changes after the service period were recognized as compensation cost during the period in which the changes occurred. At December 31, 2016, we had no unrecognized compensation cost related to cash-settled awards.



	Year Ended December 31
	2016		2015		2014
	(in millions of dollars, except per unit data)
Weighted Average Grant Date Fair Value per Unit Granted	$	—	$	33.92	$	33.85
Total Fair Value of Units Vested	$	—	$	4.9	$	2.1
Total Fair Value of Units Paid	$	2.4	$	2.5	$	2.9

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, 2015	759		$	23.02
Exercised	(242	)	21.01
Outstanding at December 31, 2016	517		23.97		2.7	$	10.3

Exercisable at December 31, 2016	517		$	23.97	2.7	$	10.3

All outstanding stock options at December 31, 2016 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, 2016, we had no unrecognized compensation cost related to stock options.

The intrinsic value of options exercised and fair value of options vested are as follows:



	Year Ended December 31
	2016		2015		2014
	(in millions of dollars)
Total Intrinsic Value of Options Exercised	$	3.4	$	5.6	$	4.0
Total Fair Value of Options Vested	$	0.1	$	1.1	$	2.4

There were no stock options granted in the years 2014 through 2016.

Expense

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



	Year Ended December 31
	2016		2015		2014
	(in millions of dollars)
Performance Share Units	$	6.6	$	4.5	$	2.5
Restricted Stock Units and Cash-Settled Awards	14.9		18.6		19.0
Stock Options	—		0.2		0.6
Other	0.4		0.5		0.5
Total Compensation Expense, Before Income Tax	$	21.9	$	23.8	$	22.6

Total Compensation Expense, Net of Income Tax	$	14.4	$	15.7	$	14.9

Cash received under all share-based payment arrangements for the years ended December 31, 2016, 2015, and 2014 was $8.5 million, $6.4 million, and $12.3 million, respectively.