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, 2014, approximately 17.05 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, 2013	116		$	25.26
Granted	166		34.72
Forfeited	(1	)	34.84
Outstanding at December 31, 2014	281		30.83

During 2014 and 2013, we issued PSUs with a weighted average grant date fair value per share of $34.72 and $25.26, 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 particular peer group during the three-year period. Forfeitable dividend equivalents on PSUs are accrued in the form of additional PSUs.

At December 31, 2014, we had approximately $5.2 million of unrecognized compensation cost related to PSUs that will be recognized over a weighted average period of 1.7 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. 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. The assumptions used to value PSUs granted during the years shown are as follows:



	Year Ended December 31
	2014		2013
Expected Volatility (based on historical daily stock prices)	31	%	35	%
Expected Life (equals the performance period)	3.0 years		3.0 years
Risk Free Interest Rate (based on U.S. Treasury yields at the date of grant)	0.65	%	0.38	%

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, 2013	1,322		$	24.35
Granted	568		33.77
Vested	(782	)	25.24
Forfeited	(27	)	29.07
Outstanding at December 31, 2014	1,081		28.41

During 2014, 2013, and 2012, we issued RSUs with a weighted average grant date fair value per share of $33.77, $24.68, and $22.96, 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 2014, 2013, and 2012 was $19.8 million, $18.3 million, and $19.5 million, respectively. At December 31, 2014, we had $10.9 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, 2013	165		$	24.09
Granted	46		33.85
Vested	(88	)	24.47
Outstanding at December 31, 2014	123		27.31

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 at the date of retirement eligibility 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.



	Year Ended December 31
	2014		2013		2012
	(in millions of dollars, except per unit data)
Weighted Average Grant Date Fair Value per Unit Granted	$	33.85	$	24.22	$	23.23
Total Fair Value of Units Vested	$	2.1	$	2.4	$	1.5
Total Fair Value of Units Paid	$	2.9	$	2.5	$	1.5

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, 2013	1,395		$	21.17
Exercised	(396	)	23.55
Outstanding at December 31, 2014	999		20.23		3.8	$	14.6

Exercisable at December 31, 2014	874		$	19.73	3.5	$	13.2

All outstanding stock options at December 31, 2014 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 at the date of retirement eligibility is recognized over the implicit service period.

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



	Year Ended December 31
	2014		2013		2012
	(in millions of dollars)
Total Intrinsic Value of Options Exercised	$	4.0	$	4.4	$	0.6
Total Fair Value of Options Vested	$	2.4	$	2.4	$	2.3

At December 31, 2014, we had $0.2 million of unrecognized compensation cost related to stock options that will be recognized over a weighted average period of 0.3 years.

The fair value of stock options is estimated on the date of initial grant using the Black-Scholes valuation model. The grant date fair value and the assumptions used to value stock options granted during the years shown are as follows. There were no stock options granted in 2014.



	Year Ended December 31
	2013			2012
Weighted Average Grant Date Fair Value per Option	$	9.77		$	9.78
Expected Volatility (based on historical daily stock prices)	52		%	52		%
Expected Life (based on historical average years to exercise)	6.0 years			6.0 years
Expected Dividend Yield (based on the dividend rate at the date of grant)	2.14		%	1.80		%
Risk Free Interest Rate (based on U.S. Treasury yields at the date of grant)	1.12		%	1.13		%

Expense

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



	Year Ended December 31
	2014		2013		2012
	(in millions of dollars)
Performance Share Units	$	2.5	$	1.1	$	—
Restricted Stock Units and Cash-Settled Awards	19.0		21.0		20.9
Stock Options	0.6		1.0		2.7
Other	0.5		0.5		0.6
Total Compensation Expense, Before Income Tax	$	22.6	$	23.6	$	24.2

Total Compensation Expense, Net of Income Tax	$	14.9	$	15.6	$	15.6

Cash received under all share-based payment arrangements for the years ended December 31, 2014, 2013, and 2012 was $12.3 million, $11.4 million, and $4.9 million, respectively.