See "Critical Accounting Estimates" contained in this Item 7 for further discussion of our valuation of investments.
Our exposure to non-current investments, defined as foreclosed real estate and invested assets which are delinquent as to interest and/or principal payments, totaled $63.3 million and $58.6 million on a fair value basis at December 31, 2012 and 2011, respectively.
Unum Limited will be impacted by new capital requirements and risk management standards under Solvency II, the effective adoption date of which is expected to be no earlier than January 1, 2015. Solvency II requirements have not been fully finalized, but the current proposals contain amended requirements on capital adequacy and risk management for insurers. Although the impact of Solvency II cannot be determined at this time, its implementation could result in increased capital, supervisory, and disclosure requirements for our U.K. subsidiaries.
In August 2012, we issued $250.0 million of unsecured senior notes in a public offering. These notes, due 2042, bear interest at a fixed rate of 5.75% and are payable semi-annually. The notes are callable at or above par and rank equally in right of payment with all of our other unsecured and unsubordinated debt. The balance outstanding on these notes was $250.0 million at December 31, 2012.
To help limit the credit exposure of the derivatives, we enter into master netting agreements with our counterparties whereby contracts in a gain position can be offset against contracts in a loss position. We also typically enter into bilateral, cross-collateralization agreements with our counterparties to help limit the credit exposure of the derivatives. These agreements require the counterparty in a loss position to submit acceptable collateral with the other counterparty in the event the net loss position meets or exceeds an agreed upon amount. Our current credit exposure on derivatives, which is limited to the value of those contracts in a net gain position less collateral held, was $8.7 million at December 31, 2012. We post fixed maturity securities or cash as collateral to our counterparties. Fixed maturity securities with a carrying value of $108.6 million and cash of $1.8 million were posted as collateral to our counterparties at December 31, 2012.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Unum Group and subsidiaries' internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 22, 2013 expressed an unqualified opinion thereon.
Policy Loans: Fair values for policy loans, net of reinsurance ceded, are estimated using discounted cash flow analyses and interest rates currently being offered to policyholders with similar policies. Carrying amounts for ceded policy loans, which equal $2,912.7 million and $2,838.3 million as of December 31, 2012 and 2011, respectively, approximate fair value and are reported on a gross basis in our consolidated balance sheets. A change in interest rates for ceded policy loans will not impact our financial position because the benefits and risks are fully ceded to reinsuring counterparties. These financial instruments are assigned a Level 3 within the fair value hierarchy.
Quantitative information regarding the significant unobservable inputs used in Level 3 fair value measurements, all of which are internally derived, is as follows:
We account for all of our securities lending agreements and repurchase agreements as collateralized financings. As of December 31, 2012, the carrying amount of fixed maturity securities loaned to third parties under our securities lending program was $452.8 million, for which we received collateral in the form of cash and securities of $455.8 million and $14.5 million, respectively. As of December 31, 2011, the carrying amount of fixed maturity securities loaned to third parties under our securities lending program was $319.1 million, for which we received collateral in the form of cash and securities of $312.3 million and $16.7 million, respectively. We had no outstanding repurchase agreements at December 31, 2012 and 2011.
The following table summarizes the location of and gains (losses) on our embedded derivative in a modified coinsurance arrangement, as reported in our consolidated statements of income.
We file federal and state income tax returns in the United States and in foreign jurisdictions. We are under continuous examination by the IRS with regard to our U.S. federal income tax returns. The IRS audit of our 2009 and 2010 years commenced in 2012. During 2012, we also finalized all issues with the IRS related to our 2007 and 2008 years and recognized a reduction of our federal income taxes of $11.0 million. During 2011, the Congressional Joint Committee on Taxation approved our final settlement with the IRS for tax years 1996 to 2004. The settlement resulted from our administrative appeal of audit adjustments relating primarily to insurance tax reserves and losses incurred by foreign subsidiaries. As a result of the settlement, we recognized in our 2011 operating results a reduction in our federal income taxes of $41.3 million as well as interest income of $17.5 million before tax and $11.4 million after tax. We received a cash refund of taxes and interest under this settlement of $60.4 million in 2012.
As of December 31, 2012, we had no net operating loss carryforward for U.S. income taxes. We record a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. As of December 31, 2012, we had no valuation allowance. In 2011, as part of an IRS settlement, we released a $4.1 million valuation allowance related to basis differences in foreign subsidiaries and net operating loss carryforwards in foreign jurisdictions for which we previously believed we would not realize a tax benefit.
The aggregate contractual principal maturities are $296.9 million in 2015, $350.0 million in 2016, and $2,095.1 million in 2018 and thereafter.
We discontinued offering retiree life insurance to future retirees effective December 31, 2012 but continue to provide this benefit to employees who retired prior to that date. The curtailment gain of $4.2 million and the prior service credit of $5.0 million, both of which are included in the table above, reflect this OPEB plan amendment.
In July 2012, February 2011, and May 2010, our board of directors authorized the repurchase of up to $750.0 million, $1.0 billion, and $500.0 million, respectively, of Unum Group's common stock. At December 31, 2012, no amounts were remaining for the purchase of shares under either the February 2011 or May 2010 repurchase program. The July 2012 share repurchase program has an expiration date of January 2014, and the dollar value of shares remaining under this program was $550.0 million at December 31, 2012.
In computing earnings per share assuming dilution, only potential common shares that are dilutive (those that reduce earnings per share) are included. Potential common shares not included in the computation of dilutive earnings per share because their impact would be antidilutive, based on current market prices, approximated 2.5 million, 2.1 million, and 3.5 million shares of common stock for the years ended December 31, 2012, 2011, and 2010, respectively.
Expected dividend yield of 1.80 percent, 1.41 percent, and 1.59 percent, respectively, based on the dividend rate at the date of grant.