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UNUM • 2014 ANNUAL REPORT 99
Note 2. Fair Values of Financial Instruments
Presented as follows are the carrying amounts and fair values of financial instruments. The carrying values of financial instruments
such as short-term investments, cash and bank deposits, accounts and premiums receivable, accrued investment income, and securities
lending agreements approximate fair value due to the short-term nature of the instruments. As such, these financial instruments are not
included in the following chart.
December 31
2014 2013
Carrying Fair Carrying Fair
(in millions of dollars) Amount Value Amount Value
Assets
Fixed Maturity Securities $45,064.9 $45,064.9 $42,344.4 $42,344.4
Mortgage Loans 1,856.6 2,024.2 1,815.1 1,980.2
Policy Loans 3,306.6 3,407.6 3,276.0 3,339.6
Other Long-term Investments
Derivatives 28.0 28.0 10.8 10.8
Equity Securities 12.5 12.5 16.4 16.4
Miscellaneous Long-term Investments 485.5 485.5 475.2 475.2
Liabilities
Policyholders’ Funds
Deferred Annuity Products $ 621.4 $ 621.4 $ 631.5 $ 631.5
Supplementary Contracts without Life Contingencies 600.4 600.4 563.1 563.1
Short-term Debt 151.9 158.9 — —
Long-term Debt 2,628.7 2,912.6 2,612.0 2,824.4
Other Liabilities
Derivatives 92.9 92.9 135.6 135.6
Embedded Derivative in Modified
Coinsurance Arrangement 49.9 49.9 53.2 53.2
Unfunded Commitments to Investment Partnerships 12.8 12.8 27.2 27.2
The methods and assumptions used to estimate fair values of financial instruments are discussed as follows.
Fair Value Measurements for Financial Instruments Not Carried at Fair Value
Mortgage Loans: Fair values are estimated using discounted cash flow analyses and interest rates currently being offered for similar
loans to borrowers with similar credit ratings and maturities. Loans with similar characteristics are aggregated for purposes of the calculations.
These financial instruments are assigned a Level 2 within the fair value hierarchy.
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 $3,068.4 million
and $3,043.7 million as of December 31, 2014 and 2013, 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.