Unum 2014 Annual Report Download - page 34

32 UNUM • 2014 ANNUAL REPORT
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
The following are our current assumptions regarding the length of our amortization periods, the approximate DAC balance that remains
at the end of years 3, 10, and 15 as a percentage of the cost initially deferred, and our DAC balances as of December 31, 2014 and 2013.
Balance Remaining as a % DAC Balances
Amortization of Initial Deferral at December 31
(in millions of dollars) Period Year 3 Year 10 Year 15 2014 2012
Unum US
Group Disability 6 30% 0% 0% $ 69.8 $ 55.9
Group Life and Accidental
Death & Dismemberment 6 31% 0% 0% 59.8 49.9
Supplemental and Voluntary:
Individual Disability 20 71% 44% 21% 423.6 433.4
Voluntary Benefits 20 58% 23% 8% 543.3 512.3
Unum UK
Group Long-term Disability 3 0% 0% 0% 5.1 5.1
Group Life 3 0% 0% 0% 1.3 1.2
Supplemental 20 57% 17% 7% 24.0 28.0
Colonial Life
Accident, Sickness, and Disability 15 46% 12% 2% 378.2 350.6
Life 25 70% 33% 16% 215.2 218.7
Cancer and Critical Illness 19 59% 26% 10% 181.0 174.1
Totals $1,901.3 $1,829.2
Amortization of DAC is adjusted to reflect actual experience for assumptions which deviate compared to the anticipated experience.
Any deviations from projections may result in a change to the rate of amortization in the period such events occur. As an example, for
our non-interest sensitive products, we may experience accelerated amortization if policies terminate earlier than projected, or we may
experience a slower rate of amortization if policies persist longer than projected. Our actual experience has not varied materially from
our assumptions during the last three years.
See Note 1 of the “Notes to Consolidated Financial Statements” contained herein for further discussion of our DAC accounting policy.
Fair Value of Investments
All of our fixed maturity securities are classified as available-for-sale and are reported at fair value. Our derivative financial instruments,
including certain derivative instruments embedded in other contracts, are reported as either assets or liabilities and measured at fair value.
We hold an immaterial amount of equity securities, which are also reported at fair value.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date and therefore represents an exit price, not an entry price. The exit price objective applies regardless
of our intent and/or ability to sell the asset or transfer the liability at the measurement date. We generally use valuation techniques
consistent with the market approach, and to a lesser extent, the income approach. The market approach uses prices and other relevant
information from market transactions involving identical or comparable assets or liabilities and the income approach converts future
amounts, such as cash flows or earnings, to a single present amount, or a discounted amount. We believe the market approach valuation
technique provides more observable data than the income approach, considering the types of investments we hold.