Unum 2006 Annual Report Download - page 124

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unum Group and Subsidiaries
106
Note 1 - Significant Accounting Policies
Basis of Presentation: The accompanying consolidated financial statements of Unum Group and its subsidiaries
(the Company) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP).
Such accounting principles differ from statutory accounting principles (see Note 16). Material intercompany
transactions have been eliminated.
In January 2007, we entered into a definitive agreement for the sale of our wholly-owned subsidiary, GENEX
Services, Inc. (GENEX). During 2004, we completed the sale of our Canadian branch. The financial results of
GENEX and the Canadian branch are reported as discontinued operations in the consolidated financial statements
for each year presented, as applicable. Except where noted, the information presented in the notes to the
consolidated financial statements excludes our discontinued operations. See Note 2 for further discussion.
Description of Business: We are the largest provider of group and individual income protection products in the
United States and the United Kingdom. We also provide a complementary portfolio of other insurance products,
including long-term care insurance, life insurance, employer- and employee-paid group benefits, and other related
services. We market our products primarily to employers interested in providing benefits to their employees.
We have three major business segments: Unum US, Unum UK, and Colonial. Our other segments are the Individual
Income Protection – Closed Block segment, the Other segment, and the Corporate segment. Unum US and Unum
UK were previously referred to as U.S. Brokerage and Unum Limited. The names were changed in conjunction
with our corporate branding initiative. See Note 14 for further discussion of our operating segments.
Use of Estimates: The preparation of financial statements in conformity with GAAP requires us to make estimates
and assumptions that affect amounts reported in the financial statements and accompanying notes. Such estimates
and assumptions could change in the future as more information becomes known, which could impact the amounts
reported and disclosed herein.
Many factors influence the assumptions upon which reserves for policy and contract benefits are based, including
historical trends in our experience and expected deviations from historical experience. Considerable judgment is
required to interpret actual historical experience and to assess the future factors that are likely to influence the
ultimate cost of settling existing claims. Given that insurance products contain inherent risks and uncertainties, the
ultimate liability may be more or less than such estimates indicate.
Investments: Investments are reported in our consolidated balance sheets as follows:
Available-for-Sale Fixed Maturity Securities are reported at fair value.
Mortgage Loans are generally carried at amortized cost less an allowance for probable losses.
Real Estate classified as investment real estate is carried at cost less accumulated depreciation. Real estate acquired
through foreclosure is valued at fair value at the date of foreclosure. If investment real estate is determined to be
other than temporarily impaired, the carrying amount of the asset is reduced to fair value. Occasionally, investment
real estate is reclassified to real estate held for sale when it no longer meets our investment criteria. Real estate held
for sale is valued net of a valuation allowance that reduces the carrying value to the lower of cost less accumulated
depreciation or fair value less estimated cost to sell. Accumulated depreciation on real estate was $9.5 million and
$9.3 million as of December 31, 2006 and 2005, respectively.