Unum 2006 Annual Report Download - page 132

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Unum Group and Subsidiaries
114
Note 2 - Discontinued Operations - Continued
During 2003, we entered into an agreement to sell our Canadian branch. In the first quarter of 2004, we recognized
a loss of $0.6 million before tax and $0.4 million after tax to write down the value of bonds in the Canadian branch
investment portfolio to market value. The transaction closed April 30, 2004, and in the second quarter of 2004, we
recognized a loss of $113.0 million before tax and $70.9 million after tax on the sale of the branch.
Selected results for the Canadian branch for the period January 1, 2004 through April 30, 2004 are as follows (in
millions of dollars, except share data):
$ 124.5
$ 146.2
Loss on Sale and Write-downs $ 16.2
(113.6)
$ (97.4)
$ 10.5
(71.3)
$ (60.8)
Basic $ (0.21)
Assuming Dilution $ (0.21)
Loss on Sale and Write-downs, Net of Income Tax
Loss
Loss Per Common Share
Loss Before Income Tax
Income Excluding Loss on Sale and Write-downs
Loss on Sale and Write-downs
Premium Income
Total Revenue
Income Before Income Tax, Excluding
Note 3 - Fair Values of Financial Instruments
We use the following methods and assumptions in estimating the fair values of our financial instruments:
Fixed Maturity Securities: Fair values are based on quoted market prices, where available. For fixed maturity
securities not actively traded, fair values are estimated using values obtained from independent pricing services. For
private placements, fair values are estimated using internally prepared valuations combining matrix pricing with
vendor purchased software programs, including valuations based on estimates of future profitability. Additionally,
we obtain prices from independent third-party brokers to establish valuations for certain of these securities. See
Note 4 for the amortized cost and fair values of securities by security type and by maturity date.
Derivatives: Fair values are based on market quotes or pricing models and represent the net amount of cash we
would have received or paid if the contracts had been settled or closed as of the last day of the year.
DIG Issue B36 Embedded Derivatives: Fair values are estimated using internal pricing models and represent the
hypothetical value of the duration mismatch of assets and liabilities, interest rate risk, and third party credit risk
embedded in certain reinsurance agreements we have entered.
Mortgage Loans: Fair values are estimated using discounted cash flow analyses and interest rates currently being
offered for similar mortgage loans to borrowers with similar credit ratings and maturities. Mortgage loans with
similar characteristics are aggregated for purposes of the calculations.
Policy Loans and Other Long-term Investments: Carrying amounts approximate fair value.