Unum 2006 Annual Report Download - page 145
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Unum Group and Subsidiaries
127
Note 7 - Liability for Unpaid Claims and Claim Adjustment Expenses
Changes in the liability for unpaid claims and claim adjustment expenses are as follows:
2006 2005 2004
$ 23,047.7 $ 22,285.1 $ 20,397.5
Less Reinsurance Recoverable 2,267.3 3,096.2 2,654.5
20,780.4 19,188.9 17,743.0
- - 267.0
- 934.8 -
Current Year 5,204.4 5,188.3 5,471.5
Prior Years
Interest 1,149.5 1,066.9 1,005.0
Incurred 624.9 442.9 335.6
Foreign Currency 292.2 (224.2) 128.7
7,271.0 6,473.9 6,940.8
Paid Related to
Current Year (1,597.5) (1,692.1) (1,726.3)
Prior Years (4,386.8) (4,125.1) (4,035.6)
Total Paid (5,984.3) (5,817.2) (5,761.9)
Net Balance at December 31 22,067.1 20,780.4 19,188.9
Plus Reinsurance Recoverable 2,257.3 2,267.3 3,096.2
Balance at December 31 24,324.4$ 23,047.7$ 22,285.1$
Total Incurred
(in millions of dollars)
Balance at January 1
Net Balance at January 1
Acquisition of Business - Note 6
Incurred Related to
Recapture of Business - Note 13
The majority of the net balances are related to disability claims with long-tail payouts on which interest earned on
assets backing liabilities is an integral part of pricing and reserving. Interest accrued on prior year reserves has been
calculated on the opening reserve balance less one-half year’s cash payments at our average reserve discount rate
used during 2006, 2005, and 2004.
We entered into settlement agreements with various state insurance regulators in the fourth quarter of 2004 and with
the California Department of Insurance (DOI) in the third quarter of 2005. In connection with these settlement
agreements, we increased our income protection claim reserves $84.5 million in 2004 and $52.7 million in 2005.
During 2006, we further increased our income protection claim reserves $396.4 million to reflect our revised
estimate for costs associated with the claim reassessment process. “Incurred Related to Prior Years – Incurred”
includes $396.4 million, $52.7 million, and $84.5 million in 2006, 2005, and 2004, respectively, for these reserve
charges. “Paid Related to Prior Years” includes $154.9 million and $16.1 million in 2006 and 2005, respectively,
for these reserve charges. There were no payments related to prior years in 2004 for these reserve charges. See
Note 15 for further discussion of the settlement agreements and the claim reassessment process.