Unum 2006 Annual Report Download - page 72

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Our net realized investment gain from sales and write-downs was $7.5 million in 2006, compared to a net realized
gain of $1.2 million in 2005 and a net realized loss of $59.4 million in 2004. Changes in the fair value of the
embedded derivatives in certain reinsurance contracts resulted in a net realized loss of $5.3 million in 2006 and $7.9
million in 2005 compared to a net realized gain of $88.6 million in 2004. We actively manage our credit risk and
expect our gains and losses for 2007 to be relatively consistent with the levels of 2006 and 2005. See “Investments”
contained herein in Item 7 for further discussion.
The reported ratio of benefits and change in reserves for future benefits to premium income was 95.3 percent for
2006 compared to 90.6 percent for 2005 and 92.5 percent for 2004. As noted above, our reported benefits and
change in reserves for future benefits include various charges pertaining to the multistate market conduct
examination settlement agreements, the settlement agreement with the California DOI, and/or the restructuring of
the individual income protection – closed block business. Excluding these charges, the ratio of benefits and change
in reserves for future benefits to premium income was 90.3 percent for 2006 compared to 90.0 percent for 2005 and
2004. See “Segment Operating Results” as follows for discussions of line of business risk results and claims
management performance in each of our segments.
Cost related to early retirement of debt includes costs associated with our $732.0 million debt repurchases during
2006. See “Debt” contained herein in Item 7 for additional information.
Excluding amounts related to claim reassessment and broker compensation settlements, our expense ratio improved
in 2006 relative to 2005 and 2004. We intend to aggressively manage our expenses while continuing to increase the
effectiveness of our operating processes.
As previously discussed, income tax for 2006 includes tax benefits of $91.9 million as a result of the reversal of tax
liabilities related primarily to group relief benefits recognized from the use of net operating losses in a foreign
jurisdiction in which our businesses operate. In addition, we recorded a net tax benefit of $1.3 million related to
interest and tax refunds on prior year tax items in excess of what was previously provided. Income tax for 2005
includes tax benefits of $42.8 million related to the reduction of income tax liabilities in the first and third quarters
of 2005 and a net tax benefit of $3.3 million recorded in connection with the repatriation of unremitted foreign
earnings from our U.K. subsidiaries under the Homeland Investment Act of 2004.