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Notes to Consolidated Financial Statements
108 Unum 2007 Annual Report
During the years ended December 31, 2007, 2006, and 2005, we recognized net gains of $26.0 million, $183.6 million, and $120.7 million,
respectively, on the termination of cash flow hedges and reported $26.1 million, $183.6 million, and $121.0 million, respectively, in other
comprehensive income (loss). During the years ended December 31, 2007 and 2005 we reported a net loss of $0.1 million and $0.3 million,
respectively, as a component of realized investment gains and losses. We amortized $20.2 million, $30.0 million, and $21.8 million of net
deferred gains into net investment income during 2007, 2006, and 2005, respectively. The estimated amount of net deferred gains to be
amortized into operating earnings during 2008 is $20.4 million.
The notional amount of derivatives outstanding under the hedge programs was $2,985.7 million at December 31, 2007. For the year
ended December 31, 2007, there was no material ineffectiveness related to our derivative holdings, and there was no component of the
derivative instruments’ gain or loss excluded from the assessment of hedge effectiveness. During 2007, we reclassified $0.1 million of net
losses into earnings as a result of the discontinuance of cash flow hedges due to the improbability of the original forecasted transactions
occurring as anticipated.
Note 6. Acquisitions and Dispositions
Acquisitions
During 2005 GENEX acquired Independent Review Services, Inc., a provider of medical diagnostic networks and independent medical
examinations, at a price of $3.5 million. Independent Review Services, Inc. was a wholly-owned subsidiary of GENEX and therefore
included with the disposition of GENEX.
A reconciliation of value of business acquired is as follows:
Year Ended December 31
(in millions of dollars) 2007 2006 2005
Balance at January 1 $ 78.2 $ 78.5 $ 101.5
Interest Accrued 4.4 4.6 5.2
Amortization (12.3) (12.6) (20.3)
Foreign Currency 0.9 7.7 (7.9)
Balance at December 31 $ 71.2 $ 78.2 $ 78.5
The estimated net amortization of value of business acquired for each of the next five years is $8.5 million in 2008, $9.5 million in
2009, $9.8 million in each of the years 2010, 2011, and 2012. Amortization of value of business acquired is included in other expenses in
the consolidated statements of income.
Dispositions
In March 2007, we completed the sale of GENEX. See Note 2 for further discussion.
During 2005, we completed the sale of Unum UK’s Netherlands branch. The gain on the sale was $5.7 million before tax and
$4.0 million after tax.