Unum 2007 Annual Report Download - page 123

Unum 2007 Annual Report 121
The expected return assumption for the life insurance reserve for the postretirement benefits plan was 5.75 percent, which was based
on full investment in fixed income securities with an average book yield of 6.30 percent and 6.39 percent for 2007 and 2006, respectively.
Our rate of compensation increase assumption is generally based on periodic studies of compensation trends.
For measurement purposes at December 31, 2007 and 2006, the annual rate of increase in the per capita cost of covered postretirement
health care benefits assumed for the next calendar year was 9.00 percent for benefits payable to retirees prior to Medicare eligibility and
9.80 percent for benefits payable to Medicare eligible retirees. The rate was assumed to change gradually to 5.00 percent by the end of
the fifth year and remain at that level thereafter. During 2005, we confirmed that all of our retiree medical plans qualify for a government
subsidy under the Medicare Prescription Drug, Improvement and Modernization Act of 2003 and chose to defer coordination with the new
prescription drug benefit until 2007. This change is reflected in our net periodic benefit cost.
The medical and dental premium used to determine the per retiree employer subsidy are capped. If the cap is not reached by the year
2015, the caps are then set equal to the year 2015 premium. Certain of the current retirees and all future retirees are subject to the cap.
Net Periodic Benefit Cost
The following table provides the components of the net periodic benefit cost for the plans described above for the years ended December 31.
Pension Benefits
U.S. Plans Non U.S. Plans Postretirement Benefits
(in millions of dollars) 2007 2006 2005 2007 2006 2005 2007 2006 2005
Service Cost $ 31.9 $ 35.9 $ 35.2 $ 9.2 $ 8.4 $ 8.3 $ 3.6 $ 4.1 $ 4.2
Interest Cost 54.2 48.4 43.7 9.7 8.0 7.5 11.0 10.1 10.4
Expected Return on Plan Assets (58.5) (44.0) (40.5) (12.2) (10.6) (6.6) (0.7) (0.7) (0.7)
Amortization of:
Net Actuarial Loss 19.2 22.4 19.2 3.0 2.3 2.6 — — —
Prior Service Credit (3.1) (3.1) (2.8) — — — (3.8) (3.8) (3.8)
Transition Asset — — — (0.2) (0.1) (0.1) — — —
Settlement Cost — — — 0.3 — — — — —
Curtailment 0.2 — — — 0.2 — — — —
Total $ 43.9 $ 59.6 $ 54.8 $ 9.8 $ 8.2 $11.7 $10.1 $ 9.7 $ 10.1
A one percent increase or decrease in the assumed health care cost trend rate at December 31, 2007 would have increased (decreased)
the service cost and interest cost by $0.6 million and $(0.5) million, respectively, and the postretirement benefit obligation by $6.9 million
and $(6.1) million, respectively.
The unrecognized net actuarial loss, prior service credit, and transition asset included in accumulated other comprehensive income
and expected to be amortized and included in net periodic pension cost during 2008 is $14.5 million before tax and $9.6 million after tax.
The prior service credit expected to be amortized and included as a reduction to net periodic cost for postretirement plans during 2008 is
$3.4 million before tax and $2.2 million after tax.