Unum 2007 Annual Report Download - page 70

Management’s Discussion and Analysis of
Financial Condition and Results of Operations
68 Unum 2007 Annual Report
Realized investment gains and losses, before tax, are as follows:
Year Ended December 31
(in millions of dollars) 2007 2006 2005
Gross Realized Investment Gain from Sales $ 105.8 $ 82.0 $ 110.8
Gross Realized Investment Loss
Write-downs 76.2 17.2 19.4
Sales 37.5 57.3 90.2
Total 113.7 74.5 109.6
Change in Fair Value of DIG Issue B36 Derivatives (57.3) (5.3) (7.9)
Net Realized Investment Gain (Loss) $ (65.2) $ 2.2 $ (6.7)
One of the factors we evaluate in determining when a decline in fair value below amortized cost of a fixed maturity security is other
than temporary is our ability and intent to retain the security for a sufficient period of time for it to recover. During the third quarter of
2007, we recognized losses of $18.4 million related to the decline in fair value below amortized cost for certain securities for which it was
determined during the third quarter of 2007 that we no longer had the intent to hold to recovery or maturity due to anticipated changes
in our capital requirements, as previously discussed.
Also during 2007, we recorded an adjustment to the book values and related unrealized loss of two securitized asset trusts acquired
in 2001 to reflect the values that would have been present had we recorded the investment income as dividends rather than interest
accretion. The book value adjustment of $20.2 million was recognized as a realized investment loss in the second quarter of 2007. Because
the investments no longer satisfied our investment objectives, we subsequently sold the trusts in June of 2007 and recognized a realized
investment gain of $24.9 million on the sale.
Realized Investment Losses $10.0 Million or Greater from Other than Temporary Impairments
During 2007, we recognized an other than temporary impairment loss of $15.0 million on bonds issued by a large media company. The
company was the subject of a leveraged buyout that placed a large amount of debt on the balance sheet during 2007. Because of our
outlook for the future business prospects of this issuer, the length of time these securities had been in an unrealized loss position, and
a change in our intent to retain the security for a sufficient period of time for it to recover, we determined that an other than temporary
impairment had occurred. These securities were investment grade at the time of purchase but were downgraded to below-investment-
grade in the second quarter of 2006. At the time of the impairment, these securities had been in an unrealized loss position for a period
of greater than two years. The circumstances of this impaired investment have no impact on other investments.
We had no individual realized investment losses $10.0 million or greater from other than temporary impairments during 2006.
During 2005, we recognized an other than temporary impairment loss of $10.3 million on certificates issued by a trust backed by
leases to a U.S. based airline. Although the airline had filed for bankruptcy in the third quarter of 2004, the bonds were secured by aircraft
owned by the trust and had remained current on all interest payments to date. However, due to the lack of clarity regarding the value of
aircraft collateralizing these securities and the length of time these securities had been in an unrealized loss position, we determined that
an other than temporary impairment had occurred. These securities were investment-grade at the time of purchase but were downgraded to
below-investment-grade in the first quarter of 2000. At the time of the impairment, these securities had been continuously in an unrealized
loss position for a period of greater than three years. The circumstances of this impaired investment have no impact on other investments.