Unum 2008 Annual Report Download - page 104

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 The accompanying consolidated financial statements of Unum Group and its subsidiaries (the Company) have
been prepared in accordance with U.S. generally accepted accounting principles (GAAP). Such accounting principles differ from statutory
accounting principles (see Note 15). Intercompany transactions have been eliminated.
In March 2007, we closed the sale of our wholly-owned subsidiary GENEX Services, Inc. (GENEX). The financial results of GENEX are
reported as discontinued operations in the consolidated financial statements. Except where noted, the information presented in the notes to
the consolidated financial statements excludes GENEX. See Note 2 for further discussion.
Freestanding derivatives with positive fair values are reported on our consolidated balance sheets at fair value as assets within other
long-term investments, and those with negative fair values are carried as liabilities within other liabilities. Embedded derivatives, excluding
those associated with modified coinsurance arrangements, are reported on the consolidated balance sheets at fair value with the host
contract. The embedded derivatives associated with modified coinsurance contracts are reported at fair value as either other long-term
investments or other liabilities in the consolidated balance sheets. We previously reported our freestanding derivatives and our embedded
derivatives related to reinsurance contracts on a net basis within fixed maturity securities. We have increased fixed maturity securities,
other long-term investments, and other liabilities $160.0 million, $109.2 million, and $269.2 million, respectively, at December 31, 2007 to
conform to the current year presentation.
We are the largest provider of group and individual disability products in the United States and the United
Kingdom. We also provide a complementary portfolio of other insurance products, including long-term care insurance, life insurance,
employer- and employee-paid group benefits, and other related services. We market our products primarily to employers interested in
providing benefits to their employees.
We have three major business segments: Unum US, Unum UK, and Colonial Life. Our other segments are the Individual Disability —
Closed Block segment and the Corporate and Other segment. See Note 13 for further discussion of our operating segments.
 The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions
that affect amounts reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the
future as more information becomes known, which could impact the amounts reported and disclosed herein.
Many factors influence the assumptions upon which reserves for policy and contract benefits are based, including historical trends
in our experience and expected deviations from historical experience. Considerable judgment is required to interpret actual historical
experience and to assess the future factors that are likely to influence the ultimate cost of settling existing claims. Given that insurance
products contain inherent risks and uncertainties, the ultimate liability may be more or less than such estimates indicate.
 Investments are reported in our consolidated balance sheets as follows:
Fixed Maturity Securities, which include bonds and redeemable preferred stocks classified as available-for-sale, are reported at fair value.
Interest income is recorded as part of net investment income when earned, using an effective yield method giving effect to amortization of
premium and accretion of discount. Payment terms specified for fixed maturity securities may include a prepayment penalty for unscheduled
payoff of the investment. Prepayment penalties are recognized as investment income when received.
Included within fixed maturity securities are mortgage-backed and asset-backed securities. We recognize investment income on these
securities using a constant effective yield based on projected prepayments of the underlying loans and the estimated economic life of the
securities. Actual prepayment experience is reviewed periodically, and effective yields are recalculated when differences arise between
prepayments originally projected and the actual prepayments received and currently projected. The effective yield is recalculated on a
retrospective basis, and the adjustment is reflected in net investment income.
Fixed maturity securities not bought and held for the purpose of selling in the near term but for which we do not have the positive intent
and ability to hold to maturity are classified as available-for-sale. Changes in the fair value of available-for-sale fixed maturity securities are
reported as a component of other comprehensive income. These amounts are net of income tax and valuation adjustments to deferred
acquisition costs and reserves for future policy and contract benefits which would have been recorded had the related unrealized gain or loss
on these securities been realized.