Unum 2008 Annual Report Download - page 108

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Where applicable, gains or losses on reinsurance transactions are deferred and amortized
into earnings based upon expected future premium income for traditional insurance policies and estimated future gross profits for interest-
sensitive insurance policies. The deferred gain on reinsurance included in other liabilities in our consolidated balance sheets at December 31,
2008 and 2007 was $150.0 million and $177.8 million, respectively.
 The separate account amounts shown in our consolidated balance sheets represent contributions by contract
holders to variable-benefits and fixed-benefits pension plans. The contract purchase payments and the assets of the separate accounts are
segregated from other funds for both investment and administrative purposes. Contract purchase payments received under variable
annuity contracts are subject to deductions for sales and administrative fees. Also, the sponsoring companies of the separate accounts
receive management fees based on the net asset values of the separate accounts.
Treasury stock is reflected as a reduction of stockholders’ equity at cost.
Traditional life and accident and health products are long duration contracts, and premium income is recognized
as revenue when due from policyholders. If the contracts are experience rated, the estimated ultimate premium is recognized as revenue
over the period of the contract. The estimated ultimate premium, which is revised to reflect current experience, is based on estimated claim
costs, expenses, and profit margins.
For interest-sensitive products, the amounts collected from policyholders are considered deposits, and only the deductions during the
period for cost of insurance, policy administration, and surrenders are included in revenue. Policyholders’ funds represent funds deposited
by contract holders and are not included in revenue.
Premium tax expense is included in other operating expenses in the consolidated statements of income. For the
years ended December 31, 2008, 2007, and 2006, premium tax expense was $133.2 million, $130.8 million, and $140.5 million, respectively.
Revenues and expenses of our foreign operations are translated at average exchange rates. Assets
and liabilities are translated at the rate of exchange on the balance sheet date. The translation gain or loss is generally reported in
accumulated other comprehensive income, net of deferred tax.
 Participating policies issued by one of our subsidiaries prior to its 1986 conversion
from a mutual to a stock life insurance company will remain participating as long as the policies remain in force. A Participation Fund Account
(PFA) was established for the benefit of all such individual participating life and annuity policies and contracts. The assets of the PFA provide
for the benefit, dividend, and certain expense obligations of the participating individual life insurance policies and annuity contracts. The
PFA was $391.2 million and $362.0 million at December 31, 2008 and 2007, respectively, and represented approximately 0.8 and 0.7 percent
of consolidated assets and 0.8 percent of consolidated liabilities at December 31, 2008 and 2007, respectively.
Effective January 1, 2008, we adopted the provisions of Statement of Financial Accounting
Standards No. 157 (SFAS 157), Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value, and
expands disclosures about fair value measurements. The adoption of SFAS 157 did not have a material effect on our financial position or
results of operations.
Effective December 31, 2008, we adopted the provisions of Financial Accounting Standards Board (FASB) Staff Position No. EITF 99-20-1,
(FSP EITF 99-20-1), Amendments to the Impairment Guidance of EITF Issue No. 99-20. This FSP amends the impairment guidance in Emerging
Issues Task Force (EITF) Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial
Interests That Continue to Be Held by a Transferor in Securitized Financial Assets, to achieve more consistent determination of whether an
other-than-temporary impairment has occurred. The FSP also retains and emphasizes the objective of an other-than-temporary impairment
assessment and the related disclosure requirements in Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities, and other related guidance. The adoption of FSP EITF 99-20-1 did not have a material effect on
our financial position or results of operations.