Unum 2008 Annual Report Download - page 111
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107
Fair values for policy loans, net of reinsurance ceded, are estimated using discounted cash flow analyses and interest
rates currently being offered to policyholders with similar policies. The carrying amounts of ceded policy loans of $2,555.6 million and
$2,422.0 million as of December 31, 2008 and 2007, respectively, are reported on a gross basis in the consolidated balance sheets and
approximate fair value.
Fair values for derivatives other than DIG Issue B36 derivatives are based on market quotes or pricing
models and represent the net amount of cash we would have received if the contracts had been settled or closed as of the last day of the
year. We do not net any cash collateral received from our counterparties against the fair value of our derivative instruments. Carrying
amounts approximate fair value for other long-term investments.
Policyholders’ funds are comprised primarily of deferred annuity products and supplementary contracts without
life contingencies. The carrying amounts approximate fair value.
Fair values for insurance contracts other than investment contracts are not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into consideration in our overall management of interest rate risk, which minimizes
exposure to changing interest rates through the matching of investment maturities with amounts due under insurance contracts.
Fair values are obtained from independent pricing services or discounted cash flow analyses based
on current incremental borrowing rates for similar types of borrowing arrangements.
Fair values for derivatives other than DIG Issue B36 derivatives are based on market quotes or pricing models and
represent the net amount of cash we would have paid if the contracts had been settled or closed as of the last day of the year. Fair values
for our DIG Issue B36 embedded derivative are estimated using internal pricing models and represent the hypothetical value of the duration
mismatch of assets and liabilities, interest rate risk, and third party credit risk embedded in the modified coinsurance arrangement.
The carrying values of financial instruments such as short-term investments, cash and bank deposits, accounts and premiums receivable,
accrued investment income, and accounts payable approximate the fair values due to the short-term nature of the instruments. As such,
these financial instruments are not included in the following chart.
December 31
2007
Carrying Fair Carrying Fair
(in millions of dollars) Amount Value Amount Value
Fixed Maturity Securities $35,814.7 $35,814.7
Mortgage Loans 1,068.9 1,079.8
Policy Loans 2,617.7 2,650.7
Other Long-term Investments
Derivatives 109.2 109.2
Miscellaneous Long-term Investments 122.9 122.9
Policyholders’ Funds
Deferred Annuity Products $ 855.8 $ 855.8
Supplementary Contracts without Life Contingencies 411.5 411.5
Short-term Debt 175.0 175.3
Long-term Debt 2,515.2 2,673.8
Other Liabilities
Derivatives 200.4 200.4
DIG Issue B36 Embedded Derivative 68.8 68.8