Unum 2008 Annual Report Download - page 119
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115
• Security cash ows and structures
• Recent issuance/supply
• Sector and issuer level spreads
• Credit ratings/maturity/weighted average life/seasoning/capital structure
• Security optionality
• Corporate actions
• Underlying collateral
• Prepayment speeds/loan performance/delinquencies
• Public covenants
• Comparative bond analysis
• Derivative spreads
• Third-party pricing sources
• Relevant reports issued by analysts and rating agencies
The overall valuation process for determining fair values may include adjustments to valuations obtained from our pricing sources
when they do not represent a valid exit price. These adjustments may be made when, in our judgment, certain features of the financial
instrument, such as its complexity or the market in which the financial instrument is traded (such as counterparty, credit, concentration, or
liquidity), require that an adjustment be made to the value originally obtained from our pricing sources. Additionally, an adjustment to the
price derived from a model typically reflects our judgment of the inputs that other participants in the market for the financial instrument
being measured at fair value would consider in pricing that same financial instrument.
Certain of our investments do not have readily determinable market prices and/or observable inputs or may at times be affected by
the lack of market liquidity. For these securities, we use internally prepared valuations combining matrix pricing with vendor purchased
software programs, including valuations based on estimates of future profitability, to estimate the fair value. Additionally, we may obtain
prices from independent third-party brokers to aid in establishing valuations for certain of these securities. Key assumptions used by us to
determine fair value for these securities include risk-free interest rates, risk premiums, performance of underlying collateral (if any), and
other factors involving significant assumptions which may or may not reflect those of an active market.
The categorization of fair value measurements, by input level, is as follows:
Quoted Prices in
Active Markets for Significant Other Significant
Identical Assets or Observable Unobservable
(in millions of dollars) Liabilities (Level 1) Inputs (Level 2) Inputs (Level 3) Total
Fixed Maturity Securities
Other Long-term Investments
Derivatives other than DIG Issue B36
Miscellaneous Long-term Investments
Other Liabilities
Derivatives other than DIG Issue B36
DIG Issue B36 Embedded Derivative