Unum 2008 Annual Report Download - page 134

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The weighted average asset allocations, by asset category, for our funded pension plans are as follows:
U.S. Plans Non U.S. Plans
 2007  2007
Target Actual Target Actual Target Actual Target Actual
Equity Securities   55–65% 58%   60% 56%
Fixed Income Securities   27–33 31   40 38
Other   8 –12 11   — 6
  100%   100%
The investment portfolio for our U.S. pension plans contains a diversified blend of domestic and international large cap, mid cap, and
small cap equity securities, investment-grade and below-investment-grade fixed income securities, private equity funds of funds, and hedge
funds of funds. Assets for our U.K. pension plan are invested in pooled funds, with approximately 57 percent in diversified growth assets
including global equities, hedge funds, commodities, below-investment-grade fixed income securities, and currencies. The remainder of the
assets for our U.K. plan is predominantly invested in U.K. corporate bonds and index linked U.K. government bonds. Assets for life insurance
benefits payable to certain former retirees covered under the postretirement benefits plan are invested primarily within life insurance
contracts issued by one of our insurance subsidiaries. The terms of these contracts are consistent in all material respects with those the
subsidiary offers to unaffiliated parties that are similarly situated. We believe our investment portfolios are well diversified by asset class
and sector, with no potential risk concentrations in any one category.
Measurement Assumptions
We use a December 31 measurement date for each of our plans. The weighted average assumptions used in the measurement of our
benefit obligations as of December 31 and our net periodic benefit costs for the years ended December 31 are as follows:
Pension Benefits
U.S. Plans Non U.S. Plans Postretirement Benefits
(in millions of dollars)  2007  2007  2007

Discount Rate  6.50%  5.80%  6.30%
Rate of Compensation Increase  4.70%  5.30%  —

Discount Rate  5.90–6.10%  5.10%  5.90%
Expected Return on Plan Assets  8.00%  6.80%  5.75%
Rate of Compensation Increase  4.70%  5.00%  —
We set the discount rate assumption annually for each of our retirement-related benefit plans at the measurement date to reflect the
yield of a portfolio of high quality fixed income debt instruments matched against the projected cash flows for future benefits.
Our long-term rate of return on plan assets assumption is an estimate, based on statistical analysis, of the average annual assumed
return that will be produced from the plan assets until current benefits are paid. Our expectations for the future investment returns of the
asset categories were based on a combination of historical market performance and evaluations of investment forecasts obtained from
external consultants and economists. The methodology underlying the return assumption included the various elements of the expected
return for each asset class such as long-term rates of return, volatility of returns, and the correlation of returns between various asset classes.
The expected return for the total portfolio was calculated based on the plan’s strategic asset allocation. Investment risk is measured and
monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies, and quarterly investment portfolio
reviews. Risk tolerance is established through consideration of plan liabilities, plan funded status, and corporate financial condition.