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Unum 2011 Annual Report
Unum
2011
129
For the years ended December 31, 2011, 2010, and 2009, there was no material ineffectiveness related to our fair value hedges,
and no component of the derivative instruments’ gain or loss was excluded from the assessment of hedge effectiveness. There were no
instances wherein we discontinued fair value hedge accounting due to a hedged firm commitment no longer qualifying as a fair value hedge.
Derivatives Not Designated as Hedging Instruments
We have an embedded derivative in a modified coinsurance arrangement for which we include in our realized investment gains and
losses a calculation intended to estimate the value of the option of our reinsurance counterparty to cancel the reinsurance contract with us.
However, neither party can unilaterally terminate the reinsurance agreement except in extreme circumstances resulting from regulatory
supervision, delinquency proceedings, or other direct regulatory action. Cash settlements or collateral related to this embedded derivative
are not required at any time during the reinsurance contract or at termination of the reinsurance contract. There are no credit-related
counterparty triggers, and any accumulated embedded derivative gain or loss reduces to zero over time as the reinsured business
winds down.
Locations and Amounts of Derivative Financial Instruments
The following tables summarize the location and fair values of derivative financial instruments, as reported in our consolidated
balance sheets.
December 31, 2011
Asset Derivatives Liability Derivatives
Balance Sheet Balance Sheet
(in millions of dollars) Location Fair Value Location Fair Value
Designated as Hedging Instruments
Interest Rate Swaps Other L-T Investments $134.2 Other Liabilities $ 32.9
Foreign Exchange Contracts Other L-T Investments 3.5 Other Liabilities 140.8
Total $137.7 $173.7
Not Designated as Hedging Instruments
Embedded Derivative in Modified Coinsurance Arrangement Other Liabilities $135.7
December 31, 2010
Asset Derivatives Liability Derivatives
Balance Sheet Balance Sheet
(in millions of dollars) Location Fair Value Location Fair Value
Designated as Hedging Instruments
Interest Rate Swaps Other L-T Investments $98.4 Other Liabilities $ 39.1
Foreign Exchange Contracts Other L-T Investments 0.7 Other Liabilities 160.5
Total $99.1 $199.6
Not Designated as Hedging Instruments
Embedded Derivative in Modified Coinsurance Arrangement Other Liabilities $ 96.3