Unum 2011 Annual Report Download - page 148

Notes To Consolidated Financial Statements
Unum 2011 Annual Report
146
Changes in our OPEB plan assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the
years ended December 31, 2011 and 2010 are as follows:
Year Ended December 31, 2011
Beginning of Actual Return Net Benefits and End of
(in millions of dollars) Year on Plan Assets Contributions Expenses Paid Year
Life Insurance Contracts $11.9 $0.2 $14.7 $(15.1) $11.7
Year Ended December 31, 2010
Beginning of Actual Return Net Benefits and End of
(in millions of dollars) Year on Plan Assets Contributions Expenses Paid Year
Life Insurance Contracts $11.9 $0.4 $14.5 $(14.9) $11.9
For the years end December 31, 2011 and 2010, the actual return on plan assets relates solely to investments still held at the reporting
date. There were no transfers into or out of level 3 during 2011 or 2010.
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 OPEB
2011 2010 2011 2010 2011 2010
Benefit Obligations
Discount Rate 5.40% 5.80% 4.90% 5.60% 5.20% 5.60%
Rate of Compensation Increase 4.00% 4.00% 3.85% 4.50% — —
Net Periodic Benefit Cost
Discount Rate 5.80% 6.40% 5.60% 5.70% 5.60% 5.90%
Expected Return on Plan Assets 7.50% 7.50% 6.70% 6.90% 5.75% 5.75%
Rate of Compensation Increase 4.00% 4.00% 4.50% 4.50% — —
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. The market-related value equals the fair value of assets,
determined as of the measurement date. 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.
The expected return assumption for the life insurance reserve for our OPEB plan at December 31, 2011 and 2010 was 5.75 percent,
which was based on full investment in fixed income securities with an average book yield of 6.27 percent and 6.21 percent in 2011 and
2010, respectively.