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Notes To Consolidated Financial Statements
118 UNUM 2012 ANNUAL REPORT
Mortgage Loans
Our mortgage loan portfolio is well diversified by both geographic region and property type to reduce risk of concentration. All of our
mortgage loans are collateralized by commercial real estate. When issuing a new loan, our general policy is not to exceed a loan-to-value
ratio, or the ratio of the loan balance to the estimated fair value of the underlying collateral, of 75 percent. We update the loan-to-value
ratios at least every three years for each loan, and properties undergo a general inspection at least every two years. Our general policy for
newly issued loans is to have a debt service coverage ratio greater than 1.25 times on a normalized 25 year amortization period.
We update our debt service coverage ratios annually.
Mortgage loans by property type and geographic region are as follows:
December 31
2012 2011
(in millions of dollars) Carrying Amount Percent of Total Carrying Amount Percent of total
Property Type
Apartment $ 34.0 2.0% $ 28.0 1.8%
Industrial 513.4 30.0 502.0 31.1
Mixed 78.4 4.6 93.5 5.8
Office 713.4 41.6 659.3 40.9
Retail 373.5 21.8 322.4 20.0
Other — — 7.1 0.4
Total $1,712.7 100.0% $1,612.3 100.0%
Region
New England $ 114.3 6.7% $ 147.0 9.1%
Mid-Atlantic 160.0 9.3 174.1 10.8
East North Central 224.7 13.1 212.7 13.2
West North Central 160.8 9.4 151.2 9.4
South Atlantic 440.9 25.7 383.8 23.8
East South Central 79.6 4.7 52.4 3.3
West South Central 159.5 9.3 160.4 9.9
Mountain 90.5 5.3 69.5 4.3
Pacific 282.4 16.5 261.2 16.2
Total $1,712.7 100.0% $1,612.3 100.0%
We evaluate each of our mortgage loans individually for impairment and assign an internal credit quality rating based on a
comprehensive rating system used to evaluate the credit risk of the loan. The factors we use to derive our internal credit ratings may
include the following:
• Loan-to-value ratio
• Debt service coverage ratio based on current operating income
• Property location, including regional economics, trends and demographics
• Age, condition, and construction quality of property
• Current and historical occupancy of property
• Lease terms relative to market
• Tenant size and financial strength
• Borrower’s financial strength
• Borrower’s equity in transaction
• Additional collateral, if any