Unum 2013 Annual Report Download - page 119

UNUM 2013 ANNUAL REPORT / 117
In determining when a decline in fair value below amortized cost of a fixed maturity security is other than temporary, we evaluate the
following factors:
• Whether we expect to recover the entire amortized cost basis of the security
• Whether we intend to sell the security or will be required to sell the security before the recovery of its amortized cost basis
• Whether the security is current as to principal and interest payments
• The significance of the decline in value
• The time period during which there has been a significant decline in value
• Current and future business prospects and trends of earnings
• The valuation of the security’s underlying collateral
• Relevant industry conditions and trends relative to their historical cycles
• Market conditions
• Rating agency and governmental actions
• Bid and offering prices and the level of trading activity
• Adverse changes in estimated cash flows for securitized investments
• Changes in fair value subsequent to the balance sheet date
• Any other key measures for the related security
While determining other-than-temporary impairments is a judgmental area, we utilize a formal, well-defined, and disciplined process
to monitor and evaluate our fixed income investment portfolio, supported by issuer specific research and documentation as of the end of each
period. The process results in a thorough evaluation of problem investments and the recording of losses on a timely basis for investments
determined to have an other-than-temporary impairment.
We held no fixed maturity securities during 2013 or 2012 for which a portion of an other-than-temporary impairment was recognized
in other comprehensive income. During 2011, we held and sold one fixed maturity security for which an $8.5 million other-than-temporary
impairment had been recognized in other comprehensive income.
At December 31, 2013, we had non-binding commitments of $58.0 million to fund private placement fixed maturity securities.
Variable Interest Entities
We invest in variable interests issued by variable interest entities. These investments include tax credit partnerships, private equity
partnerships, and special purpose entities. For those variable interests that are not consolidated in our financial statements, we are not the
primary beneficiary because we have neither the power to direct the activities that are most significant to economic performance nor
the responsibility to absorb a majority of the expected losses. The determination of whether we are the primary beneficiary is performed
at the time of our initial investment and at the date of each subsequent reporting period.
As of December 31, 2013, the carrying amount of our variable interest entity investments that are not consolidated under the provisions
of GAAP was $470.8 million, comprised of $309.5 million of tax credit partnerships and $161.3 million of private equity partnerships. These
variable interest entity investments are reported as other long-term investments in our consolidated balance sheets.
Additionally, we recognize a liability for all legally binding unfunded commitments to these partnerships, with a corresponding
recognition of an invested asset. Our liability for legally binding unfunded commitments to the tax credit partnerships was $27.2 million at
December 31, 2013. Contractually, we are a limited partner in these investments, and our maximum exposure to loss is limited to the
carrying value of our investment. We also had non-binding commitments of $158.4 million to fund certain private equity partnerships
at December 31, 2013, the amount of which may or may not be funded.