Unum 2013 Annual Report Download - page 135

UNUM 2013 ANNUAL REPORT / 133
2011 Claim Reserve Increase for Individual Disability Closed Block Business
In December 2011, we analyzed our reserve assumptions for individual disability closed block claim reserves. Claim resolution rates,
which measure the resolution of claims from recovery, deaths, settlements, and benefit expirations, are very sensitive to operational and
environmental changes and can be volatile. Our claim resolution rate assumption used in determining reserves is our expectation of the
resolution rate we will experience over the life of the block of business. At that time, we were able, with a higher degree of confidence,
to assess our own experience for older ages in our long duration lifetime claim block as our data had become credible. There is very little
industry experience for lifetime disability benefits, as our insurance companies were the primary disability companies in the insurance
industry at the time lifetime disability benefits were offered. These benefits were offered during the 1980s and 1990s, recent enough such
that claimants are just reaching the older ages and providing us with data to build our claim experience base. Emerging experience
indicated a longer life expectancy for our older age, longer duration disabled claimants, which lengthens the time a claimant receives
disability benefits. As a result of this experience, as of December 31, 2011 we adjusted our mortality assumption within our claim resolution
rate assumption and, as a result, increased our claim reserves for our individual disability closed block of business by $183.5 million. Of this
amount, approximately $176.0 million was attributed to prior year incurred claims, thereby impacting the results shown in the preceding chart.
Reconciliation
A reconciliation of policy and contract benefits and reserves for future policy and contract benefits as reported in our consolidated
balance sheets to the liability for unpaid claims and claim adjustment expenses is as follows:
December 31
(in millions of dollars) 2013 2012 2011
Policy and Contract Benefits $ 1,511.0 $ 1,484.6 $ 1,494.0
Reserves for Future Policy and Contract Benefits 43,099.1 44,694.4 43,051.9
Total 44,610.1 46,179.0 44,545.9
Less:
Life Reserves for Future Policy and Contract Benefits 7,740.5 7,571.1 7,454.2
Accident and Health Active Life Reserves 8,225.5 7,763.3 7,259.6
Unrealized Adjustment to Reserves for Future Policy and Contract Benefits 4,108.5 6,277.5 5,245.6
Liability for Unpaid Claims and Claim Adjustment Expenses $24,535.6 $24,567.1 $24,586.5
The unrealized adjustment to reserves for future policy and contract benefits reflects the changes that would be necessary
to policyholder liabilities if the unrealized investment gains and losses related to the available-for-sale securities had been realized.
Changes in this adjustment are reported as a component of other comprehensive income or loss.