Unum 2013 Annual Report Download - page 33

UNUM 2013 ANNUAL REPORT / 31
The following are our current assumptions regarding the length of our amortization periods, the approximate DAC balance that remains
at the end of years 3, 10, and 15 as a percentage of the cost initially deferred, and our DAC balances as of December 31, 2013 and 2012.
Balance Remaining as a % DAC Balances
Amortization of Initial Deferral at December 31
(in millions of dollars) Period Year 3 Year 10 Year 15 2013 2012
Unum US
Group Disability 6 25% 0% 0% $ 55.9 $ 47.4
Group Life and Accidental
Death & Dismemberment 6 30% 0% 0% 49.9 40.7
Supplemental and Voluntary:
Individual Disability — Recently Issued 20 75% 50% 25% 433.4 449.1
Voluntary Benefits 15 60% 15% 0% 512.3 487.1
Unum UK
Group Disability 3 7% 0% 0% 5.1 4.1
Group Life 3 7% 0% 0% 1.2 3.2
Supplemental 20 57% 17% 7% 28.0 31.5
Colonial Life
Accident, Sickness, and Disability 15 46% 12% 2% 350.6 328.9
Life 25 71% 35% 17% 218.7 195.4
Cancer and Critical Illness 19 60% 27% 11% 174.1 168.1
Totals $1,829.2 $1,755.5
Amortization of DAC is adjusted to reflect actual experience for assumptions which deviate compared to the anticipated experience.
Any deviations from projections may result in a change to the rate of amortization in the period such events occur. As an example, for our
traditional products, we may experience accelerated amortization if policies terminate earlier than projected, or we may experience a
slower rate of amortization if policies persist longer than projected. Our actual experience has not varied materially from our assumptions
during the last three years.
See Note 1 of the “Notes to Consolidated Financial Statements” contained herein for further discussion of our DAC accounting policy.
Fair Value of Investments
All of our fixed maturity securities are classified as available-for-sale and are reported at fair value. Our derivative financial instruments,
including certain derivative instruments embedded in other contracts, are reported as either assets or liabilities and measured at fair value.
We hold an immaterial amount of equity securities, which are also reported at fair value. Fair value is the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and therefore
represents an exit price, not an entry price. The exit price objective applies regardless of our intent and/or ability to sell the asset or transfer
the liability at the measurement date. We generally use valuation techniques consistent with the market approach, and to a lesser extent,
the income approach. The market approach uses prices and other relevant information from market transactions involving identical or
comparable assets or liabilities and the income approach converts future amounts, such as cash flows or earnings, to a single present
amount, or a discounted amount. We believe the market approach valuation technique provides more observable data than the income
approach, considering the types of investments we hold.