Unum 2014 Annual Report Download - page 132

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130 UNUM • 2014 ANNUAL REPORT
Notes To Consolidated Financial Statements
2013 Group Life Waiver of Premium Benefit Reserve Reduction
Within our Unum US segment, we offer group life insurance coverage which consists primarily of renewable term life insurance and
includes a provision for waiver of premium, if disabled. The group life waiver of premium benefit (group life waiver) provides for continuation
of life insurance coverage when an insured, or the employer on behalf of the insured, is no longer paying premium because the employee
is not actively at work due to a disability. The group life waiver claim reserve is the present value of future anticipated death benefits
reflecting the probability of death while remaining disabled. Claim reserves are calculated using assumptions based on past experience
adjusted for current trends and any other factors that would modify past experience and are subject to revision as current claim experience
emerges and alters our view of future expectations. The two fundamental assumptions in the development of the group life waiver reserve
are mortality and recovery. Our emerging experience and that which continues to emerge within the industry indicate an increase in life
expectancies, which decreases the ultimate anticipated death benefits to be paid under the group life waiver benefit. Emerging experience
also reflects an improvement in claim recovery rates, which also lessens the likelihood of payment of a death benefit while the insured is
disabled. During 2013, we completed a review of our assumptions and modified our mortality and claim recovery assumptions for our
Unum US group life waiver reserves and, as a result, reduced claim reserves by $85.0 million. Of this amount, approximately $78.0 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) 2014 2013 2012
Policy and Contract Benefits $ 1,529.3 $ 1,511.0 $ 1,484.6
Reserves for Future Policy and Contract Benefits 45,929.4 43,099.1 44,694.4
Total 47,458.7 44,610.1 46,179.0
Less:
Life Reserves for Future Policy and Contract Benefits 7,850.9 7,740.5 7,571.1
Accident and Health Active Life Reserves 9,263.5 8,225.5 7,763.3
Unrealized Adjustment to Reserves for Future Policy and Contract Benefits 6,150.3 4,108.5 6,277.5
Liability for Unpaid Claims and Claim Adjustment Expenses $24,194.0 $24,535.6 $24,567.1
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 corresponding available-for-sale securities
had been realized. Changes in this adjustment are reported as a component of other comprehensive income or loss.