Unum 2015 Annual Report Download - page 94

Download and view the complete annual report

Please find page 94 of the 2015 Unum annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 172

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172

Notes To Consolidated Financial Statements
92 Unum 2015 Annual Report
Cash and Bank Deposits: Cash and bank deposits include cash on hand and non-interest bearing cash and deposit accounts.
Derivative Financial Instruments: Derivative financial instruments (including certain derivative instruments embedded in other
contracts) are recognized as either other long-term investments or other liabilities in our consolidated balance sheets and are reported at
fair value. The accounting for a derivative depends on whether it has been designated and qualifies as part of a hedging relationship, and
further, on the type of hedging relationship. To qualify for hedge accounting, at the inception of the hedging transaction, we formally
document the risk management objective and strategy for undertaking the hedging transaction, as well as the designation of the hedge as
either a fair value hedge or a cash flow hedge. Included in this documentation is how the hedging instrument is expected to hedge the
designated risk(s) related to specific assets or liabilities on the balance sheet or to specific forecasted transactions as well as a description of
the method that will be used to retrospectively and prospectively assess the hedging instrument’s effectiveness and the method that will
be used to measure ineffectiveness.
A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk(s) of the
hedged item. Hedge effectiveness is formally assessed at inception and periodically throughout the life of the designated hedging
relationship, using qualitative and quantitative methods. Qualitative methods include comparison of critical terms of the derivative to the
hedged item. Quantitative methods include regression or other statistical analysis of changes in fair value or cash flows associated with the
hedge relationship.
Changes in the fair value of a derivative designated as a fair value hedge, including amounts measured as ineffectiveness, and
changes in the fair value of the hedged item attributable to the risk being hedged are recognized in earnings as a component of net
realized investment gain or loss during the period of change in fair value. The gain or loss on the termination of a fair value hedge is
recognized in earnings as a component of net realized investment gain or loss during the period in which the termination occurs. When
interest rate swaps are used in hedge accounting relationships, periodic settlements are recorded in the same income statement line as the
related settlements of the hedged items.
To the extent it is effective, changes in the fair value of a derivative designated as a cash flow hedge are reported in other
comprehensive income and reclassified into earnings and reported on the same income statement line item as the hedged item and in the
same period or periods during which the hedged item affects earnings. The ineffective portion of the hedge, if any, is recognized in
earnings as a component of net realized investment gain or loss during the period of change in fair value. The gain or loss on the
termination of an effective cash flow hedge is reported in other comprehensive income and reclassified into earnings and reported on the
same income statement line item as the hedged item and in the same period or periods during which the hedged item affects earnings.
Gains or losses on the termination of ineffective fair value or cash flow hedges are reported in earnings as a component of net realized
investment gain or loss. In the event a hedged item is disposed of or the anticipated transaction being hedged is no longer likely to occur,
we will terminate the related derivative and recognize the gain or loss on termination in current earnings as a component of net realized
investment gain or loss. In the event a hedged item is disposed of subsequent to the termination of the hedging transaction, we reclassify
any remaining gain or loss on the cash flow hedge out of accumulated other comprehensive income into earnings as a component of the
same income statement line item wherein we report the gain or loss on disposition of the hedged item.
For a derivative not designated as a hedging instrument, changes in the fair value of the derivative, together with the payment of
periodic fees, if applicable, are recognized in earnings as a component of net realized investment gain or loss during the period of change
in fair value.
Cash flow activity from the settlement of derivative contracts is reported in the consolidated statements of cash flows as a component
of proceeds from sales and maturities of other investments.
In our consolidated balance sheets, we do not offset fair value amounts recognized for derivatives executed with the same
counterparty under a master netting agreement and fair value amounts recognized for the right to reclaim cash collateral or the obligation
to return cash collateral arising from those master netting agreements. See Notes 2, 3 and 4.