During December, we established a $400.0 million unsecured revolving credit facility to provide additional liquidity and financial flexibility for our Company. We intend to use any drawn borrowings from the facility for general corporate purposes. Any actions that we may institute will be consistent with our capital management strategy.
We received two favorable rulings dismissing, with prejudice, both the antitrust and RICO causes of action in the case entitled In re Insurance Brokerage Antitrust Litigation. Additionally, in January 2008 the defendants’ motion for summary judgment on all ERISA claims was granted. Discovery in the case remains stayed while the court considers the proper procedure for handling of the remaining state law claims and plaintiffs pursue their appeal.
Capitalizing on our strong brands and marketplace reputation. We will seek to build on the momentum of 2007 with increased brand and product awareness.
We have no held-to-maturity fixed maturity securities. All fixed maturity securities are classified as available-for-sale and are reported at fair value. Fair values are based on quoted market prices, where available.
Increasing the 20 basis points added to the risk free rate for lack of liquidity by 1.5 basis points, increasing the five basis points added to the risk free rates for foreign investments by one basis point, and increasing the additional basis points added to each industry considered to be of greater risk by one basis point would have decreased the December 31, 2007 net unrealized gain in the fixed maturity securities portfolio by approximately $1.7 million. Historically, our realized gains or losses on dispositions of private placement fixed maturity securities have not varied significantly from amounts estimated under the valuation methodology described above.
The discount rate used for the net periodic benefit costs for 2008 and 2007 for our U.K. pension plan was 5.80 percent and 5.10 percent, respectively. The discount rate used in the net periodic benefit cost for our OPEB plan for 2008 and 2007 was 6.30 percent and 5.90 percent, respectively.
The long-term rate of return assumption is the best estimate of the average annual assumed return that will be produced from the pension trust assets until current benefits are paid. We use a compound interest method in computing the rate of return on pension plan assets. The investment portfolio for our U.S. pension plans during 2007 contained a diversified blend of large cap, mid cap, and small cap equity securities, convertible securities, and
Our pension and OPEB plans have an aggregate unrecognized net actuarial loss and an unrecognized prior service credit, which represent the cumulative liability and asset gains and losses and the portion of prior service credits that have not been recognized in pension expense. As of December 31, 2007, the unrecognized net loss for these two items combined was approximately $301.8 million compared to $352.3 million at December 31, 2006. The decrease is primarily due to the increase in the year end discount rate. Prior to the adoption of SFAS 158, unrecognized actuarial gains or losses and prior service costs or credits were amortized as a component of pension expense but were not reported in companies’ balance sheets. SFAS 158 requires that actuarial gains or losses and prior service costs or credits that have not yet been included in net periodic benefit cost as of the adoption date of SFAS 158 be recognized as components of accumulated other comprehensive income, net of tax. The unrecognized gains or losses will be amortized out of accumulated other comprehensive income and included as a component of the net benefit cost, as they were prior to the adoption of SFAS 158. Our 2007, 2006, and 2005 pension and OPEB expense includes $15.3 million, $17.8 million, and $15.2 million, respectively, of amortization of the unrecognized net actuarial loss and prior service credit. The unrecognized net actuarial loss for our pension plans, which is $310.6 million at December 31, 2007, will be amortized over the average future working life of pension plan participants, currently estimated at 12 years for U.S. participants and 15 years for U.K. participants. The unrecognized net actuarial loss of $6.7 million for our OPEB plan will be amortized the average future working life of OPEB plan participants, currently estimated at 11 years, to the extent the loss is outside of a corridor established in accordance with GAAP. The corridor is established based on the greater of 10 percent of the plan assets or 10 percent of the accumulated postretirement benefit obligation. At December 31, 2007, none of the actuarial loss was outside of the corridor.
While overall sales for Unum US declined in 2007 relative to 2006, we maintained our disciplined pricing and our sales mix was generally in line with our target mix. In 2007, we had a sales mix of approximately 61 percent core market and 39 percent large case market, in line with our targeted 60 percent core/40 percent large case market distribution mix. Although sales on an annualized premium basis declined year over year in our group core market segment, the number of new accounts in this segment increased over the prior year. Sales growth gained momentum during the second half of the year, with an increase of 14.5 percent in group core market sales during the last six months of 2007 compared to the same period of 2006.
Excluding the revisions to our estimate for claim reassessment costs, the 2006 benefit ratio of 94.8 percent was higher than the 2005 ratio of 93.8 percent due primarily to higher paid claims in both group long-term and short-term disability, partially offset by a higher rate of claim recoveries and a decrease in the claim incidence rate for group long-term disability relative to 2005.
Premium income for group life decreased in 2006 relative to 2005 due to our pricing, renewal, and risk selection strategy. The decrease in net investment income relative to 2005 resulted primarily from a decline in the level of assets supporting these lines of business.
Sales in Unum UK were generally consistent with the overall level of 2006 as well as the level of sales in the core market segment, or employee groups with less than 500 lives. Sales in the U.K. market were negatively impacted during 2006 by lower employee benefits purchase decisions caused by distraction in the U.K. employee benefits market due to changes in pension legislation. However, U.K. legislative changes that removed discrimination by employers on the basis of age, therefore encouraging the extension of insurance coverage, became effective in October 2006, which accounted for approximately £11.1 million of sales during the latter half of 2006. During 2007, Unum UK continued to take advantage of the opportunities offered by age equality legislation, with £7.4 million of additional sales during 2007. Excluding sales related to the change in age equality legislation, Unum UK achieved underlying sales growth of approximately 5 percent in 2007 as compared to 2006.
The benefit ratio for this segment decreased in 2007 in comparison to the prior year due primarily to favorable risk experience in the accident, sickness, and disability line of business as well as the life line of business. The improvement in the accident, sickness, and disability line of business resulted from the continued favorable experience related to several new products introduced in 2004. In addition, individual short-term disability claim incidence and average claim duration decreased in 2007 compared to the prior year, while the average claim payment was higher in 2007 relative to the prior year. For accident products, the claim incidence rate decreased in 2007 compared to the prior year, while the average claim payment remained constant in 2007 relative to the prior year. The life line of business reported a decrease in the rate of incurred claims for 2007, although the aggregate claim expense increased due to the larger block of business. The cancer and critical illness product line also reported a slightly lower benefit ratio in 2007 relative to the prior year.
The benefit ratio for this segment decreased in 2006 in comparison to 2005 due primarily to favorable risk experience in the accident, sickness, and disability line of business. The improvement resulted from underwriting actions taken in 2004 and 2005 as well as the introduction of several new products in 2004. Sales of these new products increased significantly during 2006. Also favorably impacting year-over-year comparisons was the first quarter of 2006 release of reserves related to the lapsed policies in the hurricane-impacted areas and a $3.5 million reserve charge in 2005 related to cancer litigation. In addition, individual short-term disability claim incidence and average claim duration decreased in 2006 compared to 2005, while the average indemnity on claims was higher in 2006 relative to 2005. For accident, the claim incidence rate decreased in 2006 relative to 2005, but the average claim payment increased over that reported for 2005. These positive trends were slightly offset by an increase in the claim incidence rate as well as the average claim payment during 2006 for our hospital income product. For cancer, the incidence increased in 2006 relative to 2005, but the incurred loss ratio decreased due to the introduction of a new cancer product. The life line of business reported a slight increase in the number of paid claims in 2006 relative to 2005 and an increase in the average claim payment.
The Corporate segment reported operating losses of $223.2 million, $184.7 million, and $152.8 million in 2007, 2006, and 2005, respectively. Included in the corporate segment operating results for 2007 and 2006 are costs related to early retirement of debt of $55.6 million and $25.8 million, respectively. Also included in the corporate segment operating results is a litigation settlement accrual of $11.6 million in 2007 and broker compensation settlement expenses of $18.5 million in 2006.
our leverage ratio at or slightly below our target levels. We expect that holding company liquidity will be in excess of $300.0 million at the end of 2008.
Net cash provided by operating activities was $1,750.3 million for the year ended December 31, 2007, compared to $1,431.9 million and $1,503.6 million for the comparable periods of 2006 and 2005. Operating cash flows are primarily attributable to the receipt of premium and investment income, offset by payments of claims, commissions, expenses, and income taxes. Premium income growth is dependent not only on new sales, but on renewals of existing business, renewal price increases, and stable persistency. Investment income growth is dependent on the growth in the underlying assets supporting our insurance reserves and on the level of portfolio yield rates. Increases in commissions and operating expenses are attributable primarily to new sales growth and the first year acquisition expenses associated with new business. The level of paid claims is due partially to the growth and aging of the block of business and also to the general economy, as previously discussed in the operating results by segment. Included in operating cash flows for 2007, 2006 and 2005 are voluntary pension contributions to our U.S. qualified defined benefit plan of $110.0 million, $92.0 million and $23.0 million, respectively. We also had increased cash inflows of approximately $211.4 million in 2007 due to the reinsurance recapture of a small block of individual disability business.
Miscellaneous liabilities include commissions due and accrued, deferred compensation liabilities, state premium taxes payable, amounts due to reinsurance companies, and various other liabilities that represent contractual obligations. Obligations where the timing of the payment was uncertain were included in the one year or less category.
Included within fixed maturity securities are mortgage-backed and asset-backed securities. We recognize investment income on these securities using a constant effective yield based on projected prepayments of the underlying loans and the estimated economic life of the securities. Actual prepayment experience is reviewed periodically, and effective yields are recalculated when differences arise between prepayments originally projected and the actual prepayments received and currently projected. The effective yield is recalculated on a retrospective basis, and the adjustment is reflected in net investment income.
hedge is reported in other comprehensive income and reclassified into earnings in the same period or periods during which the hedged item affects earnings.
At December 31, 2007, the total investment in below-investment-grade fixed maturity securities was $2,023.8 million or 5.3 percent of the fair value of invested assets excluding ceded policy loans. The amortized cost of these securities was $2,129.9 million.
During 2006, we reversed income tax liabilities of approximately $91.9 million related primarily to group relief benefits obtained from the use of net operating losses in a foreign jurisdiction in which our businesses operate as the result of final determinations on those years. Also included in 2006 operating results is income of $2.6 million before tax and $3.9 million after tax attributable to the receipt of interest and tax refunds on prior year tax items in excess of what was previously provided.
Tailwind Holdings’ ability to meet its obligations to pay principal, interest, and other amounts due on the Tailwind notes will be dependent principally on its receipt of dividends from Tailwind Re. The ability of Tailwind Re to pay such dividends will depend on its satisfaction of applicable regulatory requirements and the performance of the reinsured claims.
For measurement purposes at December 31, 2007 and 2006, the annual rate of increase in the per capita cost of covered postretirement health care benefits assumed for the next calendar year was 9.00 percent for benefits payable to retirees prior to Medicare eligibility and 9.80 percent for benefits payable to Medicare eligible retirees. The rate was assumed to change gradually to 5.00 percent by the end of the fifth year and remain at that level thereafter. During 2005, we confirmed that all of our retiree medical plans qualify for a government subsidy under the Medicare Prescription Drug, Improvement and Modernization Act of 2003 and chose to defer coordination with the new prescription drug benefit until 2007. This change is reflected in our net periodic benefit cost.
A one percent increase or decrease in the assumed health care cost trend rate at December 31, 2007 would have increased (decreased) the service cost and interest cost by $0.6 million and $(0.5) million, respectively, and the postretirement benefit obligation by $6.9 million and $(6.1) million, respectively.