Interest margins. Universal life interest margins declined slightly in 2013 compared to 2012 primarily as a result of lower investment income consistent with declining funds under management. Annuity interest margins decreased primarily as a result of higher interest credited attributable to growth in fixed indexed annuity funds under management and lower growth in net investment income.
Future premiums and related fees are projected based on contractual terms, product illustrations at the time of sale and expected policy lapses without value. Assumptions are updated based on recently observed experience and include anticipated changes in behavior based on changes in policy charges if the Company has a high degree of confidence that such changes will be implemented (e.g., change in cost of insurance (“COI”) charges).
We employ a comprehensive process to determine whether or not a security in an unrealized loss position is other-than-temporarily impaired. This assessment is done on a security-by-security basis and involves significant management judgment.
We determine our discount rate, used to value the pension and postretirement benefit obligations, based upon rates commensurate with current yields on high quality corporate bonds. Our assumed discount rate for 2013 was 3.98% for our pension plan, 3.81% for the supplemental retirement plan and 3.37% for our other postretirement benefit plan. Given the amount of pension and postretirement obligations as of December 31, 2012, the beginning of the measurement year, if we had assumed a discount rate for our pension plans and our other postretirement benefit plan that was 100 basis points higher or 100 basis points lower than the rates we assumed, the change in our net periodic costs would have been as shown in the table below. These amounts consider only changes in our assumed discount rate without consideration of possible changes in any of the other assumptions described above that could ultimately accompany any changes in our assumed discount rate.
Partially offsetting the decrease in income from continuing operations were the following items:
We have an enterprise-wide risk management program. Our Chief Risk Officer reports to the Chief Executive Officer and monitors our risk management activities. The Chief Risk Officer provides regular reports to the Board without the presence of other members of management. Our risk management governance consists of several management committees to oversee and address issues pertaining to all our major risks-operational, market and product-as well as capital management. In all cases, these committees include one or more of our Chief Executive Officer, Chief Financial Officer, Chief Investment Officer and Chief Risk Officer.
equity risk, which relates to the volatility of prices for equity and equity-like investments, such as limited partnerships.
Includes commercial mortgage-backed CDOs with amortized cost and market values of $19.5 million and $20.9 million, respectively. CMBS holdings in this exhibit include $5.4 million classified as fair value investments on the consolidated balance sheets. For these fair value investments, there is no impact to OCI as carrying value is equal to market value.
The cash values of certain individual life insurance policies increase over the lives of the policies. Policyholders have the right to borrow an amount up to a certain percentage of the cash value on those policies. As of December 31, 2013, our Life Companies had approximately $10.7 billion in cash values with respect to which policyholders had rights to take policy loans. For eligible policies, the majority of policy loans are at variable interest rates that are reset annually on the policy anniversary. Policy loans at December 31, 2013 were $2.4 billion.
The financial strength and debt ratings as of August 4, 2014 were as follows: