Surrendering

[TheBigRedOne]

As the rule said, though, they are assaulted and, with no place to retreat to, surrender, so they aren't really 'fighting to the death'.

The losses you see in the Victory screen are a combination of KIA, WIA and surrenders. They are all equivalent in terms of victory points.

Under most circumstances, a Demoralized unit will get eliminated if assaulted by a much stronger force. Every so often you get that squad that doesn't want to give up, but that's also true in war as well. In general, I think the game models this scenario in an acceptable manner.