Assurant 2010 Annual Report Download - page 11

5ASSURANT, INC.  2010 Form 10K
PART I
ITEM 1 Business
In January 2009, we entered into an agreement to market, administer
and underwrite ESC products to Whirlpool Corporation (“Whirlpool”)
appliance customers in the U.S. and Canada. Whirlpool is a leading
manufacturer and marketer of major home appliances.
On September 26, 2008, the Company acquired the Warranty
Management Group business from GE Consumer & Industrial, a
unit of General Electric Co. (“GE”).  e Company paid GE $140,000
in cash for the sale, transfer and conveyance of certain assets and
assumed certain liabilities. As part of the acquisition, the Company
entered into a new 10-year agreement to market extended warranties
and service contracts on GE-branded major appliances in the U.S.
and included warranty distribution agreements with two existing
retail customers. In connection with the acquisition of this business,
the Company recorded $126,840 of amortizable intangible assets and
$13,160 of goodwill. We recorded a charge of $30,948 (after-tax) in
the fourth quarter of 2010 for the impairment of a portion of the
intangible asset.  e impairment charge resulted from the receipt, on
November 30, 2010, from one of the retail customers of notifi cation of
non-renewal of a block of the acquired business eff ective June 1, 2011.
We do not expect the lapse of the contract to have a material impact
on Assurant Solutions’ profi tability in 2011.
On October 1, 2008, the Company completed the acquisition of
Signal Holdings LLC (“Signal”), a leading provider of wireless handset
protection programs and repair services.  e Company paid $257,400
in cash for the acquisition, transfer and conveyance of certain assets and
assumed certain liabilities. Signal services extended service contracts
for 4.2 million wireless subscribers.
Underwriting and Risk Management
We write a signifi cant portion of our contracts on a retrospective
commission basis.  is allows us to adjust commissions based on claims
experience. Under these commission arrangements, the compensation
of our clients is based upon the actual losses incurred compared to
premiums earned after a specifi ed net allowance to us. We believe that
these arrangements better align our clients’ interests with ours and help
us to better manage risk exposure.
Profi ts from our preneed life insurance programs are generally earned
from interest rate spreads—the diff erence between the death benefi t
growth rates on underlying policies and the investment returns generated
on the assets we hold related to those policies. To manage these spreads,
we regularly adjust pricing to refl ect changes in new money yields.
Assurant Specialty Property
For the Years Ended
December 31, 2010 December 31, 2009
Net earned premiums and other considerations by major product grouping:
Homeowners (lender-placed and voluntary) $ 1,342,791 $ 1,369,031
Manufactured housing (lender-placed and voluntary) 220,309 219,960
Other (1) 390,123 358,538
TOTAL $ 1,953,223 $ 1,947,529
Segment net income $ 424,287 $ 405,997
Loss ratio (2) 35.1 % 34.1 %
Expense ratio (3) 39.5 % 41.5 %
Combined ratio (4) 73.3 % 74.7 %
Equity (5) $ 1,134,432 $ 1,184,798
(1) This primarily includes lender-placed flood, miscellaneous specialty property and renters insurance products.
(2) The loss ratio is equal to policyholder benefits divided by net earned premiums and other considerations.
(3) The expense ratio is equal to selling, underwriting and general expenses divided by net earned premiums and other considerations and fees and other income. (Fees and other income
are not included in the above table)
(4) The combined ratio is equal to total benefits, losses and expenses divided by net earned premiums and other considerations and fees and other income. (Fees and other income are not
included in the above table)
(5) Equity excludes accumulated other comprehensive income.
Products and Services
Assurant Specialty Property’s business strategy is to pursue long-term
growth in lender-placed homeowners insurance and expand its strategy
into other emerging markets with similar characteristics, such as lender-
placed fl ood insurance, lender-placed automobile and renters insurance.
Assurant Specialty Property also writes other specialty products.
Lender-placed and voluntary homeowners insurance
 e largest product line within Assurant Specialty Property is homeowners
insurance, consisting principally of fi re and dwelling hazard insurance
off ered through our lender-placed programs.  e lender-placed program
provides collateral protection to our mortgage lending and servicing
clients in the event that a homeowner does not maintain insurance
on a mortgaged dwelling.  e majority of our mortgage lending
and servicing clients outsource their insurance processing to us. We
also provide insurance to some of our clients on properties that have
been foreclosed and are being managed by our clients.  is type of
insurance is called Real Estate Owned (“REO”) insurance.  is market
experienced growth increases in recent years as a result of the housing
crisis, but is now stabilizing.
We use a proprietary insurance-tracking administration system linked
with the administrative systems of our clients to continuously monitor
the clients’ mortgage portfolios and verify the existence of insurance on
each mortgaged property. We earn fee income for these administration
services. In the event that mortgagees do not maintain adequate