Assurant 2010 Annual Report Download - page 25

19ASSURANT, INC.  2010 Form 10K
PART I
ITEM 1A Risk Factors
such capabilities on unfavorable terms with a resulting material adverse
eff ect on our results of operations and fi nancial condition.
Due to the structure of our commission program,
we are exposed to risks related to the creditworthiness
and reporting systems of some of our agents, third
party administrators and clients in Assurant Solutions
and Assurant Specialty Property.
We are subject to the credit risk of some of the clients and/or agents with
which we contract in Assurant Solutions and Assurant Specialty Property.
We advance agents’ commissions as part of our preneed insurance product
off erings.  ese advances are a percentage of the total face amount of
coverage.  ere is a one-year payback provision against the agency if
death or lapse occurs within the fi rst policy year. If SCI, which receives
the largest shares of such agent commissions, were unable to fulfi ll its
payback obligations, this could have an adverse eff ect on our operations
and fi nancial condition.
In addition, some of our clients, third party administrators and agents
collect and report premiums or pay claims on our behalf.  ese parties’
failure to remit all premiums collected or to pay claims on our behalf on
a timely and accurate basis could have an adverse eff ect on our results
of operations.
We face signifi cant competitive pressures in our
businesses, which could reduce our profi tability.
We compete for customers and distributors with many insurance companies
and other fi nancial services companies for business and individual customers,
employer and other group customers, agents, brokers and other distribution
relationships. Some of our competitors may off er a broader array of products
than our subsidiaries or have a greater diversity of distribution resources,
better brand recognition, more competitive pricing, lower costs, greater
fi nancial strength, more resources, or higher ratings.
Many of our insurance products, particularly our group benefi ts and
group health insurance policies, are underwritten annually.  ere is a
risk that group purchasers may be able to obtain more favorable terms
from competitors, rather than renewing coverage with us. Competition
may, as a result, adversely aff ect the persistency of our policies, as well as
our ability to sell products.
Some of our competitors may have a lower target for returns on capital
allocated to their business than we do, which may enable them to undercut
our prices. In addition, in certain markets, we compete with organizations
that have a substantial market share. In particular, certain large competitors
of Assurant Health may be able to obtain favorable fi nancial arrangements
from health care providers that are unavailable to us, putting us at a
competitive disadvantage and potentially adversely aff ecting our revenues
and profi ts.
In addition, as fi nancial institutions gain experience with debt protection
administration, their reliance on third party administrators, such as Assurant
Solutions may diminish, thereby reducing our revenues and profi ts.
New competition could also cause the supply of insurance to change,
which could aff ect our ability to price our products at attractive rates
and thereby adversely aff ect our underwriting results. Although there
are some impediments facing potential competitors who wish to enter
the markets we serve, the entry of new competitors into our markets can
occur, aff ording our customers signifi cant fl exibility in moving to other
insurance providers.
Failure to protect our clients’ confi dential information
and privacy could result in the loss of reputation
and customers, reduce our profi tability and/or subject
us to fi nes, litigation and penalties, and the costs
of compliance with privacy and security laws could
adversely aff ect our business.
Our businesses are subject to a variety of privacy regulations and
confi dentiality obligations. If we do not properly comply with privacy
and security laws and regulations that require us to protect confi dential
information, we could experience adverse consequences, including loss of
customers and related revenue, regulatory problems (including fi nes and
penalties), loss of reputation and civil litigation, which could adversely
aff ect our business and results of operations. As have other entities in
the health care industry, we have incurred and will continue to incur
substantial costs in complying with the requirements of applicable privacy
and security laws. For more information on the privacy and security laws
that apply to us, please see Item 1, “Business—Regulation.”
We may be unable to grow our business as we would
like if we cannot fi nd suitable acquisition candidates
at attractive prices or integrate them eff ectively.
Historically, acquisitions and new ventures have played a signifi cant role
in the growth of some of our businesses. We may not be able to identify
suitable acquisition candidates or new venture opportunities, to fi nance or
complete such transactions on acceptable terms, or to integrate acquired
businesses successfully.
Acquisitions entail a number of risks including, among other things,
inaccurate assessment of liabilities; diffi culties in realizing projected
effi ciencies, synergies and cost savings; diffi culties in integrating systems
and personnel; failure to achieve anticipated revenues, earnings or cash
fl ow; an increase in our indebtedness; and a limitation in our ability to
access additional capital when needed. Our failure to adequately address
these acquisition risks could materially adversely aff ect our results of
operations and fi nancial condition.
 e inability of our subsidiaries to pay suffi cient
dividends to us could prevent us from meeting our
obligations and paying future stockholder dividends.
As a holding company whose principal assets are the capital stock of
our subsidiaries, we rely primarily on dividends and other statutorily
permissible payments from our subsidiaries to meet our obligations for
payment of interest and principal on outstanding debt obligations and
to pay dividends to stockholders and corporate expenses.  e ability of
our subsidiaries to pay dividends and to make such other payments in the
future will depend on their statutory surplus, future statutory earnings
and regulatory restrictions. Except to the extent that we are a creditor
with recognized claims against our subsidiaries, claims of the subsidiaries’
creditors, including policyholders, have priority over creditors’ claims
with respect to the assets and earnings of the subsidiaries. If any of our
subsidiaries should become insolvent, liquidate or otherwise reorganize,
our creditors and stockholders will have no right to proceed against
their assets or to cause the liquidation, bankruptcy or winding-up of
the subsidiary under applicable liquidation, bankruptcy or winding-up
laws.  e applicable insurance laws of the jurisdiction where each of our
insurance subsidiaries is domiciled would govern any proceedings relating
to that subsidiary, and the insurance authority of that jurisdiction would
act as a liquidator or rehabilitator for the subsidiary. Both creditors and