Assurant 2011 Annual Report Download - page 125

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ASSURANT, INC.2011 Form10-K F-49
21 Retirement and Other Employee Bene ts
Determination of the projected bene t obligation was based on the following weighted-average assumptions for the years ended December31:
Quali edPensionBene ts Nonquali edPensionBene ts RetirementHealthBene ts
2011 2010 2009 2011 2010 2009 2011 2010 2009
Discount rate 4.59% 5.44% 5.94% 4.40% 5.11% 5.73% 4.64% 5.55% 6.06%
Determination of the net periodic bene t cost was based on the following weighted-average assumptions for the years ended December31:
Quali edPensionBene ts Nonquali edPensionBene ts RetirementHealthBene ts
2011 2010 2009 2011 2010 2009 2011 2010 2009
Discount rate 5.44% 5.94% 6.25% 5.11% 5.73% 6.29% 5.55% 6.06% 6.22%
Expected long- term return on plan assets 7.50% 7.50% 7.50% — — — 7.50% 7.50% 7.50%
* Assumed rates of compensation increases are also used to determine net periodic benefit cost. Assumed rates varied by age and ranged from 3.25% – 9.30% for the Pension Benefits
for the years ended December31, 2011, 2010 and 2009.
e selection of our discount rate assumption re ects the rate at which
the Plans’ obligations could be e ectively settled at December31, 2011,
2010 and 2009.  e methodology for selecting the discount rate was to
match each Plan’s cash  ows to that of a yield curve that provides the
equivalent yields on zero-coupon corporate bonds for each maturity.
e yield curve utilized in the cash  ow analysis was comprised of 249
bonds rated AA by Moody’s with maturities between zero and thirty
years.  e discount rate for each Plan is the single rate that produces
the same present value of cash  ows.
To develop the expected long-term rate of return on assets assumption,
the Company considered the current level of expected returns on risk
free investments (primarily, government bonds), the historical level of
the risk premium associated with the other asset classes in which the
portfolio is invested and the expectations for future returns of each
asset class.  e expected long-term rate of return on plan assets re ects
the average rate of earnings expected on the funds invested or to be
invested.  e expected return for each asset class was then weighted
based on the targeted asset allocation to develop the expected long-
term rate of return on asset assumptions for the portfolio.  is resulted
in the selection of 7.50% for the  scal years 2011, 2010 and 2009.
e Company believes the current assumption re ects the projected
return on the invested assets, given the current market conditions
and the modi ed portfolio structure. Actual return on plan assets was
10.7% and 13.8% for the years ended December31, 2011 and 2010.
e Company lowered its expected long-term rate of return on assets
to 6.75% as of January 1, 2012.  e Company believes the revised
assumption re ects the projected return on the invested assets, given
the current market conditions and the modi ed portfolio structure.
e assumed health care cost trend rates used in measuring the accumulated bene t obligation and net periodic bene t cost were as follows:
RetirementHealthBene ts
2011 2010 2009
Health care cost trend rate assumed for next year:
Pre-65 Non-reimbursement Plan 9.8% 9.1% 9.5%
Post-65 Non-reimbursement Plan 9.5% 9.1% 9.5%
Pre-65 Reimbursement Plan 9.8% 9.1% 9.5%
Post-65 Reimbursement Plan 9.8% 9.1% 9.5%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 4.5% 4.5% 4.5%
Year that the rate reaches the ultimate trend rate
Pre-65 Non-reimbursement Plan 2028 2028 2028
Post-65 Non-reimbursement Plan 2028 2028 2028
Pre-65 Reimbursement Plan 2028 2028 2028
Post-65 Reimbursement Plan 2028 2028 2028
Assumed health care cost trend rates have a signi cant e ect on the amounts reported for the health care plans. A one-percentage point change
in assumed health care cost trend rates would have the following e ects:
RetirementHealthBene ts
2011 2010 2009
One percentage point increase in health care cost trend rate
E ect on total of service and interest cost components $ 62 $ 52 $ 43
E ect on postretirement bene t obligation 863 695 596
One percentage point decrease in health care cost trend rate
E ect on total of service and interest cost components $ (91) $ (67) $ (55)
E ect on postretirement bene t obligation (1,196) (838) (719)