Assurant 2011 Annual Report Download - page 13

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ASSURANT, INC.2011 Form10-K 5
PARTI
ITEM 1 Business
insurance business. Expertise gained in the domestic credit insurance
market has enabled us to extend our administrative infrastructure
internationally. Systems, training, computer hardware and our overall
market development approach are customized to  t the particular needs
of each targeted international market.
Underwriting and Risk Management
We write a signi 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 speci 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.
Pro ts from our preneed life insurance programs are generally earned
from interest rate spreads—the di erence between the death bene 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 re ect changes in new money yields.
Assurant Specialty Property
For the Years Ended
December31,2011 December31,2010
Net earned premiums and other considerations by major product grouping:
Homeowners (lender-placed and voluntary) $ 1,274,485 $ 1,342,791
Manufactured housing (lender-placed and voluntary) 216,613 220,309
Other(1) 413,540 390,123
TOTAL $ 1,904,638 $ 1,953,223
Segment net income $ 305,065 $ 424,287
Loss ratio(2) 45.0% 35.1%
Expense ratio(3) 38.7% 39.5%
Combined ratio(4) 81.9% 73.3%
Equity(5) $ 1,114,308 $ 1,134,432
(1) Other primarily includes lender-placed flood, miscellaneous specialty property and multi-family housing 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
is 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 is 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 adjacent markets
with similar characteristics, such as lender-placed  ood insurance,
and renters insurance. Assurant Specialty Property also writes other
specialty products.
In June2011 we acquired SureDeposit, the market leader in rental
security deposit alternatives. We believe that this acquisition will help
build our niche multi-family housing business which is focused on
distribution through property managers.
Lender-placed and voluntary homeowners insurance
e largest product line within Assurant Specialty Property is homeowners
insurance, consisting principally of  re and dwelling hazard insurance
o ered through our lender-placed programs.  e lender-placed program
provides collateral protection to lenders, mortgage servicers and investors
in mortgaged properties in the event that a homeowner does not maintain
insurance on a mortgaged dwelling. Lender-placed insurance coverage
is not limited to the outstanding loan balance; it provides structural
coverage, similar to that of a standard homeowners policy.  e policy
is based on the replacement cost of the property and ensures that a
home can be repaired or rebuilt completely in the event of damage.
It protects both the lender’s interest and the borrower’s interest and
equity. 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 signi cant growth in recent years as a result of the
housing crisis, but is now stabilizing.
In the majority of cases, we use a proprietary insurance-tracking
administration system linked with the administrative systems of our
clients to continuously monitor the clients’ mortgage portfolios to verify
the existence of insurance on each mortgaged property and identify
those that are uninsured. If a potential lapse in insurance coverage is
detected, we begin a process of noti cation and outreach to both the
homeowner and the last-known insurance carrier or agent through
phone calls and written correspondence.  is process usually takes
75 days to complete. If at the end of this process we still cannot verify
that insurance has not lapsed, a lender-placed policy is procured by the
lender.  e homeowner is still encouraged, and always maintains the
option, to obtain or renew the insurance of his or her choice.