Assurant 2011 Annual Report Download - page 22

ASSURANT, INC.2011 Form10-K14
PARTI
ITEM 1A Risk Factors
and  nancial condition could be materially adversely a ected. For
example, a loss of one or more of the discount arrangements with PPOs
could lead to higher medical or dental costs and/or a loss of members
to other medical or dental plans. In addition, we are subject to the risk
that these parties may face  nancial di culties, reputational issues or
problems with respect to their own products and services, which may
lead to decreased sales of our products and services. Moreover, if one or
more of our clients or distributors consolidate or align themselves with
other companies, we may lose business or su er decreased revenues.
Sales of our products and services may be reduced
if we are unable to attract and retain sales representatives
or to develop and maintain distribution sources.
We distribute many of our insurance products and services through
a variety of distribution channels, including independent employee
bene ts specialists, brokers, managing general agents, life agents,  nancial
institutions, mortgage lenders and servicers, retailers, funeral homes,
association groups and other third-party marketing organizations.
Our relationships with these distributors are signi cant both for our
revenues and pro ts. We do not distribute our insurance products and
services through captive or a liated agents. In Assurant Health, we
depend in large part on the services of independent agents and brokers
and on associations in the marketing of our products. In Assurant
Employee Bene ts, independent agents and brokers who act as advisors
to our customers market and distribute our products. Strong competition
exists among insurers to form relationships with agents and brokers of
demonstrated ability. We compete with other insurers for relationships
with agents, brokers, and other intermediaries primarily on the basis
of our  nancial position, support services, product features, and more
generally through our ability to meet the needs of their clients, our
customers. Independent agents and brokers are typically not exclusively
dedicated to us, but instead usually also market the products of our
competitors and therefore we face continued competition from our
competitors’ products. Moreover, our ability to market our products
and services depends on our ability to tailor our channels of distribution
to comply with changes in the regulatory environment in which we
and such agents and brokers operate.
 e minimum loss ratios imposed by the A ordable Care Act compelled
health insurers to decrease broker commission levels beginning in 2011.
Similarly, the Company decreased its commission levels for distribution
channels that market Assurant Health’s individual medical and small
employer group medical products. Although the Company believes that
its revised commission schedules are competitive with those of other
health insurers adapting to the new reform environment, this reduction
caused uncertainty among agents during 2011 as they evaluated the
e ect of new commission levels on their business, which contributed
to a decrease in sales.  e reduction could pressure our relationship
with the distribution channels that we rely on to market our Assurant
Health products and/or our ability to attract new brokers and agents,
which could materially adversely a ect our results of operations and
 nancial condition. In addition, many of the agents and brokers
who distribute Assurant Employee Bene ts products make a large
part of their living from sales of health insurance. To the extent that
some of them decide to pursue other occupations, the resulting loss
of distribution could have a material adverse impact on the sales of
Assurant Employee Bene ts’ products.
We have our own sales representatives whose distribution process varies
by segment. We depend in large part on our sales representatives to
develop and maintain client relationships. Our inability to attract and
retain e ective sales representatives could materially adversely a ect
our results of operations and  nancial condition.
General economic, fi nancial market and political
conditions may materially adversely aff ect our results
of operations and fi nancial conditions. Particularly,
diffi cult conditions in fi nancial markets and the global
economy may negatively aff ect the results of all of our
business segments.
General economic,  nancial market and political conditions may have
a material adverse e ect on our results of operations and  nancial
condition. Limited availability of credit, deteriorations of the global
mortgage and real estate markets, declines in consumer con dence
and consumer spending, increases in prices or in the rate of in ation,
continuing high unemployment, or disruptive geopolitical events could
contribute to increased volatility and diminished expectations for the
economy and the markets, including the market for our stock.  ese
conditions could also a ect all of our business segments. Speci cally,
during periods of economic downturn:
• individuals and businesses may (i)choose not to purchase our
insurance products, warranties and other related products and services,
(ii)terminate existing policies or contracts or permit them to lapse,
(iii)choose to reduce the amount of coverage they purchase, and
(iv)in the case of business customers of Assurant Health or Assurant
Employee Bene ts, have fewer employees requiring insurance coverage
due to reductions in their sta ng levels;
• clients are more likely to experience  nancial distress or declare
bankruptcy or liquidation which could have an adverse impact on the
remittance of premiums from such clients as well as the collection of
receivables from such clients for items such as unearned premiums;
• disability insurance claims and claims on other specialized insurance
products tend to rise;
•
there is a higher loss ratio on credit card and installment loan insurance
due to rising unemployment and disability levels;
•there is an increased risk of fraudulent insurance claims;
•
insureds tend to increase their utilization of health and dental bene ts
if they anticipate becoming unemployed or losing bene ts; and
• substantial decreases in loan availability and origination could reduce
the demand for credit insurance that we write or debt cancellation or
debt deferment products that we administer, and on the placement
of hazard insurance under our lender-placed insurance programs.
Recently, the global recession and disruption of the  nancial markets
have heightened concerns over the sovereign debt crisis in Europe,
particularly with respect to capital markets access and the solvency of
certain European Union (“EU”) member states, including Portugal,
Ireland, Italy, Greece and Spain, and of  nancial institutions that have
signi cant direct or indirect exposure to debt issued by these countries.
Certain major rating agencies have downgraded the sovereign debt of
Greece, Portugal, Ireland, Italy and Spain.  e issues arising out of
the sovereign debt crisis may transcend Europe, cause investors to lose
con dence in European  nancial institutions and the stability of EU