Assurant 2011 Annual Report Download - page 26

ASSURANT, INC.2011 Form10-K18
PARTI
ITEM 1A Risk Factors
 e risk parameters of our investment portfolio may not
assume an appropriate level of risk, thereby reducing
our profi tability and diminishing our ability to compete
and grow.
In pricing our products and services, we incorporate assumptions
regarding returns on our investments. Accordingly, our investment
decisions and objectives are a function of the underlying risks and
product pro les of each of our operating segments. Market conditions
may not allow us to invest in assets with su ciently high returns to
meet our pricing assumptions and pro t targets over the long term.
If, in response, we choose to increase our product prices, our ability
to compete and grow may be diminished.
Environmental liability exposure may result from our
commercial mortgage loan portfolio and real estate
investments.
Liability under environmental protection laws resulting from our
commercial mortgage loan portfolio and real estate investments may
weaken our  nancial strength and reduce our pro tability. For more
information, please see Item1, “Business—Regulation—Environmental
Regulation.”
We face risks associated with our international
operations.
Our international operations face political, legal, operational and other
risks that we may not face in our domestic operations. For example,
we may face the risk of restrictions on currency conversion or the
transfer of funds; burdens and costs of compliance with a variety of
foreign laws; political or economic instability in countries in which we
conduct business, including possible terrorist acts; foreign exchange
rate  uctuations; diminished ability to legally enforce our contractual
rights; di erences in cultural environments and unexpected changes
in regulatory requirements; exposure to local economic conditions and
restrictions on the withdrawal of non-U.S. investment and earnings; and
potentially substantial tax liabilities if we repatriate the cash generated
by our international operations back to the U.S. If our business model
is not successful in a particular country, we may lose all or most of our
investment in that country. In addition, as we engage with international
clients, we have made certain up-front commission payments, which
we may not recover if the business does not materialize as we expect.
As our international business grows, we rely increasingly on fronting
carriers or intermediaries in other countries to maintain their licenses
and product approvals, satisfy local regulatory requirements and
continue in business.
For information on the signi cant international regulations that
apply to our Company, please see Item1, “Business—Regulation—
International Regulation.”
Fluctuations in the exchange rate of the U.S.
dollar and other foreign currencies may materially
and adversely aff ect our results of operations.
While most of our costs and revenues are in U.S. dollars, some are in
other currencies. Because our  nancial results in certain countries are
translated from local currency into U.S. dollars upon consolidation,
the results of our operations may be a ected by foreign exchange rate
 uctuations. We do not currently hedge foreign currency risk. If the
U.S. dollar weakens against the local currency, the translation of these
foreign-currency-denominated balances will result in increased net assets,
net revenue, operating expenses, and net income or loss. Similarly, our
net assets, net revenue, operating expenses, and net income or loss will
decrease if the U.S. dollar strengthens against local currency.  ese
 uctuations in currency exchange rates may result in gains or losses
that materially and adversely a ect our results of operations.
Unanticipated changes in tax provisions or exposure
to additional income tax liabilities could materially
and adversely aff ect our results.
In accordance with applicable income tax guidance, the Company
must determine whether its ability to realize the value of its deferred
tax asset in the future is classi ed as “more likely than not.” Under
the income tax guidance, a deferred tax asset should be reduced by a
valuation allowance if, based on the weight of all available evidence,
it is more likely than not that some portion of the deferred tax asset
will not be realized.  e realization of deferred tax assets depends upon
the existence of su cient taxable income of the same character during
the carryback or carryforward periods.
In determining the appropriate valuation allowance, management
made certain judgments relating to recoverability of deferred tax assets,
use of tax loss and tax credit carryforwards, levels of expected future
taxable income and available tax planning strategies.  e assumptions
in making these judgments are updated periodically on the basis of
current business conditions a ecting the Company and overall economic
conditions.  ese management judgments are therefore subject to
change due to factors that include, but are not limited to, changes in
our ability to realize expected capital gains in the foreseeable future or
in our ability to execute other tax planning strategies. Management
will continue to assess and determine the need for, and the amount
of, the valuation allowance in subsequent periods. Any change in the
valuation allowance could have a material impact on our results of
operations and  nancial condition.
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
con dentiality obligations. If we do not properly comply with privacy
and security laws and regulations that require us to protect con dential
information, we could experience adverse consequences, including loss of
customers and related revenue, regulatory problems (including  nes and
penalties), loss of reputation and civil litigation, which could adversely
a 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.”