Assurant 2014 Annual Report Download

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2014 ANNUAL REPORT
AND FORM 10-K

Table of contents

  • Page 1
    2014 ANNUAL REPORT AND FORM 10-K

  • Page 2
    Financial Highlights Total Revenue Net Earned Premiums, Fees & Other Net Investment Income Net Operating Income1 Shareholders' Equity2 (U.S. dollars in millions) 2014 $10,382 9,666 656 439 4,626 2013 $9,048 8,347 650 467 4,407 2012 $ 8,508 7,712 713 449 4,355 2011 $8,273 7,530 690 438 4,316 ...

  • Page 3
    ... of our 17,600 employees, we are focused on generating sustained outperformance for our customers, shareholders and employees as we build an even stronger company for the future. 2014 RESULTS: EXECUTING OUR ADAPT, STRENGTHEN AND GROW STRATEGY Assurant's net earned premiums, fees and other income...

  • Page 4
    ... change for the health insurance market with the introduction of guaranteed issue and the public exchanges under the Affordable Care Act. Our colleagues at Assurant Health demonstrated agility in adapting to an evolving landscape. For the first time, we offered consumers individual medical coverage...

  • Page 5
    ... selection process and benefit costs to their employees. Across Assurant we will build on the momentum and focus our efforts on specialty products and services that require limited capital investment, generate attractive free cash ï¬,ow and command market leadership positions. STRENGTHEN As part...

  • Page 6
    ...the Assurant Foundation, we focus on a variety of health and wellness, homes and property and other hometown help initiatives. From supporting United Way's health and education programs, or the financial literacy efforts of Junior Achievement, to our employees volunteering to build affordable homes...

  • Page 7
    Global Reach Assurant operates in the United States as well as select worldwide markets, including: Argentina, Brazil, Canada, Chile, China, France, Germany, Italy, Mexico, Puerto Rico, Spain and the United Kingdom. 5 â-ª 2014 ASSURANT ANNUAL REPORT

  • Page 8
    ... (2009) Elyse Douglas (2011) Former Executive Vice President and Chief Financial Officer, Hertz Global Holdings, Inc. and The Hertz Corporation Jean-Paul L. Montupet (2012) Chair of the Board, Assurant; Chair of the Board, The Kresge Foundation; former President, UNUM Life Insurance Company of...

  • Page 9
    .... 2014 Assurant Solutions Assurant Specialty Property Assurant Health Assurant Employee Benefits Corporate and other Amortization of deferred gain on disposal of businesses Interest expense Net operating income Adjustments: Net realized gains on investments Change in tax valuation allowance Loss...

  • Page 10
    ... divided by diluted shares outstanding. The Company believes book value per diluted share, excluding AOCI, provides investors a valuable measure of stockholder value because it excludes the effect of unrealized gains (losses) on investments, which tend to be highly variable from period-to-period and...

  • Page 11
    FORM 10-K

  • Page 12

  • Page 13
    ...Compensation ...68 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...69 Certain Relationships and Related Transactions, and Director Independence ...69 Principal Accounting Fees and Services ...69 PART IV 70 ITEM 15 Exhibits and Financial Statement...

  • Page 14

  • Page 15
    ..., New York (Address of Principal Executive Offices) (212) 859-7000 39-1126612 (I.R.S. Employer Identification No.) 10005 (Zip Code) Registrant's telephone number, including area code: SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Title of Each Class Common Stock, $0.01 Par Value...

  • Page 16
    ...meet their obligations; credit risk of some of our agents in Assurant Specialty Property and Assurant Solutions; inability of our subsidiaries to pay sufficient dividends; failure to provide for succession of senior management and key executives; and cyclicality of the insurance industry. xi. xii...

  • Page 17
    ... insurance; property appraisal, preservation and valuation services; renters insurance and related products; manufactured housing homeowners insurance; individual health and small employer group health insurance; group dental insurance; group disability insurance; and group life insurance. Assurant...

  • Page 18
    ... report. Assurant Solutions For the Years Ended December 31, 2014 December 31, 2013 Net earned premiums for selected product groupings: Extended service contracts and warranties-domestic(1) Extended service contracts and warranties-international(1) Preneed life insurance Credit insurance-domestic...

  • Page 19
    ...services for ESCs and warranties. These contracts provide consumers with coverage on mobile devices, personal computers, consumer electronics, appliances, automobiles and recreational vehicles, protecting them from certain covered losses. We pay the cost of repairing or replacing customers' property...

  • Page 20
    ... Business Assurant Specialty Property For the Years Ended December 31, 2014 December 31, 2013 Net earned premiums by major product grouping: Homeowners (lender-placed and voluntary) Manufactured housing (lender-placed and voluntary) Other(1) TOTAL Fees and other income Segment net income Loss ratio...

  • Page 21
    ... specialty agents distribute ï¬,ood products and miscellaneous Assurant Health For the Years Ended December 31, 2014 December 31, 2013 Net earned premiums: Individual Small employer group TOTAL Fees and other income Segment net (loss) income Loss ratio(1) Expense ratio(2) Combined ratio(3) Equity...

  • Page 22
    ... costs, reviewing our pricing assumptions in light of changes in the risk pool of consumers buying policies and evaluating our product portfolio. Our new 2015 individual and small employer group medical products, which include all of the essential health benefits required under the Affordable Care...

  • Page 23
    ... ITEM 1 Business Assurant Employee Benefits For the Years Ended December 31, 2014 December 31, 2013 Net Earned Premiums: Group disability Group dental Group life Group supplemental and vision products TOTAL Voluntary Employer-paid and other TOTAL Fees and other income Segment net income Loss ratio...

  • Page 24
    ...of Canada Caribbean American Life Assurance Company Caribbean American Property Insurance Company John Alden Life Insurance Company Reliable Lloyds Standard Guaranty Insurance Company Time Insurance Company UDC Dental California Union Security Dental Care New Jersey 10 ASSURANT, INC. - 2014 Form 10...

  • Page 25
    ... 1 Business Outlook Union Security Insurance Company Union Security Life Insurance Company of New York United Dental Care of Arizona United Dental Care of Colorado United Dental Care of Michigan United Dental Care of Missouri United Dental Care of New Mexico United Dental Care of Ohio United Dental...

  • Page 26
    ... enter and exit markets or to provide, terminate or cancel certain coverages; • imposing statutory accounting and annual statement disclosure requirements; • regulating product types and approving policy forms and mandating certain insurance benefits; • regulating premium rates, including the...

  • Page 27
    ... information is used, and to provide them with the opportunity to "opt out" of certain disclosures, if applicable. ASSURANT, INC. - 2014 Form 10-K Federal Regulation Patient Protection and Affordable Care Act Although health insurance is generally regulated at the state level, the Affordable Care...

  • Page 28
    ... 1 Business Dodd-Frank Wall Street Reform and Consumer Protection Act Regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") address mortgage servicers' obligations to correct errors asserted by mortgage loan borrowers; to provide certain information...

  • Page 29
    ... managers, and we are eligible to insure properties securing loans guaranteed by or sold to government-sponsored entities ("GSEs") and serviced by the mortgage loan servicers with whom we do business. In Assurant Health, we have distribution relationships for our individual health insurance products...

  • Page 30
    ... insured could materially reduce our revenues and profits from this business. In our Assurant Health and Assurant Employee Benefits segments, a loss of one or more of certain discount arrangements we maintain with PPOs could lead to higher medical or dental costs and/ or a loss of members...

  • Page 31
    .... General inï¬,ationary pressures may affect the costs of medical and dental care, as well as repair and replacement costs on our real and personal property lines, increasing the costs of paying claims. Inï¬,ationary pressures may also affect the costs associated with our preneed insurance policies...

  • Page 32
    ... assure that we will be able to retain them. In July 2014, Moody's downgraded the financial strength ratings for Time Insurance Company and John Alden Life Insurance Company from Baa1 to Baa2 due to pressures on earnings and concerns about the impact of the Affordable Care Act. Rating agencies...

  • Page 33
    ... insurance premiums, fee income, cash ï¬,ow from our investment portfolio and liquid assets, consisting mainly of cash or assets that are readily convertible into cash. Sources of liquidity in normal markets also include a variety of short-and long-term instruments. If our access to capital markets...

  • Page 34
    ...pay premiums for the duration of the disability or for a stated period, during which time the life insurance coverage continues. If interest rates decline, reserves for open and new claims in Assurant Employee Benefits may need to be calculated using lower discount rates, thereby increasing the net...

  • Page 35
    ... Disclosures About Market Risk-Credit Risk" for additional information on the composition of our fixed maturity investment portfolio. We currently invest in a small amount of equity securities (approximately 3% of the fair value of our total investments as of December 31, 2014). However, we...

  • Page 36
    ... to support the Company's business in an efficient and cost-effective manner, and keep current with technological advances, evolving industry and regulatory standards and customer needs. In addition, our ability to keep our systems integrated with those of our clients 22 ASSURANT, INC. - 2014 Form...

  • Page 37
    ... our Fortis Financial Group ("FFG") division to The Hartford Financial Services Group, Inc. ("The Hartford") and in 2000 we sold our Long Term Care ("LTC") division to John Hancock Life Insurance Company ("John Hancock"), now a subsidiary of Manulife Financial Corporation. Most of the assets backing...

  • Page 38
    ... the credit risk of some of the clients and agents with which we contract in Assurant Solutions and Assurant Specialty Property. For example, we advance agents' commissions as part of our preneed insurance product offerings. These advances are a percentage of the total face amount of coverage. There...

  • Page 39
    ... of business; capital, surplus and dividends; underwriting limitations; companies' ability to enter and exit markets; statutory accounting and other disclosure requirements; policy forms; coverage; companies' ability to provide, terminate or cancel certain coverages; premium rates, including...

  • Page 40
    ... the ability to manage health care and utilization due to direct access laws that allow insureds to seek services directly from specialty medical providers without referral by a primary care provider; • new or enhanced regulatory requirements that require insurers to pay claims on terms other than...

  • Page 41
    ... Estimates-Health Insurance Premium Rebate Liability" for more information about the minimum medical loss ratio and the Company's rebate estimate calculations. In addition, the Affordable Care Act imposes limitations on the deductibility of compensation and certain other payments. Although Assurant...

  • Page 42
    ...of comparable companies; changes in our financial strength ratings; limitations on premium levels or the ability to maintain or raise premiums on existing policies; regulatory developments and negative publicity relating to us or our competitors. In addition, broad market and industry ï¬,uctuations...

  • Page 43
    ... None. ITEM 2 Properties in Rapid City, South Dakota. Assurant Employee Benefits has a headquarters building in Kansas City, Missouri. Assurant Health has a headquarters building in Milwaukee, Wisconsin. We lease office space for various offices and service centers located throughout the...

  • Page 44
    ..., as the broad equity market indexes, $300 and the S&P 400 Multi-line Insurance Index and S&P 500 Multi-line Insurance Index, as the published industry indexes. The graph assumes that the value of the investment in the common stock and each index was $100 on December 31, 2009 and that all dividends...

  • Page 45
    ... ITEM 5 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Annual Return Percentage Years Ending Company / Index Assurant, Inc. S&P 500 Index S&P 400 MidCap Index S&P 500 Multi-line Insurance Index* S&P 400 Multi-line Insurance Index* * 12...

  • Page 46
    ...earned premiums Net investment income Net realized gains on investments(1) Amortization of deferred gain on disposal of businesses Fees and other income Total revenues Benefits, losses and expenses Policyholder benefits(2) Amortization of deferred acquisition costs and value of businesses acquired...

  • Page 47
    ... individual catastrophic events that generated losses to the Company in excess of $5,000, pre-tax and net of reinsurance. (3) Following the completion of our annual goodwill impairment analysis, we recorded an impairment charge of $306,381 related to Assurant Employee Benefits and Assurant Health...

  • Page 48
    ... points compared with Twelve Months 2013 primarily due to continued operational discipline. Twelve Months 2014 includes a $19,937 annual insurer fee related to the Affordable Care Act. In 2015 we expect Assurant Health's results to vary based on claims development on Affordable Care Act policies...

  • Page 49
    ... of Operations estimated recoveries under Affordable Care Act risk mitigation programs. In addition, we expect net earned premiums and fees to increase in 2015 due to increased premium rates and strong sales of individual major medical policies. Assurant Employee Benefits net income increased...

  • Page 50
    ...to insurers for high cost individual business sold on or off the public marketplaces. The reinsurance entity established by HHS is funded by a per-member reinsurance fee assessed on all commercial medical plans, including self-insured group health plans. Only Affordable Care Act individual plans are...

  • Page 51
    ... Duration Contracts: Group term life - 2,905 169,006 28,786 Group disability - 1,564 1,127,068 107,961 Medical - 130,185 137,370 240,830 Dental - 4,013 2,251 17,037 Property and warranty - 2,386,719 130,517 546,979 Credit life and disability - 241,092 34,581 43,298 Extended service contracts - 3,568...

  • Page 52
    ... reported Group term life, discount rate increased by 100 basis points Medical IBNR reserves calculated using generally accepted actuarial methods represent the largest component of reserves for short duration medical claims and benefits payable. The primary methods we use in their estimation are...

  • Page 53
    ... homeowners, multi-family housing, credit property, credit unemployment and warranty insurance and some longer-tail coverages (e.g. asbestos, environmental, other general liability and personal accident). Claim reserves for these lines are calculated on a product line basis using generally accepted...

  • Page 54
    ... premium-paying period. These acquisition costs consist primarily of first year commissions paid to agents. For preneed investment-type annuities, preneed life insurance policies with discretionary death benefit growth issued after January 1, 2009, universal life insurance policies, and investment...

  • Page 55
    ... to monthly pay credit insurance business consist mainly of direct response advertising costs and are deferred and amortized over the estimated average terms and balances of the underlying contracts. Acquisition costs relating to group term life, group disability, group dental and group vision...

  • Page 56
    ...of deferred tax assets, use of tax loss and tax credit carryforwards, levels of expected future taxable income and available tax planning strategies. The assumptions used in making these judgments are updated periodically by management based on current business conditions that affect the Company and...

  • Page 57
    ...Assurant Assurant Assurant Assurant TOTAL Solutions Specialty Property Health Employee Benefits $ $ For the 2014 impairment test, we compared each reporting unit's estimated fair value with its net book value ("Step 1"). For both the Assurant Solutions and Assurant Specialty Property reporting...

  • Page 58
    ... rate declines further increase the net unrealized investment portfolio gain position, we could determine that we need to record an impairment charge related to goodwill in Assurant Solutions and Assurant Specialty Property. Had the net book value exceeded its estimated fair value in the Step 1 test...

  • Page 59
    ...tax) decrease in reportable catastrophe losses in our Assurant Specialty Property segment. Partially offsetting this item was lower net income in our Assurant Health and Assurant Employee Benefits segments. In addition, the Corporate and Other net loss increased as net realized gains on investments...

  • Page 60
    ... information regarding Assurant Solutions' segment results of operations: For the Years Ended December 31, 2014 2013 Revenues: Net earned premiums Net investment income Fees and other income Total revenues Benefits, losses and expenses: Policyholder benefits Selling, underwriting and general...

  • Page 61
    ... benefits increased $131,965 primarily related to the LSG acquisition partially offset by favorable loss experience in our domestic mobile business. Selling, underwriting and general expenses increased $355,799. Commissions, taxes, licenses and fees, of which ASSURANT, INC. - 2014 Form 10-K 47

  • Page 62
    ..., losses and expenses divided by net earned premiums and fees and other income. Regulatory Matters In January 2015, the New York Department of Financial Services ("NYDFS") issued regulations regarding tracking costs associated with lender placed insurance rates. We are currently assessing the new...

  • Page 63
    ... and new rates in New York, which were approved in August 2014. The changes to the program affect annual lender-placed hazard and real estate owned policies issued in the State of New York, which accounted for approximately $120,000 and $101,000 of Assurant Specialty Property's net earned premiums...

  • Page 64
    ... support business growth, including costs for the newly acquired FAS business. Assurant Health Overview The table below presents information regarding Assurant Health's segment results of operations: For the Years Ended December 31, 2014 2013 Revenues: Net earned premiums Net investment income Fees...

  • Page 65
    ... Care Act due to a change in estimated non-deductible compensation Risk corridor This is a temporary risk-sharing program for 2014-2016. Based on ratios of allowable costs to target costs as defined by the Affordable Care Act, health insurers will make payments to ASSURANT, INC. - 2014 Form...

  • Page 66
    ...fits Selling, underwriting and general expenses Total benefits, losses and expenses Segment income before provision for income taxes Provision for income taxes SEGMENT NET INCOME Net earned premiums: Group disability Group dental Group life Group supplemental and vision products TOTAL Voluntary...

  • Page 67
    ... disability loss experience, including a previously disclosed decrease in the reserve discount rate primarily for new long-term disability claims. Additionally, Twelve Months 2013 results were also impacted by lower investment income compared to Twelve Months 2012. Total Revenues Total revenues...

  • Page 68
    ...) change in net realized gains on investments, lower employee-related costs and impact of expense reduction initiatives. These items were partially offset by a $19,400 (after-tax) loss on an asset held for sale. Total Revenues Total revenues increased $7,189 or 10%, to $79,282 for Twelve Months 2014...

  • Page 69
    ... maturity securities Equity securities Commercial mortgage loans on real estate Policy loans Short-term investments Other investments Cash and cash equivalents Total investment income Investment expenses NET INVESTMENT INCOME $ $ Net investment income increased $6,133, or 1%, to $656,429 for 2014...

  • Page 70
    ... non-binding broker quotes with Level 2 inputs, these securities are categorized as Level 3. A non-pricing service source prices certain privately placed corporate bonds using a model with observable inputs including, but not limited to, the credit rating, credit spreads, sector add-ons, and issuer...

  • Page 71
    ... affirmed American Bankers Life Assurance Company of Florida and Union Security Insurance Company's financial strength ratings of A3 with a stable outlook. Moody's downgraded the financial strength ratings from Baa1 to Baa2 for Time Insurance Company and John Alden Life Insurance Company due to...

  • Page 72
    ... of funds for our subsidiaries consist of premiums and fees collected, proceeds from the sales and maturity of investments and net investment income. Cash is primarily used to pay insurance claims, agent commissions, operating expenses and taxes. We generally invest our subsidiaries' excess funds in...

  • Page 73
    ...of the net periodic benefit cost. The impact of a 25 basis point change in the discount rate on the 2015 projected benefit expense would result in a change of $3,000 for the Assurant Pension Plan and the various nonqualified pension plans and no impact on the retirement health benefit plan. The...

  • Page 74
    ...inï¬,ows from premiums collected from our insurance products and income received from our investments while outï¬,ows consist of policy acquisition costs, benefits paid, and operating expenses. These 60 ASSURANT, INC. - 2014 Form 10-K net cash ï¬,ows are then invested to support the obligations of...

  • Page 75
    ...due to changes in the timing of payments and by amounts yet to be recovered under the 3 R's program, partially offset by increased net written premiums in Assurant Solutions, Assurant Health and Assurant Employee Benefits. For more information on the 3 R's, please refer to Assurant Health's Results...

  • Page 76
    .... We manage interest rate risk by selecting investments with characteristics such as duration, yield, currency and liquidity tailored to the anticipated cash outï¬,ow characteristics of our insurance and reinsurance liabilities. Our group long-term disability and group term life waiver of premium...

  • Page 77
    ... Portfolio yield Basis point change in portfolio yield 0 4.98% -% 50 5.06% 0.08% 100 5.14% 0.16% Credit Risk We have exposure to credit risk primarily from customers, as a holder of fixed maturity securities and by entering into reinsurance cessions. Our risk management strategy and investment...

  • Page 78
    ... to the level of inï¬,ation. Approximately 5% of Assurant preneed insurance policies, with reserves of $268,161 and $283,968 as of December 31, 2014 and 2013, respectively, have death benefits that are guaranteed to grow with the CPI. In times of rapidly rising inï¬,ation, the credited death bene...

  • Page 79
    ...contracts. Under insurance statutes, our insurance companies may use derivative financial instruments to hedge actual or anticipated changes in their assets or liabilities, to replicate cash market instruments or for certain income-generating activities. These statutes generally prohibit the use of...

  • Page 80
    ... of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations...

  • Page 81
    ... 9B Other Information Management, including the Company's Chief Executive Officer and its Chief Financial Officer, based on their evaluation of the Company's internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)), have concluded that the Company's internal control...

  • Page 82
    ... our website at www.assurant.com which is not incorporated by reference herein. We intend to post any amendments to or waivers from the Code of Ethics that apply to our executive officers or directors on our website. ITEM 11 Executive Compensation The information in the 2015 Proxy Statement under...

  • Page 83
    ... ITEM 14 Principal Accounting Fees and Services ITEM 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information in the 2015 Proxy Statement under the captions "Equity Compensation Plan Information," "Security Ownership of Certain Beneficial...

  • Page 84
    ... are not applicable, not required, or the information is included in the financial statements or the notes thereto. (a)3. Exhibits Pursuant to the rules and regulations of the SEC, the Company has filed or incorporated by reference certain agreements as exhibits to this Annual Report on Form 10...

  • Page 85
    ...February 23, 2012).* Form of Assurant, Inc. Restricted Stock Unit Award Agreement for Time-based Awards under the Assurant, Inc. Long Term Equity Incentive Plan (incorporated by reference from Exhibit 10.8 to the Registrant's Form 10-K, originally filed on February 27, 2009).* Form of Assurant, Inc...

  • Page 86
    ...February 1, 2010).* American Security Insurance Company Investment Plan Document (incorporated by reference from Exhibit 10.34 to the Registrant's Form 10-K, originally filed on March 3, 2008). Letter Agreement, dated October 11, 2010, by and between Assurant, Inc. and Alan Colberg (incorporated by...

  • Page 87
    ... Officer of Assurant, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. The following materials from the Company's Annual Report on Form 10-K for the year ended December 31, 2014, formatted in XBRL (Extensible Business Reporting Language...

  • Page 88
    ..., thereunto duly authorized on February 19, 2015. ASSURANT, INC. By: Name: Title: /s/ALAN B. COLBERG Alan B. Colberg Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf...

  • Page 89
    ... of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations...

  • Page 90
    ... sale, at fair value (amortized cost-$10,048,100 in 2014 and $10,520,310 in 2013) Equity securities available for sale, at fair value (cost-$434,875 in 2014 and $417,535 in 2013) Commercial mortgage loans on real estate, at amortized cost Policy loans Short-term investments Collateral held/pledged...

  • Page 91
    ... before taxes Net other-than-temporary impairment losses recognized in earnings Amortization of deferred gain on disposal of businesses Fees and other income TOTAL REVENUES Benefits, losses and expenses Policyholder benefits Amortization of deferred acquisition costs and value of business acquired...

  • Page 92
    ...fit cost and change in funded status, net of taxes of $26,534, $(51,302), and $(163), respectively Total other comprehensive income (loss) TOTAL COMPREHENSIVE INCOME See the accompanying notes to the consolidated financial statements $ Years Ended December 31, 2014 2013 470,907 $ 488,907 $ 2012...

  • Page 93
    ... 31,2012 Stock plan exercises Stock plan compensation expense Change in tax benefit from sharebased payment arrangements Dividends Acquisition of common stock Net income Other comprehensive (loss) Balance, December 31, 2013 Stock plan exercises Stock plan compensation expense Change in tax bene...

  • Page 94
    ... Commercial mortgage loans on real estate Other invested assets Property and equipment and other Subsidiary, net of cash transferred(1) Equity interest(2) Change in short-term investments Change in policy loans Change in collateral held/pledged under securities agreements NET CASH PROVIDED BY (USED...

  • Page 95
    ...Supplemental information: Income taxes paid Interest on debt paid $ $ $ (1) 2014 includes the acquisition of StreetLinks, LLC, eMortgage Logic, LLC, CWI Group and other immaterial subsidiaries. 2013 includes the acquisition of Field Asset Services Group Limited and Lifestyle Services Group Limited...

  • Page 96
    ...valuation services, renters insurance and related products, manufactured housing homeowners insurance, individual health and small employer group health insurance, group dental insurance, group disability insurance, and group life insurance. Assurant, Inc. (the "Company") is a holding company whose...

  • Page 97
    .... Policy loans are reported at unpaid principal balances, which do not exceed the cash surrender value of the underlying policies. Short-term investments include money market funds and short maturity investments. These amounts are reported at cost, which approximates fair value. The Company engages...

  • Page 98
    ...Policies the Assurant Deferred Compensation Plan ("ADC"). The joint ventures and partnerships are valued according to the equity method of accounting. In applying the equity method, the Company uses financial information provided by the investee, generally on a three month lag. The invested assets...

  • Page 99
    ... using the straight-line method over their estimated useful lives, not to exceed 20 years. Property and equipment are assessed for impairment when impairment indicators exist. Long Duration Contracts Acquisition costs for pre-funded funeral ("preneed") life insurance policies issued prior to 2009...

  • Page 100
    ... in the consolidated statements of operations. Value of Businesses Acquired VOBA is an identifiable intangible asset representing the value of the insurance businesses acquired. The amount is determined using best estimates for mortality, lapse, maintenance expenses and investment returns at date...

  • Page 101
    ... 2006, individual voluntary limited benefit health policies issued in 2007 and later, the traditional life insurance contracts Short Duration Contracts The Company's short duration contracts include group term life contracts, group disability contracts, medical contracts, dental contracts, vision...

  • Page 102
    ... amount of insurance protection provided. The Company's short duration contracts primarily include group term life, group disability, medical, dental, vision, property and warranty, credit life and disability, and extended service contracts and individual medical contracts issued from 2003 through...

  • Page 103
    ...to insurers for high cost individual business sold on or off the public marketplaces. The reinsurance entity established by HHS is funded by a per-member reinsurance fee assessed on all commercial medical plans, including self-insured group health plans. Only Affordable Care Act individual plans are...

  • Page 104
    .... On January 1, 2014, the Company adopted the other expenses guidance that addresses how health insurers should recognize and classify in their statements of operations fees mandated by the Affordable Care Act. The Affordable Care Act imposes an annual fee on health insurers for each calendar year...

  • Page 105
    ... sheets. Any subsequent changes in the indemnification asset are recorded as an offset to the investment in this unconsolidated entity. On October 25, 2013, the Company acquired Lifestyle Services Group, a mobile phone insurance provider based in the U.K. The acquisition-date fair value of the...

  • Page 106
    ... Assurant Specialty Property to better align its portfolio of businesses, increase resources allocated toward these markets and strengthen their core business. The sale price was based on GAAP book value of the business from June 30, 2014 with adjustments until January 1, 2015. 5. Investments...

  • Page 107
    ... the overall investment portfolio as of December 31, 2014 and 2013. At December 31, 2014 and 2013, the securities include general obligation and revenue bonds issued by states, cities, counties, school districts and similar issuers, including $270,107 and $234,640, respectively, of advance refunded...

  • Page 108
    ...,128 Fixed maturity securities Equity securities Commercial mortgage loans on real estate Policy loans Short-term investments Other investments Cash and cash equivalents Total investment income Investment expenses NET INVESTMENT INCOME $ $ No material investments of the Company were non-income...

  • Page 109
    ...the amount and timing of projected future cash ï¬,ows. The net present value is calculated by discounting the Company's best estimate of projected future cash ï¬,ows at the effective interest rate implicit in the security at the date of acquisition. For residential and commercial mortgage-backed and...

  • Page 110
    ... at the balance sheet date. The discounted cash ï¬,ows become the new amortized cost basis of the fixed maturity security. In periods subsequent to the recognition of an OTTI, the Company generally accretes the discount (or amortizes the reduced premium) into net investment income, up to the non...

  • Page 111
    ... 2014 and from $9 to $15,574 at December 31, 2013. Credit quality indicators for commercial mortgage loans are loan-to-value and debt-service coverage ratios. Loan-to-value and debt-service coverage ratios are measures commonly used to assess the credit quality of commercial mortgage loans. The loan...

  • Page 112
    ...required by law. The Company utilizes derivative instruments in managing the Assurant Solutions segment preneed life insurance business exposure to inï¬,ation risk. The derivative instruments, Consumer Price Index Caps (the "CPI CAPs"), limits the inï¬,ation risk on certain policies. The CPI CAPs do...

  • Page 113
    ... only certain investments or certain assets and liabilities within these line items are measured at estimated fair value. Other investments are comprised of investments in the Assurant Investment Plan, American Security Insurance Company Investment Plan, Assurant Deferred Compensation Plan, a modi...

  • Page 114
    ...in the availability of observable market information and re-evaluation of the observability of pricing inputs. Any remaining unpriced securities are submitted to independent brokers who provide non-binding broker quotes or are priced by other qualified sources. F-26 ASSURANT, INC. - 2014 Form 10-K

  • Page 115
    ... Foreign governments Commercial mortgage-backed Residential mortgage-backed Corporate Equity Securities Non-redeemable preferred stocks Other investments Other assets Financial Liabilities Other liabilities TOTAL LEVEL 3 ASSETS AND LIABILITIES Balance, beginning of period Total (losses) gains...

  • Page 116
    ... credit information, perceived market movements and sector news. Commercial mortgage-backed, residential mortgage-backed and asset-backed: Commercial mortgage-backed, residential mortgage-backed and asset-backed securities are priced by our pricing service utilizing monthly payment information...

  • Page 117
    ... the price used is taken from the non-pricing service source. The pricing service provides information to indicate which securities were priced using market observable inputs so that the Company can properly categorize our financial assets in the fair value hierarchy. ASSURANT, INC. - 2014 Form 10...

  • Page 118
    ... recoverable. These assets include commercial mortgage loans, goodwill and finite-lived intangible assets. For its 2014 and 2012 fourth quarter annual goodwill impairment test, the Company performed a Step 1 analysis for the Assurant Solutions and Assurant Specialty Property reporting units. Based...

  • Page 119
    ... values for the Company's policy reserves under investment products are determined using discounted cash ï¬,ow analysis. Key inputs to the valuation include projections of policy cash ï¬,ows, reserve run-off, market yields and risk margins. Funds held under reinsurance: the carrying value reported...

  • Page 120
    ... from agents related to Assurant Solutions mobile business and amounts due under the Affordable Care Act's Risk Adjustment Program. 8. Income Taxes The Company and the majority of its subsidiaries are subject to U.S. tax and file a U.S. consolidated federal income tax return. Information about...

  • Page 121
    ... loss carryforwards Deferred gain on disposal of businesses Compensation related Employee and post-retirement benefits Unearned fee income Other Total deferred tax asset Less valuation allowance Deferred tax assets, net of valuation allowance Deferred Tax Liabilities Deferred acquisition costs Net...

  • Page 122
    ... incur additional U.S. income taxes of $971 net of anticipated foreign tax credits. At December 31, 2014, the Company and its subsidiaries had $202,099 of net operating loss carryforwards in certain foreign subsidiaries that will expire if unused as follows: Expiration Year 2015 - 2019 2020 - 2024...

  • Page 123
    ... annual tests if an event occurs or circumstances change that would "more likely than not" reduce the estimated fair value of the reporting unit below its carrying value. The goodwill impairment test has two steps. Step 1 of the test identifies potential impairments at the reporting unit level...

  • Page 124
    ... outstanding balance of VOBA is from the Assurant Solutions segment with the majority related to the preneed life insurance business. VOBA in the preneed life insurance business assumes an interest rate ranging from 5.4% to 7.5%. At December 31, 2014 the estimated amortization of VOBA for the next...

  • Page 125
    ... Life insurance no longer offered Universal life and other products no longer offered FFG, LTC and other disposed businesses Medical All other Short Duration Contracts: Group term life Group disability Medical Dental Property and warranty Credit life and disability Extended service contracts...

  • Page 126
    ... table provides a roll forward of the Company's product lines with the most significant claims and benefits payable balances: group term life, group disability, medical and property and warranty lines of business. Claims and benefits payable is comprised of case and IBNR reserves. Group Term Life...

  • Page 127
    ... significant accounting policies. See Note 2 for further information. The Assurant Solutions segment manages preneed insurance products through two separate divisions: the independent division and the American Memorial Life Insurance Company ("AMLIC") division. The Company signed an agreement with...

  • Page 128
    ...2000 and all traditional life insurance issued by the AMLIC division use discount rates, which vary by issue year and product, ranging from 0.0% to 7.5% in 2014 and 2013. Mortality assumptions for preneed life insurance issued or acquired after September 2000 and prior to 2009 are based upon pricing...

  • Page 129
    ... substantial collateral (in the form of funds withheld, trusts, and letters of credit) as security. The Not Rated category also includes recoverables from the Department of Health and Human Services, the National Flood Insurance Program and the Florida Hurricane Catastrophe Fund. An allowance for...

  • Page 130
    ...Puerto Rico, and along the Gulf and Eastern Coasts of the United States. The agreements expire in February 2015. Ibis Re II financed the property catastrophe reinsurance coverage by issuing $130,000 in catastrophe bonds to unrelated investors (the "Series 2012-1 Notes"). F-42 ASSURANT, INC. - 2014...

  • Page 131
    ... the separate account assets relating to Modified Guaranteed Annuity business sold if such value declines below the value of the associated liabilities. If The Hartford fails to fulfill these obligations, the Company will be obligated to make these payments. ASSURANT, INC. - 2014 Form 10-K F-43

  • Page 132
    ... Facility has a sublimit for letters of credit issued thereunder of $50,000. The proceeds of these loans may be used for the Company's commercial paper program or for general corporate purposes. The Company may increase the total amount available under the 2014 Credit Facility to $525,000 subject to...

  • Page 133
    ... ended December 31, 2014, 2013 and 2012, the Company recognized compensation costs net of a 5% per year forfeiture rate on a pro-rated basis over the remaining vesting period. based on the actual number of shares issued. The fair value of RSUs is estimated using the fair market value of a share of...

  • Page 134
    ... insurance group. The expected term for grants issued during the years ended December 31, 2014, 2013 and 2012 was assumed to equal the average of the vesting period of the PSUs. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant. F-46 ASSURANT, INC. - 2014...

  • Page 135
    ... awards were granted under the 2004 Assurant Long-Term Incentive Plan ("ALTIP"), which authorized the granting of up to 10,000,000 new shares of the Company's common stock to employees and officers under the ALTIP, Business Value Rights Program and CEO Equity Grants Program. Under the ALTIP, the...

  • Page 136
    ..., 2014, the Company repurchased 3,298,490 shares of the Company's outstanding common stock at a cost of $218,204, exclusive of commissions, leaving $486,670 remaining under the total repurchase authorization at December 31, 2014. The timing and the amount of future repurchases will depend on market...

  • Page 137
    ...Total before tax Provision for income taxes Net of tax NET OF TAX (1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost. See Note 21 - Retirement and Other Employee Benefits for additional information ASSURANT, INC. - 2014 Form 10...

  • Page 138
    ... as contract deposits under GAAP, with cost of insurance recognized as revenue when assessed and other contract charges recognized over the periods for which services are provided; 4) the classification and carrying amounts of investments in certain securities are different under SAP than under...

  • Page 139
    ... Plan") covering substantially all employees. The Assurant Pension Plan is considered "qualified" because it meets the requirements of Internal Revenue Code Section 401(a) ("IRC 401(a)") and the Employee Retirement Income Security Act of 1974 ("ERISA"). The Assurant Pension Plan is a pension equity...

  • Page 140
    ...of year Change in plan assets Fair value of plan assets at beginning of year Actual return on plan assets Employer contributions Benefits paid (including administrative expenses) Fair value of plan assets at end of year Funded status at end of year Pension Benefits 2013 2012 Retirement Health Bene...

  • Page 141
    ... fully reï¬,ected in the market-related value of plan assets over the next five years using the methodology described above. Other post-employment benefit assets under the Retirement Health Benefits are valued at fair value. The estimated net loss and prior service cost of Pension Benefits that...

  • Page 142
    ...fits 2014 2013 2012 4.64% 3.71% 4.40% - - - Retirement Health Benefits 2014 2013 2012 4.99% 4.12% 4.64% 6.75% 6.75% 6.75% Discount rate Expected long-term return on plan assets * Assumed rates of compensation increases are also used to determine net periodic benefit cost. Assumed rates varied...

  • Page 143
    ... hedge fund Commingled real estate fund Private equity fund High 10.0% 20.0% 10.0% 11.5% 36.0% 10.0% 10.5% 8.5% 8.5% (1) The Plans' long-term asset allocation targets are 30% equity, 50% fixed income and 20% investment funds. The Company invests certain plan assets in investment funds, examples...

  • Page 144
    ... Employee Benefits The fair value hierarchy for the Company's qualified pension plan and other post retirement benefit plan assets at December 31, 2014 by asset category, is as follows: Qualified Pension Benefits Financial Assets Cash and cash equivalents: Short-term investment funds Equity...

  • Page 145
    ...The following table for the Company's qualified pension plan and retirement health benefit plan summarizes the change in fair value associated with the MIMSF and Private Equity Partners XI Limited Partnership, the only Level 3 financial assets. Retirement Pension Benefit Health Benefit $ 61,502...

  • Page 146
    ...: Assurant Solutions, Assurant Specialty Property, Assurant Health, Assurant Employee Benefits, and Corporate & Other. Assurant Solutions provides mobile device protection, debt protection administration, credit-related insurance, warranties and service contracts and pre-funded funeral insurance...

  • Page 147
    ... Net earned premiums Net investment income Net realized gains on investments Amortization of deferred gain on disposal of businesses Fees and other income Total revenues Benefits, losses and expenses Policyholder benefits Amortization of deferred acquisition costs and value of business acquired...

  • Page 148
    ... 5,299 253,630 243,253 7,543 250,796 Revenue is based in the country where the product was sold and long-lived assets, which are primarily property and equipment, are based on the physical location of those assets. The Company has no reportable major customers. F-60 ASSURANT, INC. - 2014 Form 10-K

  • Page 149
    ...: 2014 Solutions: Credit Service contracts Preneed Other TOTAL Specialty Property: Homeowners (lender-placed and voluntary) Manufactured housing (lender-placed and voluntary) Other TOTAL Health: Individual Small employer group TOTAL Employee Benefits: Group disability Group dental Group life Group...

  • Page 150
    ...46 $ $ $ $ $ $ $ $ Fourth quarter 2014 results were primarily affected by increased claims in the Assurant Health segment, decreased net income in the Assurant Specialty Property segment due to normalization of our lender-placed business and a previously disclosed $19,400 net loss on the sale of...

  • Page 151
    ... Payment Protection Insurance ("PPI") policies that, for a period of time, were underwritten by an Assurant subsidiary and sold by various alleged agents, including Carrington Carr Home Finance Limited ("CCHFL"), which is now in administration. In early 2014, as a result of consumer complaints...

  • Page 152
    ...14,131,452 (in thousands) Fair Value 176,842 $ 769,841 664,863...EQUITY SECURITIES Commercial mortgage loans on real estate, at amortized cost Policy loans Short-term investments Collateral held/pledged under securities agreements Other investments TOTAL INVESTMENTS $ F-64 ASSURANT, INC. - 2014 Form...

  • Page 153
    ...2013) Equity securities available for sale, at fair value (amortized cost-$13,014 in 2014 and $12,157 in 2013) Short-term investments Other investments Total investments Cash and cash equivalents Receivable from subsidiaries, net Income tax receivable Accrued investment income Property and equipment...

  • Page 154
    ...358 433,822 55,085 488,907 $ 2012 8,428 7,464 92,320 601,356 709,568 Revenues Net investment income Net realized gains on investments Fees and other income Equity in undistributed net income of subsidiaries TOTAL REVENUES Expenses General and administrative expenses Interest expense TOTAL EXPENSES...

  • Page 155
    ... securities available for sale Equity securities available for sale Other invested assets Property and equipment and other Subsidiary Capital contributed to subsidiaries Return of capital contributions from subsidiaries Change in short-term investments NET CASH PROVIDED BY (USED IN) INVESTING...

  • Page 156
    Schedule III-Supplementary Insurance Information ASSURANT, INC. FOR THE YEARS ENDED DECEMBER 31, 2014, 2013 & 2012 Future policy benefits and expenses Benefits Amortization claims, of deferred losses and policy settlement acquisition expenses costs Property and Casualty Premiums Written Deferred ...

  • Page 157
    ...2.0% 5.5% Life Insurance in Force Premiums: Life insurance Accident and health insurance Property and liability insurance TOTAL EARNED PREMIUMS Benefits: Life insurance Accident and health insurance Property and liability insurance TOTAL POLICYHOLDER BENEFITS $ $ $ ASSURANT, INC. - 2014 Form 10...

  • Page 158
    ... ASSURANT, INC. AS OF DECEMBER 31, 2014, 2013 AND 2012 Balance at Beginning of Year 2014 Valuation allowance for foreign NOL deferred tax carryforward $ Valuation allowance for deferred tax assets Valuation allowance for mortgage loans on real estate Valuation allowance for uncollectible agents...

  • Page 159

  • Page 160
    ... PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 300 Madison Avenue New York, NY 10017 Telephone: 646.471.3000 Fax: 813.286.6000 www.pwc.com FORM 10-K AND OTHER REPORTS Copies of the 2014 Annual Report on Form 10-K and other reports filed with the U.S. Securities and Exchange Commission (SEC...

  • Page 161
    Assurant, Inc. 28 Liberty Street 41st Floor New York, NY 10005 Telephone: 212.859.7000 www.assurant.com