Assurant 2014 Annual Report Download - page 100

ASSURANT, INC. – 2014 Form 10-KF-12
2 Summary of Signifi cant Accounting Policies
second test to measure the amount of impairment, if any. To
determine the amount of any impairment, we determine the
implied fair value of goodwill in the same manner as if the
reporting unit were being acquired in a business combination
(“Step 2”). Specifi cally, we determine the fair value of all of
the assets and liabilities of the reporting unit, including any
unrecognized intangible assets, in a hypothetical calculation
that yields the implied fair value of goodwill. If the implied
fair value of goodwill is less than the recorded goodwill, we
record an impairment charge for the difference.
In the fourth quarter of 2014, we performed a Step 1 test for
both our Assurant Specialty Property and Assurant Solutions
reporting units and concluded that the estimated fair value
of the reporting units exceeded their respective book values
and therefore goodwill was not impaired.
In the fourth quarter of 2013, the Company chose the option
to fi rst perform a qualitative assessment for our Assurant
Specialty Property reporting unit. Based on this assessment,
the Company determined that it was more likely than not
that the reporting unit’s fair value was more than its carrying
amount, therefore further impairment testing was not
necessary. For our Assurant Solutions reporting unit, we
performed Step 1 and concluded that the estimated fair
value of the reporting unit exceeded its respective book
value and therefore goodwill was not impaired.
For 2014 and 2013, the Assurant Employee Benefi ts and
Assurant Health reporting units did not have goodwill.
Value of Businesses Acquired
VOBA is an identifi able 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 of
purchase. The amount determined represents the purchase
price paid to the seller for producing the business. Similar
to the amortization of DAC, the amortization of VOBA is over
the premium payment period for traditional life insurance
policies and a small block of limited payment policies.
For the remaining limited payment policies, preneed life
insurance policies, all universal life policies and annuities,
the amortization of VOBA is over the expected lifetime of
the policies.
VOBA is tested annually in the fourth quarter for recoverability.
If it is determined that future policy premiums and investment
income or gross profi ts are not adequate to cover related
losses or loss expenses, then an expense is reported in
current earnings. Based on 2014 and 2013 testing, future
policy premiums and investment income or gross profi ts were
deemed adequate to cover related losses or loss expenses.
Other Assets
Other assets consist primarily of investments in unconsolidated
entities, inventory associated with our mobile protection
business and prepaid items. The Company accounts for
investments in unconsolidated entities using the equity
method of accounting since the Company can exert signifi cant
infl uence over the investee, but does not have effective
control over the investee. The Company’s equity in the net
income (loss) from equity method investments is recorded
as income (loss) with a corresponding increase (decrease) in
the investment. Judgment regarding the level of infl uence
over each equity method investee includes considering
factors such as ownership interest, board representation and
policy making decisions. In applying the equity method, the
Company uses fi nancial information provided by the investee,
which may be received on a lag basis.
Other Intangible Assets
Other intangible assets that have fi nite lives, including but
not limited to, customer contracts, customer relationships
and marketing relationships, are amortized over their
estimated useful lives. Other intangible assets deemed
to have indefi nite useful lives, primarily certain state
licenses, are not amortized and are subject to at least annual
impairment tests. At the time of the annual impairment
test, the Company has the option to fi rst assess qualitative
factors to determine whether it is necessary to perform a
quantitative impairment test for indefi nite-lived intangible
assets. Impairment exists if the carrying amount of the
indefi nite-lived other intangible asset exceeds its fair value.
For other intangible assets with fi nite lives, impairment
is recognized if the carrying amount is not recoverable
and exceeds the fair value of the other intangible asset.
Generally other intangible assets with fi nite lives are only
tested for impairment if there are indicators (“triggers”) of
impairment identifi ed. Triggers include, but are not limited
to, a signifi cant adverse change in the extent, manner or
length of time in which the other intangible asset is being
used or a signifi cant adverse change in legal factors or in
the business climate that could affect the value of the other
intangible asset. In certain cases, the Company does perform
an annual impairment test for other intangible assets with
fi nite lives even if there are no triggers present. There were
no material impairment charges related to fi nite-lived and
indefi nite-lived other intangible assets in 2014 or 2013.
Amortization expense and impairment charges are included
in underwriting, general and administrative expenses in the
consolidated statements of operations.
Separate Accounts
Assets and liabilities associated with separate accounts
relate to premium and annuity considerations for variable
life and annuity products for which the contract-holder,
rather than the Company, bears the investment risk. Separate
account assets (with matching liabilities) are reported at
fair value. Revenues and expenses related to the separate
account assets and liabilities, to the extent of benefi ts
paid or provided to the separate account policyholders, are
excluded from the amounts reported in the accompanying
consolidated statements of operations because the accounts
are administered by reinsurers.