Assurant 2014 Annual Report Download - page 102

ASSURANT, INC. – 2014 Form 10-KF-14
2 Summary of Signifi cant Accounting Policies
settling the claims. The claims and benefi ts payable reserves
include (1) case reserves for known but unpaid claims as of
the balance sheet date; (2) IBNR reserves for claims where
the insured event has occurred but has not been reported
to the Company as of the balance sheet date; and (3) loss
adjustment expense reserves for the expected handling costs
of settling the claims.
For group disability, the case reserves and the IBNR reserves
are recorded at an amount equal to the net present value
of the expected future claims payments. Group long-term
disability and group term life waiver of premiums reserves
are discounted to the valuation date at the valuation interest
rate. The valuation interest rate is reviewed quarterly by
taking into consideration actual and expected earned rates
on our asset portfolio. Group long-term disability and group
term life reserve adequacy studies are performed annually,
and morbidity and mortality assumptions are adjusted where
appropriate.
The Company has exposure to asbestos, environmental and
other general liability claims arising from its participation
in various reinsurance pools from 1971 through 1985. This
exposure arose from a short duration contract that the
Company discontinued writing many years ago. The Company
carries case reserves for these liabilities as recommended by
the various pool managers and IBNR reserves. Any estimation
of these liabilities is subject to greater than normal variation
and uncertainty due to the general lack of suffi cient detailed
data, reporting delays, and absence of generally accepted
actuarial methodology for determining the exposures. There
are signifi cant unresolved industry legal issues, including
such items as whether coverage exists and what constitutes
an occurrence. In addition, the determination of ultimate
damages and the fi nal allocation of losses to fi nancially
responsible parties are highly uncertain.
Changes in the estimated liabilities are recorded as a charge
or credit to policyholder benefi ts as estimates are revised.
Amounts reimbursed by the National Flood Insurance Program
for processing and adjudication services are reported as a
reduction of policyholder benefi ts.
Deferred Gain on Disposal of Businesses
On March 1, 2000, the Company sold its LTC business using a
coinsurance contract. On April 2, 2001, the Company sold its
FFG business using a modifi ed coinsurance contract. Since the
form of sale did not discharge the Company’s primary liability
to the insureds, the gain on these disposals was deferred and
reported as a liability. The liability is decreased and recognized
as revenue over the estimated life of the contracts’ terms.
The Company reviews and evaluates the estimates affecting
the deferred gain on disposal of businesses annually or when
signifi cant information affecting the estimates becomes
known to the Company, and adjusts the revenue recognized
accordingly. Based on the Company’s annual review in the
fourth quarter of 2014, the Company re-established $12,777
of the FFG deferred gain. There were no adjustments to the
estimates affecting the deferred gain based on the annual
review in 2013.
Debt
The Company reports debt net of unamortized discount or
premium and repurchases. Interest expense related to debt
is expensed as incurred.
Premiums
Long Duration Contracts
Currently, the Company’s long duration contracts which are
actively being sold are preneed life insurance and certain
group worksite insurance policies. The preneed life insurance
policies include provisions for death benefi t growth that is
either pegged to the changes in the Consumer Price Index or
determined periodically at the discretion of management. For
preneed life insurance policies issued prior to 2009, revenues
are recognized when due from policyholders. For preneed life
insurance policies with discretionary death benefi t growth
issued after 2008 and for preneed investment-type annuity
contracts, revenues consist of charges assessed against
policy balances. Revenues are recognized ratably as earned
income over the premium-paying periods of the policies for
the group worksite insurance products.
For a majority of individual medical contracts issued prior
to 2003, a limited number of individual medical contracts
currently issued from 2003 through 2006 in certain jurisdictions,
individual voluntary limited benefi t health policies issued
in 2007 and later and traditional life insurance contracts
previously sold by the preneed business (no longer offered),
revenue is recognized when due from policyholders.
For universal life insurance and investment-type annuity
contracts previously sold by the Assurant Solutions segment
(no longer offered), revenues consist of charges assessed
against policy balances.
Premiums for LTC insurance and traditional life insurance
contracts within FFG are recognized as revenue when due
from the policyholder. For universal life insurance and
investment-type annuity contracts within FFG, revenues
consist of charges assessed against policy balances. For
the FFG and LTC businesses previously sold, all revenue
is ceded.
Short Duration Contracts
The Company’s short duration contracts are those on which
the Company recognizes revenue over the contract term in
proportion to the 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 2006 in most jurisdictions and in all
jurisdictions after 2006.
Reinstatement premiums for reinsurance are netted against
net earned premiums in the consolidated statements of
operations.