Assurant 2014 Annual Report Download - page 111

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ASSURANT, INC. – 2014 Form 10-K F-23
5 Investments
maturity securities, and in non-redeemable preferred stocks.
Within the Company’s corporate fi xed maturity securities,
the majority of the loss position relates to securities in the
industrial sector. The industrial sector’s gross unrealized
losses of twelve months or more were $2,203, or 63%, of
the corporate fi xed maturity total. The non-redeemable
preferred stocks are perpetual preferred securities that have
characteristics of both debt and equity securities. To evaluate
these securities, we apply an impairment model similar to
that used for our fi xed maturity securities. As of December 31,
2014, the Company did not intend to sell these securities
and it was not more likely than not that the Company would
be required to sell them and no underlying cash fl ow issues
were noted. Therefore, the Company did not recognize an
OTTI on those perpetual preferred securities that had been
in a continuous unrealized loss position for twelve months
or more. As of December 31, 2014, the Company did not
intend to sell the fi xed maturity securities and it was not
more likely than not that the Company would be required to
sell the securities before the anticipated recovery of their
amortized cost basis. The gross unrealized losses are primarily
attributable to widening credit spreads associated with an
underlying shift in overall credit risk premium.
The cost or amortized cost and fair value of available-for-sale fi xed maturity securities in an unrealized loss position at
December 31, 2014, by contractual maturity, is shown below:
Cost or Amortized Cost Fair Value
Due in one year or less $ 18,219 $ 18,200
Due after one year through fi ve years 388,346 383,471
Due after fi ve years through ten years 354,277 347,159
Due after ten years 133,919 127,078
TOTAL 894,761 875,908
Asset-backed 1,426 1,348
Residential mortgage-backed 85,173 84,019
TOTAL $ 981,360 $ 961,275
The Company has exposure to sub-prime and related mortgages
within our fi xed maturity security portfolio. At December 31,
2014, approximately 3% of the residential mortgage-backed
holdings had exposure to sub-prime mortgage collateral. This
represented approximately 0.2% of the total fi xed income
portfolio and 1% of the total unrealized gain position. Of
the securities with sub-prime exposure, approximately 11%
are rated as investment grade. All residential mortgage-
backed securities, including those with sub-prime exposure,
are reviewed as part of the ongoing other-than-temporary
impairment monitoring process.
The Company has entered into commercial mortgage loans,
collateralized by the underlying real estate, on properties
located throughout the U.S. and Canada. At December 31,
2014, approximately 39% of the outstanding principal balance
of commercial mortgage loans was concentrated in the states
of California, New York, and Utah. Although the Company
has a diversifi ed loan portfolio, an economic downturn could
have an adverse impact on the ability of its debtors to repay
their loans. The outstanding balance of commercial mortgage
loans range in size from $77 to $15,190 at December 31, 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-to-value ratio compares the principal amount
of the loan to the fair value of the underlying property
collateralizing the loan, and is commonly expressed as a
percentage. The debt-service coverage ratio compares a
property’s net operating income to its debt-service payments
and is commonly expressed as a ratio. The loan-to-value and
debt-service coverage ratios are generally updated annually
in the third quarter.
The following summarizes our loan-to-value and average debt-service coverage ratios as of the dates indicated:
Loan-to-Value
December 31, 2014
Carrying Value % of Gross Mortgage Loans Debt-Service Coverage Ratio
70% and less $ 1,168,454 91.6% 2.01
71 – 80% 73,762 5.8% 1.26
81 – 95% 27,268 2.1% 1.04
Greater than 95% 6,531 0.5% 0.43
Gross commercial mortgage loans 1,276,015 100.0% 1.94
Less valuation allowance (3,399)
Net commercial mortgage loans $ 1,272,616