Assurant 2014 Annual Report Download - page 138

ASSURANT, INC. – 2014 Form 10-KF-50
20 Statutory Information
20. Statutory Information
The Company’s insurance subsidiaries prepare fi nancial
statements on the basis of statutory accounting practices
(“SAP”) prescribed or permitted by the insurance departments
of their states of domicile. Prescribed SAP includes the
Accounting Practices and Procedures Manual of the National
Association of Insurance Commissioners (“NAIC”) as well as
state laws, regulations and administrative rules.
The principal differences between SAP and GAAP are: 1)
policy acquisition costs are expensed as incurred under SAP,
but are deferred and amortized under GAAP; 2) the value of
business acquired is not capitalized under SAP but is under
GAAP; 3) amounts collected from holders of universal life-
type and annuity products are recognized as premiums when
collected under SAP, but are initially recorded 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
classifi cation and carrying amounts of investments in certain
securities are different under SAP than under GAAP; 5) the
criteria for providing asset valuation allowances, and the
methodologies used to determine the amounts thereof,
are different under SAP than under GAAP; 6) the timing of
establishing certain reserves, and the methodologies used to
determine the amounts thereof, are different under SAP than
under GAAP; 7) certain assets are not admitted for purposes
of determining surplus under SAP; 8) methodologies used to
determine the amounts of deferred taxes, intangible assets
and goodwill are different under SAP than under GAAP; and 9)
the criteria for obtaining reinsurance accounting treatment
is different under SAP than under GAAP.
The combined statutory net income, excluding intercompany dividends and surplus note interest, and capital and surplus
of the Company’s U.S. domiciled statutory insurance subsidiaries follow:
Years Ended December 31,
2014 2013 2012
Statutory net income
P&C companies $ 440,930 $ 457,068 $ 371,520
Life and Health companies 67,270 148,851 223,519
TOTAL STATUTORY NET INCOME $ 508,200 $ 605,919 $ 595,039
December 31,
2014 2013
Statutory capital and surplus
P&C companies $ 1,396,305 $ 1,440,394
Life and Health companies 1,064,174 923,660
TOTAL STATUTORY CAPITAL AND SURPLUS $ 2,460,479 $ 2,364,054
The Company also has non-insurance subsidiaries and foreign
insurance subsidiaries that are not subject to SAP. The
statutory net income and statutory capital and surplus
amounts presented above do not include foreign insurance
subsidiaries in accordance with SAP.
Insurance enterprises are required by state insurance
departments to adhere to minimum risk-based capital (“RBC”)
requirements developed by the NAIC. All of the Company’s
insurance subsidiaries exceed minimum RBC requirements.
The payment of dividends to the Company by any of the
Company’s regulated U.S domiciled insurance subsidiaries
in excess of a certain amount (i.e., extraordinary dividends)
must be approved by the subsidiary’s domiciliary state
department of insurance. Ordinary dividends, for which no
regulatory approval is generally required, are limited to
amounts determined by a formula, which varies by state.
The formula for the majority of the states in which the
Company’s subsidiaries are domiciled is based on the prior
year’s statutory net income or 10% of the statutory surplus
as of the end of the prior year. Some states limit ordinary
dividends to the greater of these two amounts, others limit
them to the lesser of these two amounts and some states
exclude prior year realized capital gains from prior year net
income in determining ordinary dividend capacity. Some
states have an additional stipulation that dividends may
only be paid out of earned surplus. If insurance regulators
determine that payment of an ordinary dividend or any other
payments by the Company’s insurance subsidiaries to the
Company (such as payments under a tax sharing agreement or
payments for employee or other services) would be adverse
to policyholders or creditors, the regulators may block such
payments that would otherwise be permitted without prior
approval. Based on the dividend restrictions under applicable
laws and regulations, the maximum amount of dividends that
the Company’s U.S domiciled insurance subsidiaries could
pay to the Company in 2015 without regulatory approval is
approximately $476,000. No assurance can be given that there
will not be further regulatory actions restricting the ability
of the Company’s insurance subsidiaries to pay dividends.
State regulators require insurance companies to meet minimum
capitalization standards designed to ensure that they can fulfi ll
obligations to policyholders. Minimum capital requirements