Assurant 2014 Annual Report Download - page 143

ASSURANT, INC. – 2014 Form 10-K F-55
21 Retirement and Other Employee Benefi ts
The goal of our asset strategy is to ensure that the growth
in the value of the fund over the long-term, both in real and
nominal terms, manages (controls) risk exposure. Risk is
managed by investing in a broad range of asset classes, and
within those asset classes, a broad range of individual securities.
Diversifi cation by asset classes stabilizes total fund results
over short-term time periods. Each asset class is externally
managed by outside investment managers appointed by the
Investment Committee. Derivatives may be used consistent with
the Plan’s investment objectives established by the Investment
Committee. All securities must be U.S. dollar denominated.
In 2014, 7% of the Plans’ assets were allocated to Mesirow
Institutional Multi-Strategy Fund, L.P. (“MIMSF”). MIMSF
is a multi-strategy product for U.S. tax-exempt investors
subject to ERISA. MIMSF allocates to fi ve primary sub-strategies
including hedged equity, credit, event, relative value and
multi-strategy. Allocations to these sub-strategies will shift
over time depending upon MIMSF’s investment outlook. MIMSF
is managed to be broadly diversifi ed in terms of both strategy
and manager exposures.
The Investment Committee that oversees the investment of
the plan assets conducts an annual review of the investment
strategies and policies of the Plans. This includes a review
of the strategic asset allocation, including the relationship
of the Plans’ liabilities and portfolio structure. As a result of
this review, the Investment Committee adopted the current
target asset allocation. The allocation is consistent with 2013.
Financial Assets(1)
The Plans’ Asset Allocation Percentages
Low Target(2) High
Equity securities:
Common stock- U.S. listed small cap 5.0% 7.5% 10.0%
Mutual fund- U.S. listed large cap 10.0% 15.0% 20.0%
Common/collective trust- foreign listed 5.0% 7.5% 10.0%
Fixed maturity securities:
U.S. & foreign government and government agencies and authorities 6.5% 9.0% 11.5%
Corporate- U.S. & foreign investment grade 31.0% 33.5% 36.0%
Corporate- U.S. & foreign high yield 5.0% 7.5% 10.0%
Alternative investment fund:
Multi-strategy hedge fund 5.5% 8.0% 10.5%
Commingled real estate fund 3.5% 6.0% 8.5%
Private equity fund — 6.0% 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 of which include real estate investment funds and private equity funds. Amounts allocated for these investments
are included in the alternative investment funds caption of the asset allocation at December 31, 2014, provided in the section above.
(2) It is understood that these guidelines are targets and that deviations may occur periodically as a result of cash flows, market impact or short-term
decisions implemented by either the Investment Committee or their investment managers.
The assets of the Plans are primarily invested in fi xed maturity
and equity securities. While equity risk is fully retained,
interest rate risk is hedged by aligning the duration of the
fi xed maturity securities with the duration of the liabilities.
Specifi cally, interest rate swaps are used to synthetically
extend the duration of fi xed maturity securities to match
the duration of the liabilities, as measured on a projected
benefi t obligation basis. In addition, the Plans’ fi xed income
securities have exposure to credit risk. In order to adequately
diversify and limit exposure to credit risk, the Investment
Committee established parameters which include a limit on
the asset types that managers are permitted to purchase,
maximum exposure limits by sector and by individual issuer
(based on asset quality) and minimum required ratings on
individual securities. As of December 31, 2014, 46% of plan
assets were invested in fi xed maturity securities and 15%,
12% and 11% of those securities were concentrated in the
fi nancial, energy and communications industries, with no
exposure to any single creditor in excess of 5%, 5% and 8%
of those industries, respectively. As of December 31, 2014,
36% of plan assets were invested in equity securities and
60% of the Plans’ equity securities were invested in a mutual
fund that attempts to replicate the return of the Standard &
Poor’s 500 index (“S&P 500”) by investing its assets in large
capitalization stocks that are included in the S&P 500 using
a weighting similar to the S&P 500.