Assurant 2014 Annual Report Download - page 36

ASSURANT, INC. – 2014 Form 10-K22
PART I
ITEM 1A Risk Factors
In determining the appropriate valuation allowance,
management made certain judgments relating to recoverability
of deferred tax assets, use of tax loss and tax credit
carryforwards, levels of expected future taxable income
and available tax planning strategies. The assumptions in
making these judgments are updated periodically on the basis
of current business conditions affecting the Company and
overall economic conditions. These management judgments
are therefore subject to change due to factors that include,
but are not limited to, changes in our ability to realize
suffi cient taxable income of the same character in the same
jurisdiction or in our ability to execute other tax planning
strategies. Management will continue to assess and determine
the need for, and the amount of, the valuation allowance in
subsequent periods. Any change in the valuation allowance
could have a material impact on our results of operations
and fi nancial condition.
Changes in tax laws could increase our corporate taxes or
reduce our deferred tax assets. Certain proposed changes
could have the effect of increasing our effective tax rate
by reducing deductions or increasing income inclusions.
Conversely, other changes, such as lowering the corporate
tax rate, could reduce the value of our deferred tax assets.
Failure to protect our clients’ confi dential
information and privacy could harm our
reputation, cause us to lose customers,
reduce our profi tability and subject us to
fi nes, litigation and penalties, and the costs
of compliance with privacy and security laws
could adversely affect our business.
Our businesses are subject to a variety of privacy regulations
and confi dentiality obligations. If we do not comply with
state and federal privacy and security laws and regulations,
or contractual provisions, requiring us to protect confi dential
information and provide notice to individuals whose
information is improperly disclosed, we could experience
adverse consequences, including loss of customers and related
revenue, regulatory problems (including fi nes and penalties),
harm to our reputation and civil litigation, which could
adversely affect our business and results of operations. As
have other entities in the insurance industry, we have incurred
and will continue to incur substantial costs in complying with
the requirements of applicable privacy and security laws.
For more information on the privacy and security laws that
apply to us, please see Item 1, “Business — Regulation.”
The failure to effectively maintain and
modernize our information systems could
adversely affect our business.
Our business is dependent upon our ability to maintain
the effectiveness of existing technology systems, enhance
technology to support the Company’s business in an
effi cient and cost-effective manner, and keep current with
technological advances, evolving industry and regulatory
standards and customer needs. In addition, our ability
to keep our systems integrated with those of our clients
is critical to the success of our business. If we do not
effectively maintain our systems and update them to address
technological advancements, our relationships and ability to
do business with our clients may be adversely affected. We
could also experience other adverse consequences, including
unfavorable underwriting and reserving decisions, internal
control defi ciencies and security breaches resulting in loss
of data. System development projects may be more costly
or time-consuming than anticipated and may not deliver
the expected benefi ts upon completion.
Failure to successfully manage outsourcing
activities could adversely affect our business.
As we continue to improve operating effi ciencies across the
business, we have outsourced and may outsource selected
functions to third parties. We take steps to monitor and
regulate the performance of these independent third parties
to whom the Company has outsourced these functions. If these
third parties fail to satisfy their obligations to the Company
as a result of their performance, changes in their operations,
fi nancial condition or other matters beyond our control, the
Company’s operations, information, service standards and data
could be compromised. In addition, to the extent the Company
outsources selected services or functions to third parties outside
the U.S., the Company is exposed to the risks that accompany
operations in a foreign jurisdiction, including international
economic and political conditions, foreign laws and fl uctuations
in currency values and, potentially, increased risk of data
breaches. For more information on the risks associated with
outsourcing to international third parties, please see Item 1A,
“Risk Factors—Risks Related to Our Company—We face risks
associated with our international operations.” If third party
providers do not perform as anticipated, we may not fully
realize the anticipated economic and other benefi ts of this
outsourcing, which could adversely affect our results of
operations and fi nancial condition.
System security risks, data protection breaches
and cyber-attacks could adversely affect our
business and results of operations.
Our information technology systems are vulnerable to threats
from computer viruses, natural disasters, unauthorized access,
cyber attack and other similar disruptions. Although we have
network security measures in place, experienced computer
programmers and hackers may be able to penetrate our network
and misappropriate or compromise confi dential information,
create system disruptions or cause shutdowns.
As an insurer, we receive and are required to protect confi dential
information from customers, vendors and other third parties
that may include personal health or fi nancial information. If
any disruption or security breach results in a loss or damage
to our data, or inappropriate disclosure of our confi dential
information or that of others, it could damage to our reputation,
affect our relationships with our customers and clients, lead
to claims against the Company, result in regulatory action
and harm our business. In addition, we may be required to
incur signifi cant costs to mitigate the damage caused by any
security breach or to protect against future damage.