Assurant 2014 Annual Report Download - page 72

58 ASSURANT, INC. – 2014 Form 10-K
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
(such as large-scale hurricanes). Dividends or returns of
capital, net of infusions and amounts used for acquisitions,
made to the holding company from its operating companies
were $453,485, $607,295, and $581,908 for the years ended
December 31, 2014, 2013, and 2012, respectively. We use
these cash infl ows primarily to pay expenses, to make interest
payments on indebtedness, to make dividend payments to
our stockholders, to make subsidiary capital contributions, to
fund acquisitions and to repurchase our outstanding shares.
In addition to paying expenses and making interest payments
on indebtedness, our capital management strategy provides
for several uses of the cash generated by our subsidiaries,
including without limitation, returning capital to shareholders
through share repurchases and dividends, investing in our
businesses to support growth in targeted areas, and making
prudent and opportunistic acquisitions. During 2014, 2013
and 2012 we made share repurchases and paid dividends
to our stockholders of $295,765, $472,308 and $472,103,
respectively. We expect 2015 dividends from the operating
segments to approximate their earnings subject to the growth
of the businesses, rating agency and regulatory capital
requirements as well as investment performance.
The primary sources of funds for our subsidiaries consist of
premiums and fees collected, proceeds from the sales and
maturity of investments and net investment income. Cash is
primarily used to pay insurance claims, agent commissions,
operating expenses and taxes. We generally invest our
subsidiaries’ excess funds in order to generate investment income.
We conduct periodic asset liability studies to measure the
duration of our insurance liabilities, to develop optimal
asset portfolio maturity structures for our signifi cant lines
of business and ultimately to assess that cash fl ows are
suffi cient to meet the timing of cash needs. These studies
are conducted in accordance with formal company-wide
Asset Liability Management (“ALM”) guidelines.
To complete a study for a particular line of business, models are
developed to project asset and liability cash fl ows and balance
sheet items under a large, varied set of plausible economic
scenarios. These models consider many factors including the
current investment portfolio, the required capital for the
related assets and liabilities, our tax position and projected
cash fl ows from both existing and projected new business.
Alternative asset portfolio structures are analyzed for signifi cant
lines of business. An investment portfolio maturity structure
is then selected from these profi les given our return hurdle
and risk preference. Sensitivity testing of signifi cant liability
assumptions and new business projections is also performed.
Our liabilities generally have limited policyholder
optionality, which means that the timing of payments is
relatively insensitive to the interest rate environment.
In addition, our investment portfolio is largely comprised
of highly liquid fi xed maturity securities with a suffi cient
component of such securities invested that are near
maturity which may be sold with minimal risk of loss to
meet cash needs. Therefore, we believe we have limited
exposure to disintermediation risk.
Generally, our subsidiaries’ premiums, fees and investment
income, along with planned asset sales and maturities,
provide suffi cient cash to pay claims and expenses. However,
there may be instances when unexpected cash needs arise in
excess of that available from usual operating sources. In such
instances, we have several options to raise needed funds,
including selling assets from the subsidiaries’ investment
portfolios, using holding company cash (if available), issuing
commercial paper, or drawing funds from our revolving credit
facility. In addition, we have fi led an automatically effective
shelf registration statement on Form S-3 with the SEC. This
registration statement allows us to issue equity, debt or
other types of securities through one or more methods of
distribution. The terms of any offering would be established
at the time of the offering, subject to market conditions. If
we decide to make an offering of securities, we will consider
the nature of the cash requirement as well as the cost of
capital in determining what type of securities we may offer.
On January 9, 2015, our Board of Directors declared a quarterly
dividend of $0.27 per common share payable on March 9,
2015 to stockholders of record as of February 23, 2015. We
paid dividends of $0.27 per common share on December 15,
2014 to stockholders of record as of December 1, 2014,
$0.27 per common share on September 9, 2014 to stockholders
of record as of August 25, 2014, and $0.27 per common share
on June 10, 2014 to stockholders of record as of May 27, 2014.
This represents an 8 percent increase above the quarterly
dividend of $0.25 per common share paid on March 10,
2014 to stockholders of record as of February 24, 2014. Any
determination to pay future dividends will be at the discretion
of our Board of Directors and will be dependent upon: our
subsidiaries’ payments of dividends and/or other statutorily
permissible payments to us; our results of operations and cash
fl ows; our fi nancial position and capital requirements; general
business conditions; legal, tax, regulatory and contractual
restrictions on the payment of dividends; and other factors
our Board of Directors deems relevant.
On November 15, 2013, our Board of Directors authorized
the Company to repurchase up to an additional $600,000 of
its outstanding common stock, making its total authorization
$752,436 at that date. During the year ended December 31,
2014, we repurchased 3,298,490 shares of our outstanding
common stock at a cost of $218,204, exclusive of commissions.
As of December 31, 2014, $486,670 remained under the total
repurchase authorization. The timing and the amount of future
repurchases will depend on market conditions, our fi nancial
condition, results of operations, liquidity and other factors.
Management believes the Company will have suffi cient
liquidity to satisfy its needs over the next twelve months,
including the ability to pay interest on our senior notes and
dividends on our common shares.
Retirement and Other Employee Benefi ts
We sponsor a qualifi ed pension plan, (the “Assurant Pension
Plan”) and various non-qualifi ed pension plans (including
an Executive Pension Plan), along with a retirement health