Assurant 2014 Annual Report Download - page 73

59ASSURANT, INC. – 2014 Form 10-K
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
benefi ts plan covering our employees who meet specifi ed
eligibility requirements. The reported expense and liability
associated with these plans requires an extensive use of
assumptions which include, but are not limited to, the discount
rate, expected return on plan assets and rate of future
compensation increases. We determine these assumptions
based upon currently available market and industry data, and
historical performance of the plan and its assets. The actuarial
assumptions used in the calculation of our aggregate projected
benefi t obligation vary and include an expectation of long-
term appreciation in equity markets which is not changed by
minor short-term market fl uctuations, but does change when
large interim deviations occur. The assumptions we use may
differ materially from actual results due to changing market
and economic conditions, higher or lower withdrawal rates
or longer or shorter life spans of the participants.
The Pension Protection Act of 2006 (“PPA”) requires certain
qualifi ed plans, like the Assurant Pension Plan, to meet specifi ed
funding thresholds. If these funding thresholds are not met,
there are negative consequences to the Assurant Pension Plan
and participants. If the funded percentage falls below 80%,
full payment of lump sum benefi ts as well as implementation
of amendments improving benefi ts are restricted.
As of January 1, 2014, the Assurant Pension Plan’s funded
percentage was 135% on a PPA calculated basis (based on an
actuarial average value of assets compared to the funding
target). Therefore, benefi t and payment restrictions did not
occur during 2014. The 2014 funded measure will also be used
to determine restrictions, if any, that can occur during the
fi rst nine months of 2015. Due to the funding status of the
Assurant Pension Plan in 2014, no restrictions will exist before
October 2015 (the time that the January 1, 2015 actuarial
valuation needs to be completed). Also, based on the estimated
funded status as of January 1, 2015, we do not anticipate any
restrictions on benefi ts for the remainder of 2015.
The Assurant Pension Plan was under-funded by $28,956 and
over-funded by $18,078 (based on the fair value of the assets
compared to the projected benefi t obligation) on a GAAP basis
at December 31, 2014 and 2013, respectively. This equates to
an 97% and 102% funded status at December 31, 2014 and 2013,
respectively. The change in funded status is mainly due to a
decrease in the discount rate and a change in the mortality
rates used to determine the projected benefi t obligation.
The Company’s funding policy is to contribute amounts to the
plan suffi cient to meet the minimum funding requirements
in ERISA, plus such additional amounts as the Company may
determine to be appropriate from time to time up to the
maximum permitted. The funding policy considers several
factors to determine such additional amounts including items
such as the amount of service cost plus 15% of the Assurant
Pension Plan defi cit and the capital position of the Company.
During 2014, we contributed $30,000 in cash to the Assurant
Pension Plan. We expect to contribute up to $43,000 in cash
to the Assurant Pension Plan over the course of 2015. See
Note 21 to the Consolidated Financial Statements included
elsewhere in this report for the components of the net
periodic benefi t cost.
The impact of a 25 basis point change in the discount rate on
the 2015 projected benefi t expense would result in a change
of $3,000 for the Assurant Pension Plan and the various non-
qualifi ed pension plans and no impact on the retirement health
benefi t plan. The impact of a 25 basis point change in the
expected return on assets assumption on the 2015 projected
benefi t expense would result in a change of $2,000 for the
Assurant Pension Plan and the various non-qualifi ed pension
plans and $100 for the retirement health benefi ts plan.
Commercial Paper Program
Our commercial paper program requires us to maintain
liquidity facilities either in an available amount equal to
any outstanding notes from the program or in an amount
suffi cient to maintain the ratings assigned to the notes issued
from the program. Our commercial paper is rated AMB-2 by
A.M. Best, P-2 by Moody’s and A-2 by S&P. Our subsidiaries do
not maintain commercial paper or other borrowing facilities.
This program is currently backed up by a $400,000 senior
revolving credit facility, of which $395,740 was available at
December 31, 2014, due to $4,260 of outstanding letters of
credit related to this program.
On September 16, 2014, we entered into a fi ve-year unsecured
$400,000 revolving credit agreement (“2014 Credit Facility”)
with a syndicate of banks arranged by JP Morgan Chase Bank,
N.A. and Wells Fargo, N.A. The 2014 Credit Facility replaces
our prior four-year $350,000 revolving credit facility (“2011
Credit Facility”), which was entered into on September 21,
2011 and was scheduled to expire in September 2015. The
2011 Credit Facility terminated upon the effectiveness of
the 2014 Credit Facility. The 2014 Credit Facility provides for
revolving loans and the issuance of multi-bank, syndicated
letters of credit and/or letters of credit from a sole issuing
bank in an aggregate amount of $400,000 and is available
until September 30, 2019, provided we are in compliance
with all covenants. The 2014 Credit Facility has a sublimit for
letters of credit issued thereunder of $50,000. The proceeds
of these loans may be used for our commercial paper program
or for general corporate purposes. The Company may increase
the total amount available under the 2014 Credit Facility to
$525,000 subject to certain conditions. No bank is obligated
to provide commitments above their current share of the
$400,000 facility.
We did not use the commercial paper program during the
twelve months ended December 31, 2014 and 2013 and there
were no amounts relating to the commercial paper program
outstanding at December 31, 2014 and December 31, 2013.
The Company made no borrowings using either the 2011
Credit Facility or the 2014 Credit Facility and no loans were
outstanding at December 31, 2014.
The 2014 Credit Facility contains restrictive covenants, all of
which were met as of December 31, 2014. These covenants
include (but are not limited to):
(i) Maintenance of a maximum debt to total capitalization
ratio on the last day of any fi scal quarter of not greater
than 35%, and