Assurant 2014 Annual Report Download - page 74

60 ASSURANT, INC. – 2014 Form 10-K
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
(ii) Maintenance of a consolidated adjusted net worth in
an amount not less than the “Minimum Amount”. For
the purpose of this calculation the “Minimum Amount”
is an amount equal to the sum of (a) the base amount
$3,317,000 plus (b) 25% of consolidated net income for
each fi scal quarter (if positive) ending after June 30,
2014, plus (c) 25% of the net proceeds received by the
Company from any capital contribution to, or issuance
of any Capital Stock or Hybrid Securities received after
June 30, 2014.
At December 31, 2014, our ratio of debt to total capitalization
as calculated under the covenant was 20%, the consolidated
Minimum Amount described in (ii) above was $3,365,481 and
our actual consolidated adjusted net worth as calculated
under the covenant was $4,778,526.
In the event of the breach of certain covenants all obligations
under the 2014 Credit Facility, including unpaid principal
and accrued interest and outstanding letters of credit, may
become immediately due and payable.
Senior Notes
On March 28, 2013, we issued two series of senior notes with
an aggregate principal amount of $700,000 (the “2013 Senior
Notes”). The fi rst series is $350,000 in principal amount,
bears interest at 2.50% per year and is payable in a single
installment due March 15, 2018. The second series is $350,000
in principal amount, bears interest at 4.00% per year and is
payable in a single installment due March 15, 2023.
The net proceeds from the sale of the 2013 Senior Notes were
$698,093, which represents the principal amount less the
discount before offering expenses. The Company used the
net proceeds of the 2013 Senior Notes for general corporate
purposes, including to repay $500,000 of debt that matured
in February 2014.
In addition, during 2014, we had two series of senior notes
outstanding in an aggregate principal amount of $975,000
(the “2004 Senior Notes”). The fi rst series was $500,000 in
principal amount, bore interest at 5.63% per year and was
repaid on February 18, 2014. The second series is $475,000
in principal amount, bears interest at 6.75% per year and is
due February 15, 2034.
Interest on our 2004 Senior Notes is payable semi-annually on
February 15 and August 15 of each year. The interest expense
incurred related to the 2004 Senior Notes was $35,414, $59,414
and $60,306 for the years ended December 31, 2014, 2013,
and 2012, respectively. There was $12,023 and $21,876 of
accrued interest at December 31, 2014 and 2013, respectively.
The 2004 Senior Notes are unsecured obligations and rank
equally with all of our other senior unsecured indebtedness.
The 2004 Senior Notes are not redeemable prior to maturity.
Interest on our 2013 Senior Notes is payable semi-annually on
March 15 and September 15 of each year. The interest expense
incurred related to the 2013 Senior Notes was $22,981 and
$17,357 for the twelve months ended December 31, 2014 and
2013, respectively. There was $6,635 of accrued interest at
December 31, 2014 and 2013, respectively. The 2013 Senior
Notes are unsecured obligations and rank equally with all
of the Company’s other senior unsecured indebtedness.
The Company may redeem each series of the 2013 Senior
Notes in whole or in part at any time and from time to time
before their maturity at the redemption price set forth in
the Indenture.
In management’s opinion, dividends from our subsidiaries
together with our income and gains from our investment
portfolio will provide suffi cient liquidity to meet our needs
in the ordinary course of business.
Cash Flows
We monitor cash fl ows at the consolidated, holding company
and subsidiary levels. Cash fl ow forecasts at the consolidated
and subsidiary levels are provided on a monthly basis, and
we use trend and variance analyses to project future cash
needs making adjustments to the forecasts when needed.
The table below shows our recent net cash fl ows:
For the Years Ended December 31,
2014 2013 2012
Net cash provided by (used in):
Operating activities(1) $ 313,782 $ 1,003,819 $ 673,215
Investing activities 63,889 (392,738) (449,883)
Financing activities (776,199) 196,699 (480,641)
NET CHANGE IN CASH $ (398,528) $ 807,780 $ (257,309)
(1) Includes effect of exchange rates changes and the reclassification of assets held for sale on cash and cash equivalents.
Cash Flows for the Years Ended December 31,
2014, 2013 and 2012.
Operating Activities:
We typically generate operating cash infl ows from premiums
collected from our insurance products and income received
from our investments while outfl ows consist of policy
acquisition costs, benefi ts paid, and operating expenses. These
net cash fl ows are then invested to support the obligations
of our insurance products and required capital supporting
these products. Our cash fl ows from operating activities are
affected by the timing of premiums, fees, and investment
income received and expenses paid.
Net cash provided by operating activities was $313,782
and $1,003,819 for the years ended December 31, 2014
and 2013, respectively. The decrease in cash provided by