Assurant 2014 Annual Report Download - page 77

63ASSURANT, INC. – 2014 Form 10-K
PART II
ITEM 7A Quantitative and Qualitative Disclosures About Market Risk
The interest rate sensitivity relating to price risk of our fi xed
maturity securities is assessed using hypothetical scenarios
that assume several positive and negative parallel shifts of
the yield curves. We have assumed that the U.S. and Canadian
yield curve shifts are of equal direction and magnitude.
The individual securities are repriced under each scenario
using a valuation model. For investments such as callable
bonds and mortgage-backed and asset-backed securities, a
prepayment model is used in conjunction with a valuation
model. Our actual experience may differ from the results
noted below particularly due to assumptions utilized or if
events occur that were not included in the methodology.
The following tables summarize the results of this analysis
for bonds, mortgage-backed and asset-backed securities
held in our investment portfolio as of the dates indicated:
INTEREST RATE MOVEMENT ANALYSIS OF MARKET VALUE OF FIXED MATURITY SECURITIES INVESTMENT PORTFOLIO
As of December 31, 2014
-100
-50 050 100
Total market value $ 12,135,439 $ 11,692,341 $ 11,263,174 $ 10,853,281 $ 10,464,375
% Change in market value from base case 7.74% 3.81% —% (3.64)% (7.09)%
$ Change in market value from base case $ 872,265 $ 429,167 $ — $ (409,893) $ (798,799)
As of December 31, 2013
-100
-50 050 100
Total market value $ 12,115,046 $ 11,701,578 $ 11,291,875 $ 10,898,116 $ 10,525,665
% Change in market value from base case 7.29% 3.63% —% (3.49)% (6.79)%
$ Change in market value from base case $ 823,171 $ 409,703 $ — $ (393,759) $ (766,210)
The interest rate sensitivity relating to reinvestment risk of our fi xed maturity securities is assessed using hypothetical
scenarios that assume purchases in the primary market and considers the effects of interest rates on sales. The effects of
embedded options including call or put features are not considered. Our actual results may differ from the results noted
below particularly due to assumptions utilized or if events occur that were not included in the methodology.
The following tables summarize the results of this analysis on our reported portfolio yield as of the dates indicated:
INTEREST RATE MOVEMENT ANALYSIS OF PORTFOLIO YIELD OF FIXED MATURITY SECURITIES INVESTMENT PORTFOLIO
As of December 31, 2014
-100
-50 0 50 100
Portfolio yield 4.89% 4.94% 5.00% 5.06% 5.11%
Basis point change in portfolio yield (0.11)% (0.06)% —% 0.06% 0.11%
As of December 31, 2013
-100
-50 0 50 100
Portfolio yield 4.82% 4.90% 4.98% 5.06% 5.14%
Basis point change in portfolio yield (0.16)% (0.08)% —% 0.08% 0.16%
Credit Risk
We have exposure to credit risk primarily from customers,
as a holder of fi xed maturity securities and by entering into
reinsurance cessions.
Our risk management strategy and investment policy is to
invest in debt instruments of high credit quality issuers and to
limit the amount of credit exposure with respect to any one
issuer. We attempt to limit our credit exposure by imposing
fi xed maturity portfolio limits on individual issuers based
upon credit quality. Currently our portfolio limits are 1.5%
for issuers rated AA- and above, 1% for issuers rated A- to A+,
0.75% for issuers rated BBB- to BBB+ and 0.38% for issuers
rated BB- to BB+. These portfolio limits are further reduced
for certain issuers with whom we have credit exposure on
reinsurance agreements. We use the lower of Moody’s or
S&P’s ratings to determine an issuer’s rating.