Assurant 2014 Annual Report Download - page 96

ASSURANT, INC. – 2014 Form 10-KF-8
2 Summary of Signifi cant Accounting Policies
Notes to Consolidated Financial Statements
December 31, 2014, 2013 and 2012
(In thousands except number of shares and per share amounts)
1. Nature of Operations
Assurant, Inc. (the “Company”) is a holding company whose
subsidiaries provide specialized insurance products and
related services in North America, Latin America, Europe
and other select worldwide markets.
The Company is traded on the New York Stock Exchange
under the symbol “AIZ.”
Through its operating subsidiaries, the Company provides
mobile device protection, debt protection administration,
credit-related insurance, warranties and service contracts,
pre-funded funeral insurance, lender-placed homeowners
insurance, property, appraisal, preservation and valuation
services, renters insurance and related products, manufactured
housing homeowners insurance, individual health and small
employer group health insurance, group dental insurance,
group disability insurance, and group life insurance.
2. Summary of Signifi cant Accounting Policies
Basis of Presentation
The consolidated fi nancial statements have been prepared
in accordance with accounting principles generally accepted
in the United States of America (“GAAP”). Amounts are
presented in United States of America (“U.S.”) dollars and
all amounts are in thousands, except for number of shares,
per share amounts and number of securities in an unrealized
loss position.
Principles of Consolidation
The consolidated fi nancial statements include the accounts
of the Company and all of its wholly owned subsidiaries. All
inter-company transactions and balances are eliminated in
consolidation.
Variable Interest Entities
The Company may enter into agreements with other entities
that are deemed to be variable interest entities (“VIEs”).
At the time these agreements are executed, the Company
evaluates the applicability of the accounting guidance for
VIEs. Entities which do not have suffi cient equity at risk to
allow the entity to fi nance its activities without additional
fi nancial support or in which the equity investors, as a group,
do not have the characteristic of a controlling fi nancial interest
are referred to as VIEs. A VIE is consolidated by the variable
interest holder that is determined to have the controlling
fi nancial interest (“primary benefi ciary”) as a result of having
both the power to direct the activities of a VIE that most
signifi cantly impact the VIE’s economic performance and the
obligation to absorb losses or right to receive benefi ts from
the VIE that could potentially be signifi cant to the VIE. The
Company determines whether it is the primary benefi ciary
of an entity subject to consolidation based on a qualitative
assessment of the VIE’s capital structure, contractual terms,
nature of the VIE’s operations and purpose and the Company’s
relative exposure to the related risks of the VIE on the
date it becomes initially involved in the VIE. The Company
reassesses its VIE determination with respect to an entity
on an ongoing basis.
Use of Estimates
The preparation of fi nancial statements in conformity with
GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities.
The items on the Company’s balance sheets affected by the
use of estimates include but are not limited to, investments,
premiums and accounts receivable, reinsurance recoverables,
deferred acquisition costs (“DAC”), deferred income taxes
and associated valuation allowances, goodwill, valuation
of business acquired (“VOBA”), future policy benefi ts and
expenses, unearned premiums, claims and benefi ts payable,
deferred gain on disposal of businesses, pension and post-
retirement liabilities and commitments and contingencies.
The estimates are sensitive to market conditions, investment
yields, mortality, morbidity, commissions and other acquisition
expenses, policyholder behavior and other factors. Actual
results could differ from the estimates recorded. The Company
believes all amounts reported are reasonable and adequate.
In 2014, an adjustment was recorded which decreased DAC
by $236,818, unearned premiums by $196,708 and other
comprehensive income by $26,072, net of tax. There was no
impact on net income or cash fl ows. This adjustment refl ects
the recording of the impacts of unrealized investment gains
and losses on these accounts for certain preneed insurance
policies, as if those unrealized gains and losses had been
realized. This adjustment to correct these items was evaluated
considering both qualitative and quantitative factors and the
impact of these adjustments in relation to current period,