Assurant 2014 Annual Report Download - page 97

ASSURANT, INC. – 2014 Form 10-K F-9
2 Summary of Signifi cant Accounting Policies
as well as the materiality to the periods in which they
originated. Management believes these adjustments are
immaterial to the consolidated fi nancial statements and all
previously issued fi nancial statements.
Earnings Per Share
Basic earnings per share is computed by dividing net income by
the weighted average number of common shares outstanding
for the period. Diluted earnings per share refl ects the potential
dilution that could occur if securities or other contracts
that can be converted into common stock were exercised
as of the end of the period. Restricted stock and restricted
stock units which have non-forfeitable rights to dividends
or dividend equivalents are included in calculating basic
and diluted earnings per share under the two-class method.
Comprehensive Income
Comprehensive income is comprised of net income, net
unrealized gains and losses on foreign currency translation,
net unrealized gains and losses on securities classifi ed as
available for sale, net unrealized gains and losses on other-
than-temporarily impaired securities and expenses for pension
and post-retirement plans, less deferred income taxes.
Reclassifi cations
Certain prior period amounts have been reclassifi ed to
conform to the 2014 presentation.
Foreign Currency Translation
For foreign affi liates where the local currency is the functional
currency, unrealized foreign currency translation gains and
losses net of deferred income taxes have been refl ected in
accumulated other comprehensive income (“AOCI”). Other
than for two of our wholly owned Canadian subsidiaries,
deferred taxes have not been provided for unrealized
currency translation gains and losses since the Company
intends to indefi nitely reinvest the earnings in these other
jurisdictions. Transaction gains and losses on assets and
liabilities denominated in foreign currencies are recorded
in underwriting, general and administration expenses in the
consolidated statements of operations during the period in
which they occur.
Fair Value
The Company uses an exit price for its fair value measurements.
An exit price is defi ned as the amount received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. In
measuring fair value, the Company gives the highest priority
to unadjusted quoted prices in active markets for identical
assets or liabilities and the lowest priority to unobservable
inputs. See Note 6 for further information.
Investments
Fixed maturity and equity securities are classifi ed as available-
for-sale, as defi ned in the investments guidance, and reported
at fair value. If the fair value is higher than the amortized
cost for fi xed maturity securities or the purchase cost for
equity securities, the excess is an unrealized gain; and, if
lower than cost, the difference is an unrealized loss. Net
unrealized gains and losses on securities classifi ed as available-
for-sale, less deferred income taxes, are included in AOCI.
Commercial mortgage loans on real estate are reported at
unpaid balances, adjusted for amortization of premium or
discount, less allowance for losses. The allowance is based
on management’s analysis of factors including actual loan loss
experience, specifi c events based on geographical, political or
economic conditions, industry experience, loan groupings that
have probable and estimable losses and individually impaired
loan loss analysis. A loan is considered individually impaired
when it becomes probable the Company will be unable to collect
all amounts due, including principal and interest, according to
the contractual terms of the loan agreement. Indicative factors
of impairment include, but are not limited to, whether the
loan is current, the value of the collateral and the fi nancial
position of the borrower. If a loan is individually impaired, the
Company uses one of the following valuation methods based
on the individual loans’ facts and circumstances to measure
the impairment amount: (1) the present value of expected
future cash fl ows, (2) the loan’s observable market price, or
(3) the fair value of collateral. Changes in the allowance for
loan losses are recorded in net realized losses on investments,
excluding other-than-temporary impairment losses.
The Company places loans on non-accrual status after 90 days
of delinquent payments (unless the loans are both well secured
and in the process of collection). A loan may be placed on
non-accrual status before this time if information is available
that suggests its impairment is probable.
Policy loans are reported at unpaid principal balances, which
do not exceed the cash surrender value of the underlying
policies.
Short-term investments include money market funds and
short maturity investments. These amounts are reported at
cost, which approximates fair value.
The Company engages in collateralized transactions in which
fi xed maturity securities, especially bonds issued by the U.S.
government, government agencies and authorities, and U.S.
corporations, are loaned to selected broker/dealers. The
collateral held under these securities lending transactions is
reported at fair value and the obligation is reported at the
amount of the collateral received. The difference between
the collateral held and obligations under securities lending is
recorded as an unrealized loss and is included as part of AOCI.
Other investments consist primarily of investments in joint
ventures, partnerships, invested assets associated with a
modifi ed coinsurance arrangement, invested assets associated
with the Assurant Investment Plan (“AIP”), the American
Security Insurance Company Investment Plan (“ASIC”) and