Assurant 2010 Annual Report Download - page 105

F-35ASSURANT, INC.  2010 Form 10K
13 Reserves
to year, while also giving due consideration to the potential variability
of these factors.
Since case and IBNR reserves include estimates developed from various
actuarial methods, the Company’s actual losses incurred may be more
or less than the Company’s previously developed estimates. As shown
in the table above, if the amounts listed on the line labeled “Incurred
losses related to: Prior years” are negative (redundant) this means that
the Company’s actual losses incurred related to prior years for these
lines were less than the estimates previously made by the Company.
If the line labeled “Incurred losses related to: Prior years” are positive
(defi cient) this means that the Company’s actual losses incurred related
to prior years for these lines were greater than the estimates previously
made by the Company.
Medical reserves established for obligations that would persist even
if contracts were cancelled (such as extension of benefi ts) have been
excluded from the incurred loss roll-forwards because they cannot be
analyzed appropriately under a roll-forward approach.
 e Group Term Life case and IBNR reserves redundancies in all years
are due to actual mortality rates running below those assumed in
prior year reserves, and actual recovery rates running higher than those
assumed in prior year reserves.
Group Disability case and IBNR reserves show redundancies in
all years due to actual claim recovery rates exceeding those assumed
in prior year reserves.
 e redundancies in our Medical lines case and IBNR reserves were
caused by the Company’s claims and other case reserves developing
more favorably than expected.  e Company’s actual claims experience
refl ected lower medical provider utilization and lower medical infl ation
than assumed in the Company’s prior-year pricing and reserving
processes as well as favorable litigation settlements.
 e Company’s group disability products are short duration contracts
that include short and long term disability coverage. Case reserves
and IBNR for long-term disability have been discounted at 5.25% in
2010.  e December 31, 2010 and 2009 liabilities net of reinsurance
include $1,337,576 and $1,353,597 respectively, of such reserves.
 e amount of discounts deducted from outstanding reserves as of
December 31, 2010 and 2009 are $469,442 and $473,509, respectively.
In 2010, 2009, and 2008 the Company’s Property and Warranty case
and IBNR reserves refl ected redundancies from the Company’s lender-
placed homeowners business due to lower than anticipated loss ratios.
 e current year redundancy increased due to favorable development
on a long tail product and a Credit product as well as various other
short tail product lines. A subrogation recovery, net of reinsurance, of
$9,000 associated with the 2007 California wildfi res contributed to
the redundancy in 2009. For the longer-tail Property and Warranty
coverages (e.g. asbestos, environmental, and other general liability), for
all other years presented, there were no material changes in estimated
amounts for incurred claims in prior years. Property and Warranty case
and IBNR reserves were at their highest level at December 31, 2008 due
to outstanding 2008 hurricane claims, most of which were paid in 2009.
Long Duration Contracts
 e Company’s long duration contracts are primarily comprised of
preneed life insurance and annuity policies, life insurance policies (no
longer off ered), universal life and annuities (no longer off ered), FFG and
LTC disposed businesses and medical policies.  e principal products
and services included in these categories are described in the summary
of signifi cant accounting policies. See Note 2 for further information.
 e Company’s Solutions segment manages preneed insurance products
through two separate divisions: the independent division and the
American Memorial Life Insurance Company (“AMLIC”) division.
 e Company signed an agreement with Forethought Life Insurance
Company on November 9, 2005 whereby the Company discontinued
writing new preneed insurance policies in the U.S. via independent
funeral homes.  e reserve assumptions for future policy benefi ts
and expenses for pre-funded funeral life and annuity contracts and
traditional life insurance (no longer off ered) by the preneed business
diff er by division and are established based upon the following:
PreNeed Business—Independent Division
Interest and discount rates for preneed life insurance issued prior
to 2009 vary by year of issuance and product, are based on pricing
assumptions and modifi ed to allow for provisions for adverse deviation.
For preneed life insurance with discretionary death benefi t growth
issued after 2008, interest and discount rates are based upon current
assumptions without provisions for adverse deviation. During 2010
and 2009, interest and discount rates ranged between 4.5% and 7.3%.
Interest and discount rates for traditional life insurance (no longer
off ered) vary by year of issuance and products and were 7.5% grading
to 5.3% over 20 years in 2010 and 2009 with the exception of a block
of pre-1980 business which had a level 8.8% discount rate in 2010
and 2009.
Mortality assumptions for business issued prior to 2009 are based upon
pricing assumptions and modifi ed to allow for provisions for adverse
deviation. For business issued after 2008, mortality assumptions are
based upon pricing assumptions without provisions for adverse deviation.
Surrender rates vary by product and are based upon pricing assumptions.
Future assumed policy benefi t increases on preneed life insurance issued
prior to 2009 ranged from 1.0% to 7.0% in 2010 and 2009. Some
policies have future policy benefi t increases, which are guaranteed or
tied to equal some measure of infl ation.  e infl ation assumption for
most of these infl ation-linked benefi ts was 3.0% in both 2010 and
2009 with the exception of most policies issued in 2005 through 2007
where the assumption was 2.3%. Future policy benefi t increases for
business issued in 2010 are based on current assumptions.
 e reserves for annuities issued by the independent division are based
on assumed interest rates credited on deferred annuities, which vary
by year of issue, and ranged from 1.5% to 5.5% in 2010 and 2009.
Withdrawal charges, if any, generally range from 7.0% to 0.0% and
grade to zero over a period of seven years for business issued in the
U.S. Canadian annuity products have a surrender charge that varies
by product series and premium paying period.
PreNeed Business—AMLIC Division
Interest and discount rates for preneed life insurance issued or acquired
after September 2000 and prior to 2009 vary by year of issuance and
are based on pricing assumptions and modifi ed to allow for provisions
for adverse deviation. For preneed life insurance with discretionary
death benefi t growth issued after 2008, interest and discount rates are
based on product nonforfeiture rates and current assumptions without
provisions for adverse deviation. Discount rates for 2010 and 2009