Assurant 2010 Annual Report Download - page 119

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F-49ASSURANT, INC.2010 Form 10K
22 Retirement and Other Employee Benefi ts
e selection of our discount rate assumption refl ects the rate at which the
Plans’ obligations could be eff ectively settled at December 31, 2010, 2009
and 2008.  e methodology for selecting the discount rate was to
match each Plan’s cash fl ows to that of a yield curve that provides the
equivalent yields on zero-coupon corporate bonds for each maturity.
e yield curve utilized in the cash fl ow analysis was comprised of
246 bonds rated AA by Moody’s with maturities between zero and
thirty years.  e discount rate for each Plan, is the single rate that
produces the same present value of cash fl ows.
To develop the expected long-term rate of return on assets assumption,
the Company considered the current level of expected returns on risk
free investments (primarily, government bonds), the historical level of
the risk premium associated with the other asset classes in which the
portfolio is invested and the expectations for future returns of each
asset class.  e expected long-term rate of return on plan assets refl ects
the average rate of earnings expected on the funds invested or to be
invested.  e expected return for each asset class was then weighted
based on the targeted asset allocation to develop the expected long-term
rate of return on asset assumptions for the portfolio.  is resulted
in the selection of 7.50% for the fi scal years 2010 and 2009 and
8.25% for the fi scal year 2008.  e Company believes the current
assumption refl ects the projected return on the invested assets, given
the current market conditions and the modifi ed portfolio structure.
Actual return on plan assets was 13.8% and 15.8% for the years ended
December 31, 2010 and 2009.
e assumed health care cost trend rates used in measuring the accumulated benefi t obligation and net periodic benefi t cost were as follows:
Retirement Health Benefi ts
2010 2009 2008
Health care cost trend rate assumed for next year:
Pre-65 Non-reimbursement Plan 9.1 % 9.5 % 8.0 %
Post-65 Non-reimbursement Plan 9.1 % 9.5 % 10.0 %
Pre-65 Reimbursement Plan 9.1 % 9.5 % 8.0 %
Post-65 Reimbursement Plan 9.1 % 9.5 % 10.0 %
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 4.5 % 4.5 % 5.0 %
Year that the rate reaches the ultimate trend rate
Pre-65 Non-reimbursement Plan 2028 2028 2012
Post-65 Non-reimbursement Plan 2028 2028 2014
Pre-65 Reimbursement Plan 2028 2028 2012
Post-65 Reimbursement Plan 2028 2028 2014
Assumed health care cost trend rates have a signifi cant eff ect on the amounts reported for the health care plans. A one-percentage point change
in assumed health care cost trend rates would have the following eff ects:
Retirement Health Benefi ts
2010 2009 2008
One percentage point increase in health care cost trend rate
Eff ect on total of service and interest cost components $ 52 $ 43 $ 20
Eff ect on postretirement benefi t obligation 695 596 345
One percentage point decrease in health care cost trend rate
Eff ect on total of service and interest cost components $ (67) $ (55) $ (20)
Eff ect on postretirement benefi t obligation (838) (719) (350)
e assets of the Plans are managed to maximize their long-term
pre-tax investment return, subject to the following dual constraints:
minimization of required contributions and maintenance of solvency
requirements. It is anticipated that periodic contributions to the Plans
will, for the foreseeable future, be suffi cient to meet benefi t payments
thus allowing the balance to be managed according to a long-term
approach.  e Investment Committee for the Plans meets on a quarterly
basis and reviews the re-balancing of existing fund assets and the asset
allocation of new fund contributions.
e goal of our asset strategy is to ensure that the growth in the value
of the fund over the long-term, both in real and nominal terms,
manages (controls) risk exposure. Risk is managed by investing in
a broad range of asset classes, and within those asset classes, a broad
range of individual securities. Diversifi cation by asset classes stabilizes
total fund results over short-term time periods. Each asset class is
externally managed by outside investment managers appointed by the
Investment Committee. Derivatives may be used consistent with the
Plan’s investment objectives established by the Investment Committee.
All securities must be U.S. dollar denominated.
Beginning in 2009, 8% of the Plans’ assets were allocated to Mesirow
Institutional Multi-Strategy Fund, L.P. (“MIMSF”). MIMSF is a
multi-strategy product for U.S. tax-exempt investors subject to ERISA.
MIMSF allocates to fi ve primary sub-strategies including hedged
equity, credit, event, relative value and multi-strategy. Allocations to
these sub-strategies will shift over time depending upon MIMSF’s
investment outlook. MIMSF is managed to be broadly diversifi ed in
terms of both strategy and manager exposures.