Assurant 2010 Annual Report Download - page 120

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F-50 ASSURANT, INC.2010 Form 10K
22 Retirement and Other Employee Benefi ts
e Investment Committee that oversees the investment of the plan
assets conducts an annual review of the investment strategies and policies
of the Plans.  is includes a review of the strategic asset allocation,
including the relationship of the Plans’ liabilities and portfolio structure.
As a result of this review, the Investment Committee has adopted the
current target asset allocation.  e allocation is consistent with 2009.
Financial Assets
e Plans’ Asset Allocation Percentages
Low Target (2) High
Equity securities (1):
Common stock- U.S. listed small cap 5.0 % 7.5 % 10.0 %
Mutual fund- U.S. listed large cap 22.0 % 27.0 % 32.0 %
Common/collective trust- foreign listed 5.0 % 7.5 % 10.0 %
Fixed maturity securities:
U.S. & foreign government and government agencies and authorities 8.0 % 10.5 % 13.0 %
Corporate- U.S & foreign investment grade 29.5 % 32.0 % 34.5 %
Corporate- U.S & foreign high yield 5.0 % 7.5 % 10.0 %
Investment fund:
Multi-strategy hedge fund 5.5 % 8.0 % 10.5 %
(1) The Plans’ long-term asset allocation targets are 30% equity, 50% fixed income and 20% investment funds. Current target asset allocations for equity securities include allocations
for investment funds. The Company invests certain plan assets in investment funds, examples of which include real estate investment funds and private equity funds, during 2010.
Amounts allocated for these investments are included in the equity securities caption of the fair value hierarchy at December 31, 2010, provided in the section above.
(2) It is understood that these guidelines are targets and that deviations may occur periodically as a result of cash flows, market impact or short-term decisions implemented by either the
Investment Committee or their investment managers.
e assets of the Plans are primarily invested in fi xed maturity and
equity securities. While equity risk is fully retained, interest rate risk
is hedged by aligning the duration of the fi xed maturity securities
with the duration of the liabilities. Specifi cally, interest rate swaps are
used to synthetically extend the duration of fi xed maturity securities
to match the duration of the liabilities, as measured on a projected
benefi t obligation basis. In addition, the Plans’ fi xed income securities
have exposure to credit risk. In order to adequately diversify and
limit exposure to credit risk, the Investment Committee established
parameters which include a limit on the asset types that managers
are permitted to purchase, maximum exposure limits by sector and
by individual issuer (based on asset quality) and minimum required
ratings on individual securities. As of December 31, 2010, 46.5%
of plan assets were invested in fi xed maturity securities and 16.6%,
12.9% and 7.6% of those securities were concentrated in the fi nancial,
communications and energy industries, with no exposure to any single
creditor in excess of 8.9%, 11.6% and 9.7% of those industries,
respectively. As of December 31, 2010, 43.5% of plan assets were
invested in equity securities and 60.1% of the Plans’ equity securities
were invested in a mutual fund that attempts to replicate the return of
the Standard & Poor’s 500 index (“S&P 500”) by investing its assets
in large capitalization stocks that are included in the S&P 500 using
a weighting similar to the S&P 500.
e fair value hierarchy for the Company’s qualifi ed pension plan and other post retirement benefi t plan assets at December 31, 2010 by asset
category, is as follows:
Qualifi ed Pension Benefi ts
Financial Assets
December 31, 2010
Total Level 1 Level 2 Level 3
Cash and cash equivalents:
Short-term investment funds $ 9,071 $ — $ 9,071 $ —
Equity securities:
Common stock- U.S. listed small cap 42,619 42,619 — —
Mutual funds- U.S. listed large cap 139,731 139,731 — —
Common/collective trust- foreign listed 50,130 — 50,130 —
Fixed maturity securities:
U.S. & foreign government and government agencies and authorities 66,390 — 66,390 —
Corporate- U.S & foreign investment grade 152,306 — 152,306 —
Corporate- U.S & foreign high yield 29,686 — 29,686 —
Investment fund:
Multi-strategy hedge fund 38,738 — — 38,738
Derivatives:
Interest rate swap 1,522 — 1,522 —
TOTAL FINANCIAL ASSETS $ 530,1931 $ 182,350 $ 309,105 $ 38,738
(1) The difference between the fair value of plan assets above and the amount used in determining the funded status is due to interest receivable which is not required to be included in the
fair value hierarchy.