Assurant 2010 Annual Report Download - page 127

F-57ASSURANT, INC.  2010 Form 10K
26 Commitments and Contingencies
During the fourth quarter of 2010, following the completion of our
annual goodwill impairment analysis, the Company recorded an
impairment charge of $306,381 related to the Assurant Employee
Benefi ts and Assurant Health reporting units.  e impairment charge
resulted in a decrease to net income and had no related tax benefi t.
See Notes 2, 6 and 11 for further information.
During the fourth quarter of 2009, following the completion of
our annual goodwill impairment analysis, the Company recorded
an impairment charge of $83,000 related to the Assurant Employee
Benefi ts reporting unit.  e impairment charge resulted in a decrease
to net income and had no related tax benefi t. See Notes 2, 6 and 11
for further information.
26. Commitments and Contingencies
 e Company and its subsidiaries lease offi ce space and equipment under operating lease arrangements. Certain facility leases contain escalation
clauses based on increases in the lessors’ operating expenses. At December 31, 2010, the aggregate future minimum lease payments under these
operating lease agreements that have initial or non-cancelable terms in excess of one year are:
2011 $ 30,224
2012 24,639
2013 18,372
2014 15,252
2015 14,097
 ereafter 30,988
Total minimum future lease payments $ 133,572
Rent expense was $39,700, $41,639 and $37,360 for 2010, 2009 and
2008, respectively.
In the normal course of business, letters of credit are issued primarily to
support reinsurance arrangements in which the Company is the reinsurer.
 ese letters of credit are supported by commitments under which the
Company is required to indemnify the fi nancial institution issuing the
letter of credit if the letter of credit is drawn.  e Company had $ 24,946
and $28,566 of letters of credit outstanding as of December 31, 2010
and 2009, respectively.
 e Company is involved in litigation in the ordinary course of
business, both as a defendant and as a plaintiff .  e Company may
from time to time be subject to a variety of legal and regulatory actions
relating to the Company’s current and past business operations. While
the Company cannot predict the outcome of any pending or future
litigation, examination or investigation, the Company does not believe
that any pending matter will have a material adverse eff ect individually
or in the aggregate, on the Company’s fi nancial condition, results of
operations, or cash fl ows.
As of December 31, 2009, the Company held litigation reserves of
$51,952 related to previously disclosed unfavorable outcomes from
ordinary course claim-related litigation in its Assurant Health segment.
During 2010, the Company paid a total of $25,350 to resolve this
litigation, and released the remaining reserves.
One of the Company’s subsidiaries, American Reliable Insurance
Company (“ARIC”), participated in certain excess of loss reinsurance
programs in the London market and, as a result, reinsured certain
personal accident, ransom and kidnap insurance risks from 1995
to 1997. ARIC and a foreign affi liate ceded a portion of these risks
to retrocessionaires. ARIC ceased reinsuring such business in 1997.
However, certain disputes arose regarding these programs.  e disputes
generally involved multiple layers of reinsurance, and allegations that the
reinsurance programs involved interrelated claims “spirals” devised to
disproportionately pass claims losses to higher-level reinsurance layers.
 e companies involved in these programs, including ARIC, have
resolved many of these disputes.  e disputes involving ARIC and an
affi liate, Assurant General Insurance Limited (formerly Bankers Insurance
Company Limited) (“AGIL”), for the 1995 and 1996 program years,
were the subject of working group settlements negotiated with other
market participants. For the 1995 program year, the participants have
negotiated a fi nal commutation agreement that extinguishes any future
liability between the participants. For the 1996 program year, four of
the fi ve participants (representing approximately 95% of the exposure)
have negotiated a fi nal commutation agreement that extinguishes any
future liability between the participants.
 e Company believes, on the basis of information currently available,
that the existing loss accruals related to these programs are adequate.
However, the inherent uncertainty of resolving these matters, including
the uncertainty of estimating whether any settlements the Company
may enter into in the future would be on favorable terms, makes it
impossible to predict the outcomes with certainty.
As previously disclosed, the Company entered into a settlement on
January 21, 2010 in connection with a complaint fi led by the SEC
regarding a fi nite reinsurance arrangement entered into by the Company.
 e Company consented, without admitting or denying the allegations
in the complaint, to the entry of a judgment requiring payment of
a civil penalty of $3,500, an expense that the Company accrued as
of December 31, 2009, and a permanent injunction prohibiting the
Company from violating certain provisions of the federal securities
laws.  e court approved the settlement in a fi nal judgment entered
on January 25, 2010, and the Company paid the penalty.
In the course of implementing procedures for compliance with the
new mandatory reporting requirements under the Medicare, Medicaid,
and SCHIP Extension Act of 2007, Assurant Health identifi ed a
possible ambiguity in the Medicare Secondary Payer Act and related
regulations about which the Company subsequently had a meeting
with representatives of the Centers for Medicare and Medicaid Services
(“CMS”). Assurant Health believes that its historical interpretation
and application of such laws and regulations is correct and requested
that CMS issue a written determination to that eff ect. More recently,
CMS informed counsel for Assurant Health that it disagrees with some
of Assurant Health’s legal positions and requested another meeting to
discuss the matter further, but, as of this date, no such meeting has
been scheduled.  e Company does not believe that any loss relating
to this issue is probable, nor can the Company make any estimate of
any possible loss or range of possible loss associated with this issue.