Assurant 2010 Annual Report Download - page 60

54 ASSURANT, INC.  2010 Form 10K
PART II
ITEM 7A Quantitative and Qualitative Disclosures About Market Risk
Commitments and Contingencies
We have obligations and commitments to third parties as a result of our operations.  ese obligations and commitments, as of December 31, 2010,
are detailed in the table below by maturity date as of the dates indicated:
As of December 31, 2010
Total Less than 1 year 1-3 years 3-5 years More than 5 years
Contractual obligations:
Insurance liabilities (1) $ 19,445,211 $ 1,738,096 $ 1,614,593 $ 1,446,706 $ 14,645,816
Debt and related interest 1,796,813 60,188 120,375 564,125 1,052,125
Mandatory redeemable preferred stock (2) 5,000 5,000 — — —
Operating leases 133,572 30,224 43,011 29,349 30,988
Pension obligations and postretirement benefi t 551,050 39,807 80,222 110,945 320,076
Commitments:
Purchase commitments 100,000 100,000 — — —
Investment purchases outstanding:
Commercial mortgage loans on real estate 25,140 25,140 — — —
Other investments 3,524 3,524 — — —
Liability for unrecognized tax benefi t 22,249 5,149 8,851 8,249 —
TOTAL OBLIGATIONS AND COMMITMENTS $ 22,082,559 $ 2,007,128 $ 1,867,052 $ 2,159,374 $ 16,049,005
(1) Insurance liabilities reflect estimated cash payments to be made to policyholders.
(2) During February 2011, all outstanding mandatory redeemable preferred stock shares were redeemed.
Liabilities for future policy benefi ts and expenses of $8,105,153 and claims and benefi ts payable of $3,351,169 have been included in the
commitments and contingencies table. Signifi cant uncertainties relating to these liabilities include mortality, morbidity, expenses, persistency,
investment returns, infl ation, contract terms and the timing of payments.
Letters of Credit
In the normal course of business, letters of credit are issued primarily to
support reinsurance arrangements.  ese letters of credit are supported by
commitments with fi nancial institutions. We had approximately $24,946
and $28,566 of letters of credit outstanding as of December 31, 2010
and December 31, 2009, respectively.
Off -Balance Sheet Arrangements
 e Company does not have any off -balance sheet arrangements that
are reasonably likely to have a material eff ect on the fi nancial condition,
results of operations, liquidity, or capital resources of the Company.
ITEM 7A Quantitative and Qualitative Disclosures
About Market Risk
As a provider of insurance products, eff ective risk management
is fundamental to our ability to protect both our customers’ and
stockholders’ interests. We are exposed to potential loss from various
market risks, in particular interest rate risk and credit risk. Additionally,
we are exposed to infl ation risk and to a lesser extent foreign currency risk.
Interest rate risk is the possibility that the fair value of liabilities will
change more or less than the market value of investments in response
to changes in interest rates, including changes in investment yields and
changes in spreads due to credit risks and other factors.
Credit risk is the possibility that counterparties may not be able to meet
payment obligations when they become due. We assume counterparty
credit risk in many forms. A counterparty is any person or entity from
which cash or other forms of consideration are expected to extinguish
a liability or obligation to us. Primarily, our credit risk exposure is
concentrated in our fi xed maturity investment portfolio and, to a lesser
extent, in our reinsurance recoverables.
Infl ation risk is the possibility that a change in domestic price levels
produces an adverse eff ect on earnings.  is typically happens when
either invested assets or liabilities, but not both is indexed to infl ation.
Foreign exchange risk is the possibility that changes in exchange rates
produce an adverse eff ect on earnings and equity when measured in
domestic currency.  is risk is largest when assets backing liabilities
payable in one currency are invested in fi nancial instruments of another
currency. Our general principle is to invest in assets that match the
currency in which we expect the liabilities to be paid.