Assurant 2010 Annual Report Download - page 63

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57ASSURANT, INC.2010 Form 10K
PART II
ITEM 8 Financial Statements and Supplementary Data
As of December 31, 2009
Foreign exchange spot rate at December 31, 2009,
US Dollar to Canadian Dollar -10 % -5 % 0 5 % 10 %
Total market value $ 9,852,603 $ 9,909,688 $ 9,966,772 $ 10,023,856 $ 10,080,941
% change of market value from base case (1.15)% (0.57)% — % 0.57 % 1.15 %
$ change of market value from base case $ (114,169) $ (57,084) $ — $ 57,084 $ 114.169
e foreign exchange risk sensitivity of our consolidated net income
is assessed using hypothetical test scenarios that assume earnings in
Canadian dollars are recognized evenly throughout a period. Our
actual results may diff er from the results noted below particularly
due to assumptions utilized or if events occur that were not included
in the methodology. For more information on this risk. Please see
“Item 1A—Risk Factors-Risk Related to Our Company—Fluctuations
in the exchange rate of the U.S. dollar and other foreign currencies
may materially and adversely aff ect our results of operations.  e
following tables summarize the results of this analysis on our reported
net income as of the dates indicated:
FOREIGN EXCHANGE MOVEMENT ANALYSIS OF NET INCOME
As of December 31, 2010
Foreign exchange daily average rate for the year
ended December 31, 2010, US Dollar to
Canadian Dollar -10 % -5 % 0 5 % 10 %
Net income $ 274,761 $ 276,969 $ 279,177 $ 281,385 $ 283,593
% change of net income from base case (1.58)% (0.79)% — % 0.79 % 1.58 %
$ change of net income from base case $ (4,416) $ (2,208) $ — $ 2,208 $ 4,416
As of December 31, 2009
Foreign exchange daily average rare for the year ended
December 31, 2009, US Dollar to Canadian Dollar -10 % -5 % 0 5 % 10 %
Net Income $ 427,843 $ 429,208 $ 430.574 $ 431.940 $ 433,305
% change of net income from base case (0.63)% (0.32)% — % 0.32 % 0.63 %
$ change of net income from base case $ (2,731) $ (1.366) $ — $ 1,366 $ 2,731
Derivatives
Derivatives are fi nancial instruments whose values are derived from
interest rates, foreign exchange rates, fi nancial indices or the prices of
securities or commodities. Derivative fi nancial instruments may be
exchange-traded or contracted in the over-the-counter market and
include swaps, futures, options and forward contracts.
Under insurance statutes, our insurance companies may use derivative
fi nancial instruments to hedge actual or anticipated changes in their
assets or liabilities, to replicate cash market instruments or for certain
income-generating activities.  ese statutes generally prohibit the
use of derivatives for speculative purposes. We generally do not use
derivative fi nancial instruments.
We have purchased contracts to cap the infl ation risk exposure inherent
in some of our preneed insurance policies.
In accordance with the guidance on embedded derivatives, we have
bifurcated the modifi ed coinsurance agreement with  e Hartford into
its debt host and embedded derivative (total return swap) and recorded
the embedded derivative at fair value in the consolidated balance sheets.
e invested assets related to this modifi ed coinsurance agreement
are included in other investments on the consolidated balance sheets.
ITEM 8 Financial Statements and Supplementary Data
e consolidated fi nancial statements and fi nancial statement schedules in Part IV, Item 15(a) 1 and 2 of this report are incorporated by reference
into this Item 8.