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F-20 ASSURANT, INC.2010 Form 10K
5 Investments
e cost or amortized cost and fair value of available for sale fi xed maturity securities in an unrealized loss position at December 31, 2010, by
contractual maturity, is shown below:
Cost or Amortized
Cost Fair Value
Due in one year or less $ 3,659 $ 3,653
Due after one year through fi ve years 283,701 279,802
Due after fi ve years through ten years 444,224 427,721
Due after ten years 748,246 712,816
Total 1,479,830 1,423,992
Asset-backed 2,949 2,865
Commercial mortgage-backed 4,765 4,754
Residential mortgage-backed 175,922 170,924
TOTAL $ 1,663,466 $ 1,602,535
e Company has exposure to sub-prime and related mortgages
within our fi xed maturity security portfolio. At December 31, 2010,
approximately 2.3% of the residential mortgage-backed holdings
had exposure to sub-prime mortgage collateral.  is represented
approximately 0.2% of the total fi xed income portfolio and 0.7% of
the total unrealized gain position. Of the securities with sub-prime
exposure, approximately 26% are rated as investment grade. All
residential mortgage-backed securities, including those with sub-prime
exposure, are reviewed as part of the ongoing other-than-temporary
impairment monitoring process.
e Company has made commercial mortgage loans, collateralized
by the underlying real estate, on properties located throughout the
U.S. and Canada. At December 31, 2010, approximately 40% of
the outstanding principal balance of commercial mortgage loans was
concentrated in the states of California, New York, and Washington.
Although the Company has a diversifi ed loan portfolio, an economic
downturn could have an adverse impact on the ability of its debtors
to repay their loans.  e outstanding balance of commercial mortgage
loans range in size from $5 to $16,614 at December 31, 2010 and
from $9 to $22,092 at December 31, 2009.
Credit quality indicators for commercial mortgage loans are loan-to-
value and debt-service coverage ratios. Loan-to-value and debt-service
coverage ratios are measures commonly used to assess the credit quality
of commercial mortgage loans.  e loan-to-value ratio compares the
principal amount of the loan to the fair value of the underlying property
collateralizing the loan, and is commonly expressed as a percentage.  e
debt-service coverage ratio compares a property’s net operating income
to its debt-service payments and is commonly expressed as a ratio of
one.  e loan-to-value and debt-service coverage ratios are generally
updated annually in the third quarter.  e following summarizes our
loan-to-value and average debt-service coverage ratios:
Loan-to-Value Carrying Value % of Gross
Mortgage Loans Debt-Service
Coverage ratio
70% and less $ 902,271 66.6 % 2.03
71—80% 217,282 16.1 % 1.41
81—95% 147,493 10.9 % 1.25
Greater than 95% 86,756 6.4 % 0.94
Gross commercial mortgage loans 1,353,802 100.0 % 1.78
Less valuation allowance (32,838)
Net commercial mortgage loans $ 1,320,964
All commercial mortgage loans that are individually impaired have an
established mortgage loan valuation allowance for losses. Changing
economic conditions aff ect our valuation of commercial mortgage loans.
Changing vacancies and rents are incorporated into the discounted cash
fl ow analysis that we perform for monitored loans and may contribute
to the establishment of (or an increase or decrease in) a commercial
mortgage loan valuation allowance for losses. In addition, we continue
to monitor the entire commercial mortgage loan portfolio to identify
risk. Areas of emphasis are properties that have exposure to earthquakes,
have deteriorating credits or have experienced a reduction in debt-service
coverage ratio. Where warranted, we have established or increased a
valuation allowance based upon this analysis.
e commercial mortgage loan valuation allowance for losses was
$32,838 and $16,129 at December 31, 2010 and 2009, respectively.
e provision expense during 2010 and 2009 was $16,709 and $10,221
respectively.  e provision expense for both periods was mainly due
to one individually impaired commercial mortgage loan with a loan
valuation allowance of $22,092 and $6,320, and a net loan value of
$0 and $15,772 at December 31, 2010 and December 31, 2009,
respectively.
At December 31, 2010, the Company had mortgage loan commitments
outstanding of approximately $25,140 and is committed to fund
additional capital contributions of $3,524 to joint ventures and to
certain investments in limited partnerships. Furthermore, the Company
has a $100,000 commitment to fund a revolving credit facility with
one of its customers.
e Company has short term investments and fi xed maturities of
$553,722 and $542,246 at December 31, 2010 and 2009, respectively,
on deposit with various governmental authorities as required by law.
e Company mainly utilizes derivative instruments in managing the
Assurant Solutions segment pre-arranged funeral business exposure to
infl ation risk.  e derivative instruments, Consumer Price Index Caps
(the “CPI CAPs”), limits the infl ation risk on certain policies.  e CPI
CAPs do not qualify under GAAP as eff ective hedges; therefore, they
are marked-to-market on a quarterly basis and the accumulated gain