Assurant 2011 Annual Report Download

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2011 ANNUAL REPORT AND FORM 10-K

Table of contents

  • Page 1
    2011 ANNUAL REPORT AND FORM 10-K

  • Page 2
    ... Specialty Property Assurant Health Assurant Employee Benefits (1) Includes net operating income of operating segments. Excludes Corporate and other, net realized gains on investments, amortization of deferred gains on disposal of businesses and interest expense. Book Value Per Diluted Share...

  • Page 3
    ...grows; Increasing our rental insurance capabilities and offerings; Introducing new products to make health insurance more accessible and affordable for consumers; and Growing our array of voluntary, employee-funded benefit products. z z z 2011 RESULTS FROM OPERATIONS Assurant Solutions Earnings...

  • Page 4
    ... Assurant employees worldwide provide superior service to our customers and do their part to create long-term value for our shareholders. Every day, I am proud to work with my colleagues and be a part of the Assurant team. Sincerely, Assurant Health Assurant Health made great progress during 2011...

  • Page 5
    ... Robert B. Pollock S. Craig Lemasters Michael J. Peninger President and Chief Executive Officer, Assurant Alan B. Colberg President and Chief Executive Officer, Assurant Solutions Gene E. Mergelmeyer Executive Vice President and Chief Financial Officer, Assurant John S. Roberts Executive...

  • Page 6
    ... used by other companies, investors should be careful when comparing Assurant's non-GAAP financial measures to those of other companies. (dollars in millions, net of tax) Assurant Solutions Assurant Specialty Property Assurant Health Assurant Employee Benefits Corporate and other Amortization...

  • Page 7
    FORM 10-K

  • Page 8
    ... and Procedures...62 Other Information ...62 PART III ITEM 10 ITEM 11 ITEM 12 ITEM 13 ITEM 14 63 Directors, Executive Officers and Corporate Governance...63 Executive Compensation...63 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters...63 Certain...

  • Page 9
    ...York, New York (Address of Principal Executive Offices) (212) 859-7000 39-1126612 (I.R.S. Employer Identification No.) 10005 (Zip Code) (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Title of Each Class Common Stock, $0.01 Par Value...

  • Page 10
    ..., on our health and employee benefits businesses; actions by governmental agencies that could result in reductions of the premium rates we charge or increases in the claims we pay; (ix) (x) current or new laws and regulations that could increase our costs and decrease our revenues; general global...

  • Page 11
    ..., individual health and small employer group health insurance, group dental, disability, and life insurance and employee-funded voluntary benefits. Assurant's mission is to be the premier provider of specialized insurance products and related services in North America and select worldwide markets...

  • Page 12
    ...in this report. Assurant Solutions For the Years Ended December 31, 2011 December 31, 2010 Gross written premiums for selected product groupings (1): Domestic extended service contracts and warranties (2) International extended service contracts and warranties (2) Preneed life insurance (face sales...

  • Page 13
    ...-placed flood insurance, and renters insurance. Assurant Specialty Property also writes other specialty products. In June 2011 we acquired SureDeposit, the market leader in rental security deposit alternatives. We believe that this acquisition will help build our niche multi-family housing business...

  • Page 14
    ... Our products are offered with different plan options to meet a broad range of customer needs and levels of affordability. Assurant Health also offers medical insurance to small employer groups. 6 ASSURANT, INC. - 2011 Form 10-K The Patient Protection and Affordable Care Act and the Health Care and...

  • Page 15
    ...our major medical customers with access to more than one million health care providers and 7,500 hospitals nationwide. Access to this network will enhance the competitiveness of Assurant Health for individuals, families, and small groups. Marketing and Distribution Our health insurance products are...

  • Page 16
    ... support centers and a home office customer service department. Compensation of brokers in some cases includes an annual performance incentive, based on volume and retention of business. DRMS provides turnkey group disability and life insurance solutions to insurance carriers that want to supplement...

  • Page 17
    ...Security Insurance Company Assurant Life of Canada Caribbean American Life Assurance Company Caribbean American Property Insurance Company John Alden Life Insurance Company Reliable Lloyds Standard Guaranty Insurance Company Time Insurance Company UDC Dental California Union Security Dental Care New...

  • Page 18
    ... regulating companies' ability to enter and exit markets or to provide, terminate or cancel certain coverages; • imposing statutory accounting and annual statement disclosure requirements; • approving policy forms and mandating certain insurance benefits; • regulating premium rates, including...

  • Page 19
    ... actions were taken at the federal level that impose added restrictions on our business, in particular Assurant Health and Assurant Employee Benefits. In March 2010, President Obama signed the Affordable Care Act into law. Provisions of the Affordable Care Act and related reforms have and will...

  • Page 20
    ...insurance coverage for individuals and small groups (generally groups with 50 or fewer employees) and limitations on exclusions based on pre-existing conditions. HIPAA also imposes requirements on health insurers, health plans and health care providers to ensure the privacy and security of protected...

  • Page 21
    ... our preneed insurance policies. In Assurant Specialty Property, we have exclusive relationships with mortgage lenders and manufactured housing lenders, manufacturers and property managers. In Assurant Health, we have exclusive distribution relationships for our individual health insurance products...

  • Page 22
    ... by the Affordable Care Act compelled health insurers to decrease broker commission levels beginning in 2011. Similarly, the Company decreased its commission levels for distribution channels that market Assurant Health's individual medical and small employer group medical products. Although the...

  • Page 23
    ..., general inflationary pressures may affect the costs of medical and dental care, as well as repair and replacement costs on our real and personal property lines, increasing the costs of paying claims. Inflationary pressures may also affect the costs associated with our preneed insurance policies...

  • Page 24
    ... cost of borrowing. As of December 31, 2011, contracts representing approximately 17% of Assurant Solutions' and 26% of Assurant Specialty Property's net earned premiums and fee income contain provisions requiring the applicable subsidiaries to maintain minimum A.M. Best financial strength ratings...

  • Page 25
    ... to pay premiums for the duration of the disability or for a stated period, during which time the life insurance coverage continues. If interest rates decline, reserves for open and/or new claims in Assurant Employee Benefits would need to be calculated using lower discount rates, thereby increasing...

  • Page 26
    ... the long term. If, in response, we choose to increase our product prices, our ability to compete and grow may be diminished. Environmental liability exposure may result from our commercial mortgage loan portfolio and real estate investments. Liability under environmental protection laws resulting...

  • Page 27
    ... the insurance operations of our Fortis Financial Group ("FFG") division to The Hartford Financial Services Group, Inc. ("The Hartford") and in 2000 we sold our Long Term Care ("LTC") division to John Hancock Life Insurance Company ("John Hancock"), now a subsidiary ASSURANT, INC. - 2011 Form 10...

  • Page 28
    ... brand recognition, more competitive pricing, lower costs, greater financial strength, more resources, or higher ratings. Many of our insurance products, particularly our group benefits and group health insurance policies, are underwritten annually. There is a risk that group purchasers may be able...

  • Page 29
    ... the health insurance industry. For more information on the Affordable Care Act, please see Item 1, "Business-Regulation-Federal Regulation-Patient Protection and Affordable Care Act." The Affordable Care Act requires Assurant Health, for some products, to increase benefits, to limit rescission...

  • Page 30
    ...on us or that changes the way we are able to do business may significantly harm our business or results of operations in the future. For example, some states have imposed new time limits for the payment of uncontested covered claims and require health care and dental service plans to pay interest on...

  • Page 31
    ...from specialty medical providers without referral by a primary care provider; • new or enhanced regulatory requirements that require insurers to pay claims on terms other than those mandated by underlying policy contracts; and • restriction of solicitation of insurance consumers by funeral board...

  • Page 32
    ... Specialty Property has operations centers located in Florence, South Carolina and Springfield, Ohio. Assurant Solutions' preneed business also has a headquarters building in Rapid City, South Dakota. Assurant Employee Benefits has a headquarters building in Kansas City, Missouri. Assurant Health...

  • Page 33
    ... the Consolidated Financial Statements included elsewhere in this report for a description of certain matters. The Company may from time to time be subject to a variety of legal and regulatory actions relating to our current and past business operations. While the Company cannot predict the outcome...

  • Page 34
    ...31/10 S&P 500 Multi-line Insurance Index 12/31/11 S&P 400 Multi-line Insurance Index TOTAL VALUES/RETURN TO STOCKHOLDERS INCLUDES REINVESTMENT OF DIVIDENDS Base Period 12/31/06 100 100 100 100 INDEXED VALUES Years Ending 12/31/11 80.57 117.72 12.09 94.17 Company/Index Assurant, Inc. S&P 400...

  • Page 35
    ..., Related Stockholder Matters and Issuer Purchases of Equity Securities Company/Index Assurant, Inc. S&P 400 MidCap Index S&P 500 Multi-line Insurance Index* S&P 400 Multi-line Insurance Index* * 12/31/07 22.06 7.98 (12.89) (9.67) 12/31/08 (54.58) (36.23) (88.67) (29.07) ANNUAL RETURN PERCENTAGE...

  • Page 36
    ... dividend payment would cause an event of default under the facility. ITEM 6 Selected Financial Data ASSURANT, INC. FIVEYEAR SUMMARY OF SELECTED FINANCIAL DATA 2011 Consolidated Statement of Operations Data: Revenues Net earned premiums and other considerations Net investment income Net realized...

  • Page 37
    ... Benefits and Assurant Health and a charge of $83,000 related to Assurant Employee Benefits during the fourth quarters of 2010 and 2009, respectively. The impairment charges resulted in a decrease to net income but did not have any related tax benefit. (4) During 2011, we had an $80,000 release...

  • Page 38
    ...Solutions, Assurant Specialty Property, Assurant Health, Assurant Employee Benefits, and Corporate and Other. The Corporate and Other segment includes activities of the holding company, financing expenses, net realized gains (losses) on investments, interest income earned from short-term investments...

  • Page 39
    ... the market value of, fixed maturity and short-term investments. The fair market value of the fixed maturity securities in our investment portfolio and the investment income from these securities fluctuate depending on general economic and market conditions. The fair market value generally increases...

  • Page 40
    ... Regulation released December 7, 2011. Additionally, the premium rebate accrual was based on separate projection models for the individual medical and small group businesses using projections of expected premiums, claims, and enrollment by state, legal entity, and market for medical business subject...

  • Page 41
    ... for social security and other benefit offsets and yield rates earned on assets supporting the reserves. Group long term disability and group term life waiver of premium reserves are discounted because the payment pattern and ultimate cost are fixed and determinable on an individual claim basis...

  • Page 42
    ...life waiver of premium reserves. Group term life, discount rate decreased by 100 basis points Group term life, as reported Group term life, discount rate increased by 100 basis points Claims and Benefits Payable $ 258,699 $ 249,707 $ 241,629 Medical IBNR reserves calculated using generally accepted...

  • Page 43
    .... The disputes involving ARIC and an affiliate, Assurant General Insurance Limited (formerly Bankers Insurance Company Limited ("AGIL")), for the 1995 and 1996 program years are subject to working group settlements negotiated with other market participants. Negotiations, arbitrations and litigation...

  • Page 44
    ... costs relating to monthly pay credit insurance business consist mainly of direct marketing costs and are deferred and amortized over the estimated average terms and balances of the underlying contracts. Acquisition costs relating to group term life, group disability, group dental and group vision...

  • Page 45
    ... plans and a retirement health benefits plan covering our employees who meet specified eligibility requirements. The calculation of reported expense and liability associated with these plans requires an extensive use of assumptions including factors such as discount rates, expected long-term returns...

  • Page 46
    ... the 2010 Step 1 test, Assurant Specialty Property had an estimated fair value that exceeded its net book value by 62.9%. In undertaking our qualitative assessment, we considered macro-economic, industry and reporting unit-specific factors. These included (i.) the effect of the current interest rate...

  • Page 47
    ... directly comparable companies, particularly for Assurant Solutions, make the other methods less credible. Following the 2010 Step 1 test, the Company concluded that the net book values of the Assurant Employee Benefits and Assurant Health reporting units exceeded their estimated fair values. Based...

  • Page 48
    ...2009. See Note 23 for further information. Recent Accounting Pronouncements-Not Yet Adopted In July 2011, the FASB issued amendments to the other expenses guidance to address how health insurers should recognize and classify in their statements of operations fees mandated by the Affordable Care Act...

  • Page 49
    ...our Assurant Health and Assurant Employee Benefits segments. Partially offsetting these items was improved net income in our Assurant Solutions segment and an $80,000 release of a capital loss valuation allowance related to deferred tax assets during Twelve Months 2011. Year Ended December 31, 2010...

  • Page 50
    ... Assurant Solutions' segment results of operations: For the Years Ended December 31, 2011 2010 Revenues: Net earned premiums and other considerations Net investment income Fees and other income Total revenues Benefits, losses and expenses: Policyholder benefits Selling, underwriting and general...

  • Page 51
    ... Canada compared to 2010, when consumer buying increased in advance of a consumer tax rate change that took effect July 1, 2010 in certain provinces. lines of business that are in run-off. Partially offsetting these items was a $7,500 increase to policyholder benefits for unreported claims related...

  • Page 52
    ... flood, miscellaneous specialty property and multi-family housing insurance products. The loss ratio is equal to policyholder benefits divided by net earned premiums and other considerations. The expense ratio is equal to selling, underwriting and general expenses divided by net earned premiums...

  • Page 53
    ...,756 for Twelve Months 2009. Growth in lender-placed homeowners, lender-placed flood and renters insurance products gross earned premiums and increased fee income were partially offset by increased ceded lender-placed homeowners' premiums and lower real estate owned premiums. Total Benefits, Losses...

  • Page 54
    ... Company began accruing premium rebates to comply with the minimum medical loss ratio requirements under the Affordable Care Act. As of January 1, 2011, covered lives consist of all policies, including supplemental coverages and self-funded group products, purchased by policyholders. Prior periods...

  • Page 55
    ... small employer group business decreased $15,464, or 3%, due to lower sales and a continued high level of policy lapses, partially offset by premium rate increases. Twelve Months 2011 included a premium rebate accrual of $41,589 associated with the MLR requirement included in the Affordable Care Act...

  • Page 56
    ... attributable to less favorable disability and life insurance loss experience, partially offset by improved dental insurance experience. Twelve Months 2011 results include a decrease in the reserve interest discount rate primarily for new long-term disability claims as well as a $6,630 (after-tax...

  • Page 57
    ... premiums increased 5% or $49,258 mainly due to assumed premiums from two new clients in our DRMS distribution channel and the acquisition of a block of business from Shenandoah Life Insurance Company, all added in Fourth Quarter 2009. This was partially offset by decreases in our direct products...

  • Page 58
    ... Assurant Specialty Property reporting unit, the Company chose the option to first perform the qualitative assessment. For the Assurant Solutions reporting unit, the Company performed a Step 1 test consistent with prior years. See "Item 7-Management's Discussion and Analysis of Financial Condition...

  • Page 59
    ...703,190 $ 2009 558,639 38,189 92,116 3,329 7,933 17,453 8,359 726,018 (27,180) 698,838 Fixed maturity securities Equity securities Commercial mortgage loans on real estate Policy loans Short-term investments Other investments Cash and cash equivalents Total investment income Investment expenses NET...

  • Page 60
    ...: relevant credit information, perceived market movements and sector news. Valuation models can 52 ASSURANT, INC. - 2011 Form 10-K change period to period, depending on the appropriate observable inputs that are available at the balance sheet date to price a security. When market observable inputs...

  • Page 61
    ... of Assurant's primary life and health insurance subsidiaries at A3 but changed the outlook on such ratings to negative from stable. For further information on our ratings and the risks of ratings downgrades, see "Item 1-Business" and "Item 1A-Risk Factors-Risks Related to Our Company-A.M. Best...

  • Page 62
    ... with a retirement health benefits plan covering our employees who meet specified eligibility requirements. The reported expense and liability associated with these plans requires an extensive use of assumptions which include, but are not limited to, the discount rate, expected return on plan assets...

  • Page 63
    ... report for the components of the net periodic benefit cost. The impact of a 25 basis point change in the discount rate on the 2012 projected benefit expense would result in a change of $2,900 for the Assurant Pension Plan and the various non-qualified pension plans and $50 for the retirement health...

  • Page 64
    ... second quarter of 2011 and changes in our short-term investments and commercial mortgage loans on real estate. Net cash (used in) provided by investing activities was $(8,876) and $141,467 for the years ended December 31, 2010 and 2009, respectively. The change in investing activities was primarily...

  • Page 65
    ...and claims and benefits payable of $3,437,119 have been included in the commitments and contingencies table. Significant uncertainties relating to these liabilities include mortality, morbidity, expenses, persistency, investment returns, inflation, contract terms and the timing of payments. Letters...

  • Page 66
    ... of our insurance and reinsurance liabilities. Our group long-term disability reserves are also sensitive to interest rates. Group long-term disability and group term life waiver of premium reserves are discounted to the valuation date at the valuation interest rate. The valuation interest rate is...

  • Page 67
    ... portfolio yield as of the dates indicated: INTEREST RATE MOVEMENT ANALYSIS OF PORTFOLIO YIELD OF FIXED MATURITY SECURITIES INVESTMENT PORTFOLIO As of December 31, 2011 Portfolio yield Basis point change in portfolio yield As of December 31, 2010 Portfolio yield Basis point change in portfolio yield...

  • Page 68
    ... partially mitigated this risk by purchasing derivative contracts with payments tied to the CPI. See "-Derivatives." In addition, we have inflation risk in our individual and small employer group health insurance businesses to the extent that medical costs increase with inflation, and we have not...

  • Page 69
    ... foreign exchange rates, financial indices or the prices of securities or commodities. Derivative financial 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...

  • Page 70
    ...to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. A company's internal control over financial reporting includes policies...

  • Page 71
    ... Matters The information in the 2012 Proxy Statement under the captions "Securities Authorized for Issuance Under Equity Compensation Plans," "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Management" is incorporated herein by reference. ASSURANT, INC. - 2011 Form 10...

  • Page 72
    ... "Corporate Governance" is incorporated herein by reference. ITEM 14 Principal Accounting Fees and Services The information in the 2012 Proxy Statement under the caption "Fees of Principal Accountants" in "Audit Committee Matters" is incorporated herein by reference. 64 ASSURANT, INC. - 2011 Form...

  • Page 73
    ... available upon request at the investor relations section of our website, located at www.assurant.com. Pursuant to the rules and regulations of the SEC, the Company has filed or incorporated by reference certain agreements as exhibits to this Annual Report on Form 10-K. These agreements may contain...

  • Page 74
    ... under the Assurant, Inc. Long Term Equity Incentive Plan.* Form of Restricted Stock Agreement for Executive Officers under the Assurant, Inc. Long Term Equity Incentive Plan (incorporated by reference from Exhibit 10.6 to the Registrant's Form 10-Q, originally filed on August 4, 2008).* Form of CEO...

  • Page 75
    ... Insurance Company Investment Plan Document (incorporated by reference from Exhibit 10.34 to the Registrant's Form 10-K, originally filed on March 3, 2008). Reinsurance Agreement, dated May 5, 2009, by and between American Security Insurance Company, American Bankers Insurance Company of Florida...

  • Page 76
    ... duly authorized on February 23, 2012. ASSURANT, INC. By: /S/ ROBERT B. POLLOCK Name: Robert B. Pollock Title: President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf...

  • Page 77
    ... designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and...

  • Page 78
    ... value (cost-$357,411 in 2011 and $452,648 in 2010) Commercial mortgage loans on real estate, at amortized cost Policy loans Short-term investments Collateral held/pledged under securities agreements Other investments Total investments Cash and cash equivalents Premiums and accounts receivable, net...

  • Page 79
    ... Share data: Weighted average shares outstanding used in basic per share calculations Plus: Dilutive securities WEIGHTED AVERAGE SHARES USED IN DILUTED PER SHARE CALCULATIONS See the accompanying notes to the consolidated financial statements. $ $ $ $ $ $ $ $ $ $ $ $ ASSURANT, INC. - 2011 Form...

  • Page 80
    ... unrecognized net periodic benefit cost and change in funded status, net of taxes of $5,439, $7,303 and $6,579, respectively Total other comprehensive income TOTAL COMPREHENSIVE INCOME See the accompanying notes to the consolidated financial statements. $ 2011 545,839 $ 2010 279,177 $ 2009 430...

  • Page 81
    ...December 31, 2009 Stock plan exercises Stock plan compensation expense Change in tax benefit from share-based payment arrangements Dividends Acquisition of common stock Net income Other comprehensive income Balance, December 31, 2010 Stock plan exercises Stock plan compensation expense Change in tax...

  • Page 82
    ...: Fixed maturity securities available for sale Equity securities available for sale Commercial mortgage loans on real estate Other invested assets Property and equipment and other Subsidiaries and warranty business, net of cash transferred (1) Change in short-term investments Change in policy loans...

  • Page 83
    ..., warranties and service contracts, pre-funded funeral insurance, lender-placed homeowners insurance, manufactured housing homeowners insurance, individual health and small employer group health insurance, group dental insurance, group disability insurance and group life insurance. Assurant...

  • Page 84
    ... include amounts related to paid benefits and estimated amounts related to unpaid policy and contract claims, future policyholder benefits and policyholder contract deposits. The cost of reinsurance is recognized over the terms of the underlying reinsured F-8 ASSURANT, INC. - 2011 Form 10-K

  • Page 85
    ... costs relating to monthly pay credit insurance business consist mainly of direct marketing costs and are deferred and amortized over the estimated average terms and balances of the underlying contracts. Acquisition costs relating to group term life, group disability, group dental, and group vision...

  • Page 86
    ...the Assurant Employee Benefits and Assurant Health reporting units, respectively. These impairments reflected the effects of the Affordable Care Act, the low interest rate environment, continuing high unemployment, the slow pace of the economic recovery and increased net book value primarily related...

  • Page 87
    ...group disability contracts, medical contracts, dental contracts, property and warranty contracts, credit life and disability contracts and extended service contracts. For short duration contracts, claims and benefits payable reserves are recorded when insured events occur. ASSURANT, INC. - 2011 Form...

  • Page 88
    ... contracts, revenues consist of charges assessed against policy balances. Revenues are recognized ratably as earned income over the premium-paying periods of the policies for the group worksite insurance products and certain group short-term disability policies. F-12 ASSURANT, INC. - 2011 Form...

  • Page 89
    ..., group disability, medical, dental, vision, property and warranty, credit life and disability, and extended service contracts and individual medical contracts issued from 2003 through 2006 in most jurisdictions and in all jurisdictions after 2006. Reinstatement premiums for reinsurance are netted...

  • Page 90
    ...2009. See Note 23 for further information. Recent Accounting Pronouncements-Not Yet Adopted In July 2011, the FASB issued amendments to the other expenses guidance to address how health insurers should recognize and classify in their statements of operations fees mandated by the Affordable Care Act...

  • Page 91
    ... group life, disability, dental and vision insurance business in-force with Shenandoah. There were no goodwill or intangible assets associated with this agreement. On June 21, 2011, in an all cash transaction, the Company acquired the SureDeposit business, the leading provider of security deposit...

  • Page 92
    ..., held to support those foreign-denominated liabilities. Our international investments are managed as part of our overall portfolio with the same approach to risk management and focus on diversification. The cost or amortized cost and fair value of fixed maturity securities at December 31, 2011 by...

  • Page 93
    ...703,190 $ 2009 558,639 38,189 92,116 3,329 7,933 17,453 8,359 726,018 (27,180) 698,838 Fixed maturity securities Equity securities Commercial mortgage loans on real estate Policy loans Short-term investments Other investments Cash and cash equivalents Total investment income Investment expenses NET...

  • Page 94
    ... in value. The net present value is calculated by discounting the Company's best estimate of projected future cash flows at the effective interest rate implicit in the fixed maturity security prior to impairment at the balance sheet date. The discounted cash flows become the new amortized cost basis...

  • Page 95
    ... the Company would be required to sell the securities before the anticipated recovery of their amortized cost basis. The gross unrealized losses are primarily attributable to widening credit spreads associated with an underlying shift in overall credit risk premium. ASSURANT, INC. - 2011 Form 10...

  • Page 96
    ... real estate, on properties located throughout the U.S. and Canada. At December 31, 2011, approximately 39% 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 diversified loan portfolio...

  • Page 97
    ... has short term investments and fixed maturities of $562,553 and $553,722 at December 31, 2011 and 2010, respectively, on deposit with various governmental authorities as required by law. The Company utilizes derivative instruments in managing the Assurant Solutions segment preneed life insurance...

  • Page 98
    ... assets and liabilities within these line items are measured at estimated fair value. Other investments are comprised of investments in the Assurant Investment Plan, American Security Insurance Company Investment Plan, Assurant Deferred Compensation Plan, a modified coinsurance agreement and other...

  • Page 99
    ... occur when market observable inputs that were previously available become unavailable in the current period. The remaining unpriced securities are submitted to independent brokers who provide non-binding broker quotes or are priced by other qualified sources. ASSURANT, INC. - 2011 Form 10-K F-23

  • Page 100
    ... Foreign governments Asset-backed Commercial mortgage-backed Residential mortgage-backed Corporate Equity Securities Non-redeemable preferred stocks Other investments Other assets Other liabilities TOTAL LEVEL 3 ASSETS AND LIABILITIES Year Ended December, 31, 2011 Net unrealized gains (losses...

  • Page 101
    ... liabilities has been consistent. • Level 1 Securities The Company's investments and liabilities classified as Level 1 as of December 31, 2011 and 2010, consisted of mutual funds and money market funds, foreign government fixed maturities and common stocks that are publicly listed and/or actively...

  • Page 102
    ...losses on commercial mortgage loans. The fair value measurement was classified as Level 3 (unobservable) in the fair value hierarchy at December 31, 2010. For its fourth quarter annual goodwill impairment test, a qualitative assessment was performed for the Assurant Specialty Property reporting unit...

  • Page 103
    ...31, 2011 and 2010. December 31, 2011 Carrying Value Fair Value December 31, 2010 Carrying Value Fair Value 1,320,964 $ 56,142 1,400,553 56,142 Financial assets Commercial mortgage loans on real estate Policy loans Financial liabilities Policy reserves under investment products (Individual and group...

  • Page 104
    ...$ 7. Income Taxes The Company and the majority of its subsidiaries are subject to U.S. tax and file a U.S. consolidated federal income tax return. Information about current and deferred tax expense (benefit) follows: Year Ended December 31, 2011 2010 Current expense: Federal & state Foreign Total...

  • Page 105
    ... on disposal of businesses Compensation related Employee and post-retirement benefits Other Total deferred tax asset Less valuation allowance Deferred tax assets, net of valuation allowance Deferred Tax Liabilities Deferred acquisition costs Net unrealized appreciation on securities Total deferred...

  • Page 106
    ... depreciation TOTAL $ $ Depreciation expense for 2011, 2010 and 2009 amounted to $55,193, $59,017 and $61,772, respectively. Depreciation expense is included in underwriting, general and administrative expenses in the consolidated statements of operations. F-30 ASSURANT, INC. - 2011 Form 10-K

  • Page 107
    ... 2 and 5 for further information. (2) Represents impairment of Assurant Employee Benefits and Assurant Health reporting units. See Notes 2 and 5 for further information. The Company has assigned goodwill to its operating segments for impairment testing purposes. The Corporate and Other segment is...

  • Page 108
    ... 2 test was not performed, the estimated fair value of the reporting units exceeded their respective net book values and therefore goodwill was not impaired. The 2010 impairments at Assurant Employee Benefits and Assurant Health reflects the effects of the Affordable Care Act, the low interest rate...

  • Page 109
    ... table provides reserve information of the Company's major product lines at the dates shown: December 31, 2011 Claims and Benefits Payable Incurred But Future Policy Unearned Not Reported Benefits and Expenses Premiums Case Reserves Reserves December 31, 2010 Claims and Benefits Payable Incurred...

  • Page 110
    ... Short duration and long duration medical methodologies used for settling claims and benefits payable are similar. (3) The Company's net retained credit life and disability claims and benefits payable were $60,797, $69,127 and $87,852 at December 31, 2011, 2010 and 2009. F-34 ASSURANT, INC. - 2011...

  • Page 111
    ...-year pricing and reserving processes as well as more favorable reimbursement from a pharmacy services provider for 2009 and 2010 activity. The Company's group disability products include short and long term disability coverage. Case reserves and IBNR for long-term disability claims incurred in 2011...

  • Page 112
    ... varies by product series and premium paying period. minimum benefit increases associated with an inflation index, assumed benefit increases equaled the discount rate less 3.0% in 2011 and 2010. The reserves for annuities issued by the AMLIC division are based on assumed interest rates credited on...

  • Page 113
    ... exposure are reviewed at the time of execution. The A.M. Best ratings for existing reinsurance agreements are reviewed on a periodic basis, at least annually. The following table provides the reinsurance recoverable as of December 31, 2011 grouped by A.M. Best rating: Best Ratings of Reinsurer...

  • Page 114
    ...is expected to provide protection for a storm that generates in excess of approximately $310,000 of losses net of any reimbursements from the Florida Hurricane Catastrophe Fund. Under the terms of these reinsurance agreements, the Subsidiaries are obligated to pay annual reinsurance premiums to Ibis...

  • Page 115
    ...new notes registered under the Securities Act of 1933, as amended. The interest expense incurred related to the Senior Notes was $60,188 for the years ended December 31, 2011, 2010, and 2009, respectively. There was $22,570 of accrued interest at December 31, 2011 and 2010, respectively. The Company...

  • Page 116
    ... loans may be used for the Company's commercial paper program or for general corporate purposes. The Company may increase the total amount available under the 2011 Credit Facility to $525,000 subject to certain conditions. No bank is obligated to provide commitments above their share of the $350,000...

  • Page 117
    ...The Company also applied the "long form" method to calculate its beginning pool of windfall tax benefits related to employee stock-based compensation awards as of the adoption date of the guidance. For the years ended December 31, 2011, 2010 and 2009, the Company recognized compensation costs net of...

  • Page 118
    ...in 2010 and 2011. For the 2009-2011 performance cycle, the actual payout level is determined by ranking the average of the Company's performance with respect to all three measures against the performance of all companies included in the A.M. Best Insurance Index for the applicable performance period...

  • Page 119
    ... were granted under the 2004 Assurant Long-Term Incentive Plan ("ALTIP"), which authorized the granting of up to 10,000,000 new shares of the Company's common stock to employees and officers under the ALTIP, Business Value Rights Program ("BVR") and CEO Equity Grants Program. Under the ALTIP, the...

  • Page 120
    ...volatility of the Company's stock. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is based on the current annualized dividend and share price as of the grant date. For awards issued...

  • Page 121
    ... adjustments of $10,334, $9,820 and $8,114, net of tax, in 2011, 2010 and 2009, respectively, for amortization of prior service cost included in net income. 20. Statutory Information The Company's insurance subsidiaries prepare financial statements on the basis of statutory accounting practices...

  • Page 122
    ... plan for a certain group of employees. Benefits are based on certain years of service and the employee's compensation during certain such years of service. The Company's funding policy is to contribute amounts to the plan sufficient to meet F-46 ASSURANT, INC. - 2011 Form 10-K the minimum funding...

  • Page 123
    ... provides certain life and health care benefits ("Retirement Health Benefits") for retired employees and their dependents. On July 1, 2011, the Company terminated certain health care benefits for employees who did not qualify for "grandfathered" status and will no longer offer these benefits to new...

  • Page 124
    ... are $23,061 and $781, respectively. The estimated net loss and prior service credit of Retirement Health Benefits that will be amortized from accumulated other comprehensive income into net periodic cost over the next fiscal year is $0 and $933, respectively. F-48 ASSURANT, INC. - 2011 Form 10-K

  • Page 125
    ... Benefits 2011 2010 2009 5.11% 5.73% 6.29% - - - Retirement Health Benefits 2011 2010 2009 5.55% 6.06% 6.22% 7.50% 7.50% 7.50% Discount rate Expected long- term return on plan assets * Assumed rates of compensation increases are also used to determine net periodic benefit cost. Assumed rates...

  • Page 126
    ... The Company invests certain plan assets in investment funds, examples of which include real estate investment funds and private equity funds, during 2011. Amounts allocated for these investments are included in the equity securities caption of the fair value hierarchy at December 31, 2011, provided...

  • Page 127
    ... the funded status is due to interest receivable which is not required to be included in the fair value hierarchy. Retirement Health Benefits Financial Assets Cash and cash equivalents: Short-term investment funds Equity securities: Common stock- U.S. listed small cap Mutual funds- U.S. listed...

  • Page 128
    ... the funded status is due to interest receivable which is not required to be included in the fair value hierarchy. Retirement Health Benefits Financial Assets Cash and cash equivalents: Short-term investment funds Equity securities: Common stock- U.S. listed small cap Mutual funds- U.S. listed...

  • Page 129
    ... warranties and service contracts, and pre-funded funeral insurance. Assurant Specialty Property provides lender-placed homeowners insurance and manufactured housing homeowners insurance. Assurant Health provides individual health and small employer group health insurance. Assurant Employee Benefits...

  • Page 130
    ... selected financial information by segment for the years ended December 31, 2011, 2010 and 2009: Year Ended December 31, 2011 Specialty Employee Property Health Benefits Corporate & Other Solutions Revenues Net earned premiums and other considerations Net investment income Net realized gains...

  • Page 131
    ...8,392 267,169 266,141 9,279 275,420 Revenue is based in the country where the product was sold and long-lived assets, which are primarily property and equipment, are based on the physical location of those assets. The Company has no reportable major customers. ASSURANT, INC. - 2011 Form 10-K F-55

  • Page 132
    ... Service contracts Preneed Other TOTAL Specialty Property: Homeowners (lender-placed and voluntary) Manufactured housing (lender-placed and voluntary) Other TOTAL Health: Individual markets Group markets Total net earned premiums before premium rebates Premium rebates (1) TOTAL Employee Benefits...

  • Page 133
    ...-tax) in the Assurant Specialty Property segment. During the fourth quarter of 2010, following the completion of Management's annual goodwill impairment analysis, the Company recorded an impairment charge of $306,381 related to the Assurant Employee Benefits and Assurant Health reporting units. The...

  • Page 134
    ... involving ARIC and an affiliate, 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...

  • Page 135
    ...-backed Commercial mortgage-backed Residential mortgage-backed Corporate TOTAL FIXED MATURITY SECURITIES Equity securities: Common stocks Non-redeemable preferred stocks TOTAL EQUITY SECURITIES Commercial mortgage loans on real estate, at amortized cost Policy loans Short-term investments Collateral...

  • Page 136
    ...2010 ASSETS Investments: Equity investment in subsidiaries Fixed maturity securities available for sale, at fair value (amortized cost-$334,115 in 2011 and $318,190 in 2010) Equity securities available for sale, at fair value (amortized cost-$9,929 in 2011 and $4,638 in 2010) Short-term investments...

  • Page 137
    ... Equity in undistributed and distributed net income of subsidiaries TOTAL REVENUES Expenses General and administrative expenses Interest expense Goodwill impairment TOTAL EXPENSES Income before benefit for income taxes Benefit for income taxes NET INCOME $ $ ASSURANT, INC. - 2011 Form 10-K F-61

  • Page 138
    ... Change in short-term investments NET CASH PROVIDED BY (USED) IN INVESTING ACTIVITIES Financing Activities Repayment of mandatorily redeemable preferred stock Change in tax benefit from share-based payment arrangements Acquisition of common stock Dividends paid Change in receivables under securities...

  • Page 139
    Schedule III-Supplementary Insurance Information ASSURANT, INC. FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 & 2009 Future Deferred policy Acquisition benefits and Cost expenses Premium Benefits Claims and revenue Net claims, losses benefits and other investment and settlement payable considerations ...

  • Page 140
    ...4.8% Life Insurance in Force Premiums: Life insurance Accident and health insurance Property and liability insurance TOTAL EARNED PREMIUMS Benefits: Life insurance Accident and health insurance Property and liability insurance TOTAL POLICYHOLDER BENEFITS $ $ $ F-64 ASSURANT, INC. - 2011 Form 10...

  • Page 141
    ... ASSURANT, INC. AS OF DECEMBER 31, 2011, 2010 AND 2009 Balance at Beginning of Year 2011: Valuation allowance for foreign NOL deferred tax carryforward Valuation allowance for deferred tax assets Valuation allowance for mortgage loans on real estate Valuation allowance for uncollectible agents...

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  • Page 143
    ... Avenue New York, NY 10017 Telephone: 646.471.3000 Fax: 813.286.6000 www.pwc.com FORM 10-K AND OTHER REPORTS Copies of the 2011 Annual Report on Form 10-K and other reports filed with the U.S. Securities and Exchange Commission (SEC) also are available, without charge, from the Assurant website at...

  • Page 144
    Assurant, Inc. One Chase Manhattan Plaza 41st Floor New York, NY 10005 Telephone: 212.859.7000 www.assurant.com 2011 ANNUAL REPORT AND FORM 10-K