Assurant 2011 Annual Report Download - page 41

ASSURANT, INC.2011 Form10-K 33
PARTII
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
 e following table provides reserve information for our major product lines for the years ended December31,2011 and 2010:
December31,2011 December31,2010
Future Policy
Bene tsand
Expenses
Unearned
Premiums
Claims and Bene ts Payable
Future Policy
Bene tsand
Expenses
Unearned
Premiums
Claims and Bene ts Payable
Case Reserves
Incurred But
Not Reported
Reserves Case Reserves
Incurred But
Not Reported
Reserves
Long Duration Contracts:
Preneed funeral life
insurance policies and
investment-type annuity
contracts $ 3,996,162 $ 120,067 $ 11,342 $ 7,555 $ 3,862,431 $ 78,986 $ 12,009 $ 4,085
Life insurance no longer
o ered 456,860 626 1,428 4,487 467,574 649 1,577 265
Universal life and other
products no longer o ered 229,726 132 988 6,534 246,177 197 272 8,727
FFG, LTC and other
disposed businesses 3,491,994 38,039 641,238 55,151 3,435,762 39,119 546,003 55,089
Medical 86,456 11,097 8,385 10,170 87,588 9,340 7,515 11,044
All other 8,145 249 16,708 6,928 5,621 324 18,465 5,115
Short Duration Contracts:
Group term life — 4,277 211,910 37,797 — 4,550 209,514 36,486
Group disability — 2,390 1,243,975 133,441 — 2,567 1,251,999 152,275
Medical — 135,557 97,964 170,970 — 104,169 104,288 186,102
Dental — 4,634 2,788 17,436 — 4,400 3,079 18,063
Property and warranty — 2,041,190 199,829 370,814 — 1,887,759 168,952 349,479
Credit life and disability — 286,631 50,645 59,949 — 307,430 61,808 69,644
Extended service contracts — 2,498,403 2,425 37,398 — 2,363,836 2,855 40,373
All other — 338,725 9,874 18,990 — 260,673 8,211 17,875
TOTAL $ 8,269,343 $ 5,482,017 $ 2,499,499 $ 937,620 $ 8,105,153 $ 5,063,999 $ 2,396,547 $ 954,622
For a description of our reserving methodology, see Note12 to the
Consolidated Financial Statements included elsewhere in this report.
Long Duration Contracts
Reserves for future policy bene ts represent the present value of future
bene ts to policyholders and related expenses less the present value of
future net premiums. Reserve assumptions re ect best estimates for
expected investment yield, in ation, mortality, morbidity, expenses and
withdrawal rates.  ese assumptions are based on our experience to the
extent it is credible, modi ed where appropriate to re ect current trends,
industry experience and provisions for possible unfavorable deviation.
We also record an unearned revenue reserve which represents premiums
received which have not yet been recognized in our income statements.
Historically, premium deficiency testing has not resulted in a
material adjustment to deferred acquisition costs or reserves except
for discontinued products. Such adjustments could occur, however, if
economic or mortality conditions signi cantly deteriorated.
Risks related to the reserves recorded for certain discontinued individual
life, annuity, and long-term care insurance policies have been 100%
ceded via reinsurance. While the Company has not been released from
the contractual obligation to the policyholders, changes in and deviations
from economic and mortality assumptions used in the calculation of
these reserves will not directly a ect our results of operations unless
there is a default by the assuming reinsurer.
Short Duration Contracts
Claims and bene ts payable reserves for short duration contracts
include(1)case reserves for known claims which are unpaid as of the
balance sheet date;(2)IBNR reserves for claims where the insured
event has occurred but has not been reported to us as of the balance
sheet date; and(3)loss adjustment expense reserves for the expected
handling costs of settling the claims. Periodically, we review emerging
experience and make adjustments to our reserves and assumptions
where necessary. Below are further discussions on the reserving process
for our major short duration products.
Group Disability and Group Term Life
Case or claim reserves are set for active individual claims on group
long term disability policies and for waiver of premium bene ts on
group term life policies. Reserve factors used to calculate these reserves
re ect assumptions regarding disabled life mortality and claim recovery
rates, claim management practices, awards for social security and other
bene t o sets 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  xed and determinable on an individual claim basis.
Factors considered when setting IBNR reserves include patterns in
elapsed time from claim incidence to claim reporting, and elapsed
time from claim reporting to claim payment.
Key sensitivities at December31,2011 for group long term disability
claim reserves include the discount rate and claim termination rates.