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ASSURANT, INC.2011 Form10-K46
PARTII
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Assurant Health
Overview
e table below presents information regarding Assurant Health’s segment results of operations:
For the Years Ended December31,
2011 2010 2009
Revenues:
Net earned premiums and other considerations $ 1,718,300 $ 1,864,122 $ 1,879,628
Net investment income 45,911 48,540 47,658
Fees and other income 34,635 40,133 39,879
Total revenues 1,798,846 1,952,795 1,967,165
Bene ts, losses and expenses:
Policyholder bene ts 1,271,060 1,302,928 1,410,171
Selling, underwriting and general expenses 460,646 565,060 604,698
Total bene ts, losses and expenses 1,731,706 1,867,988 2,014,869
Segment income (loss) before provision for income tax 67,140 84,807 (47,704)
Provision (bene t) for income taxes 26,254 30,778 (17,484)
SEGMENT NET INCOME LOSS $ 40,886 $ 54,029 $ 30,220
Net earned premiums and other considerations:
Individual Markets:
Individual markets $ 1,286,236 $ 1,375,005 $ 1,374,436
Group markets 473,653 489,117 505,192
Total net earned premiums before premium rebates 1,759,889 1,864,122 1,879,628
Premium rebates(4) (41,589) — —
TOTAL $ 1,718,300 $ 1,864,122 $ 1,879,628
Covered lives by product line(5):
Individual Markets:
Individual markets 603 617 646
Group markets 129 144 121
TOTAL 732 761 767
Ratios:
Loss ratio(1) 74.0% 69.9% 75.0%
Expense ratio(2) 26.3% 29.7% 31.5%
Combined ratio(3) 98.8% 98.1% 105.0%
(1) The loss ratio is equal to policyholder benefits divided by net earned premiums and other considerations.
(2) The expense ratio is equal to selling, underwriting and general expenses divided by net earned premiums and other considerations and fees and other income.
(3) The combined ratio is equal to total benefits, losses and expenses divided by net earned premiums and other considerations and fees and other income.
(4) As of January1,2011, the Company began accruing premium rebates to comply with the minimum medical loss ratio requirements under the Affordable Care Act.
(5) As of January1,2011, covered lives consist of all policies, including supplemental coverages and self-funded group products, purchased by policyholders. Prior periods consisted only of
medical policies.
e Aff ordable Care Act
Some provisions of the A ordable Care Act took e ect in 2011, and
other provisions will become e ective at various dates over the next
several years. In December2010, HHS issued a number of interim  nal
regulations with respect to the A ordable Care Act. In December2011,
HHS issued  nal regulations regarding the MLR. HHS has also issued
technical corrections and Q&As throughout 2010 and 2011. However,
HHS has not issued guidance regarding speci c components of the
MLR calculations.  e Company has discussed these issues with other
industry experts in order to make reasonable assumptions regarding
the MLR rebate calculations. However, there remains a risk that HHS
will issue new guidance before the 2011 MLR rebate calculations are
due to be  led with HHS on June1,2012. Management continues to
modify its business model to adapt to these new regulations and will
continue to monitor HHS and state regulatory activity for clari cation
and additional regulations. Given the sweeping nature of the changes
represented by the A ordable Care Act, our results of operations
and  nancial position could be materially adversely a ected. For
more information, see Item1A, “Risk Factors—Risk related to our
industry—Reform of the health insurance industry could make our
health insurance business unpro table.”