Assurant 2011 Annual Report Download - page 59

ASSURANT, INC.2011 Form10-K 51
PARTII
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Investments
 e Company had total investments of $14,026,165 and $13,519,848 as of December31,2011 and December31,2010, respectively. For more
information on our investments see Note4 to the Notes to Consolidated Financial Statements included elsewhere in this report.
 e following table shows the credit quality of our  xed maturity securities portfolio as of the dates indicated:
Fixed Maturity Securities by Credit Quality (Fair Value)
As of
December31,2011 December31,2010
Aaa / Aa / A $ 6,620,808 59.1% $ 6,488,208 61.2%
Baa 3,692,709 33.0% 3,227,216 30.4%
Ba 648,817 5.8% 618,465 5.8%
B and lower 230,265 2.1% 278,663 2.6%
TOTAL $ 11,192,599 100.0% $ 10,612,552 100.0%
Major categories of net investment income were as follows:
Years Ended December31,
2011 2010 2009
Fixed maturity securities $ 565,486 $ 572,909 $ 558,639
Equity securities 29,645 33,864 38,189
Commercial mortgage loans on real estate 80,903 88,894 92,116
Policy loans 3,102 3,248 3,329
Short-term investments 5,351 5,259 7,933
Other investments 21,326 19,019 17,453
Cash and cash equivalents 7,838 5,577 8,359
Total investment income 713,651 728,770 726,018
Investment expenses (24,119) (25,580) (27,180)
NET INVESTMENT INCOME $ 689,532 $ 703,190 $ 698,838
Net investment income decreased $13,658, or 2%, to $689,532 at
December31,2011 from $703,190 at December31,2010.  e
decrease is due to lower overall investment yields.
Net investment income increased $4,352, or 1%, to $703,190 at
December31,2010 from $698,838 at December31,2009.  e increase
is due to higher invested assets partially o set by lower investment yields.
 e net unrealized gain position increased to $1,074,135 as of
December31,2011, compared to $617,538 as of December31,2010
primarily due to declining U.S. Treasury yields.
As of December31,2011, the Company owned $221,742 of securities
guaranteed by  nancial guarantee insurance companies. Included in
this amount was $198,734 of municipal securities, with a credit rating
of A+ both with and without the guarantee.
Our states, municipalities and political subdivisions holdings are
highly diversi ed across the UnitedStates and Puerto Rico, with no
individual state’s exposure (including both general obligation and revenue
securities) exceeding 0.5% of the overall investment portfolio as of
December31,2011 and December31,2010. At December31,2011
and December31,2010, the securities include general obligation and
revenue bonds issued by states, cities, counties, school districts and
similar issuers, including $164,347 and $154,742, respectively, of
advance refunded or escrowed-to-maturity bonds (collectively referred
to as “pre-refunded bonds”), which are bonds for which an irrevocable
trust has been established to fund the remaining payments of principal
and interest. As of December31,2011 and December31,2010,
revenue bonds account for 51% and 48% of the holdings, respectively.
Excluding pre-refunded bonds, sales tax, highway, transit, water and
miscellaneous (which includes bond banks,  nance authorities and
appropriations) provide for 79% and 80% of the revenue sources, as
of December31,2011 and December31,2010, respectively.
 e Company’s investments in foreign government  xed maturity
securities are held mainly in countries and currencies where the Company
has policyholder liabilities, which allow the assets and liabilities to be
more appropriately matched. At December31,2011, approximately
63%, 13%, and 7% of the foreign government securities were held in
the Canadian government/provincials and the governments of Brazil
and Germany, respectively. At December31,2010, approximately 60%,
11%, 7%, and 6% of the foreign government securities were held in
the Canadian government/provincials, and the governments of Brazil,
Germany and the United Kingdom, respectively. No other country
represented more than 5% of our foreign government securities as of
December31,2011 and December31,2010.
 e Company has European investment exposure in its corporate  xed
maturity and equity securities of $868,012 with an unrealized gain
of $61,387 at December31,2011 and $891,095 with an unrealized
gain of $52,282 at December31,2010. Approximately 31% and 39%
of the corporate European exposure are held in the  nancial industry
at December31,2011 and December31,2010, respectively. No
European country represented more than 5% of the fair value of our
corporate securities as of December31,2011 and December31,2010.
Approximately 5% of the fair value of the corporate European securities
are pound and euro-denominated and are not hedged to U.S. dollars, but,
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 diversi cation.