Assurant 2012 Annual Report Download - page 124

ASSURANT, INC.2012 Form10-KF-48
20 Retirement and Other Employee Bene ts
Determination of the net periodic bene t cost was based on the following weighted-average assumptions for the years ended December31:
Quali ed Pension Bene ts Nonquali ed Pension Bene ts Retirement Health Bene ts
2012 2011 2010 2012 2011 2010 2012 2011 2010
Discount rate 4.59% 5.44% 5.94% 4.40% 5.11% 5.73% 4.64% 5.55% 6.06%
Expected long- term return on plan assets 6.75% 7.50% 7.50% 0% 0% 0% 6.75% 7.50% 7.50%
* Assumed rates of compensation increases are also used to determine net periodic benefit cost. Assumed rates varied by age and ranged from 3.25% – 9.30% for the Pension Benefits
for the years ended December31, 2012, 2011 and 2010.
 e selection of our discount rate assumption re ects the rate at which
the Plans’ obligations could be e ectively settled at December31, 2012,
2011 and 2010.  e methodology for selecting the discount rate was to
match each Plan’s cash  ows to that of a yield curve that provides the
equivalent yields on zero-coupon corporate bonds for each maturity.
 e yield curve utilized in the cash  ow analysis was comprised of 189
bonds rated AA by either Moody’s or Standard& Poor’s with maturities
between zero and thirty years.  e discount rate for each Plan is the
single rate that produces the same present value of cash  ows.
To develop the expected long-term rate of return on assets assumption,
the Company considered the current level of expected returns on risk
free investments (primarily, government bonds), the historical level of
the risk premium associated with the other asset classes in which the
portfolio is invested and the expectations for future returns of each asset
class.  e expected long-term rate of return on plan assets re ects the
average rate of earnings expected on the funds invested or to be invested.
 e expected return for each asset class was then weighted based on
the targeted asset allocation to develop the expected long-term rate of
return on asset assumptions for the portfolio.  e Company believes
the current assumption re ects the projected return on the invested
assets, given the current market conditions and the modi ed portfolio
structure. Actual return on plan assets was 13.6% and 10.7% for the
years ended December31, 2012 and 2011, respectively.
 e assumed health care cost trend rates used in measuring the accumulated bene t obligation and net periodic bene t cost were as follows:
Retirement Health Bene ts
2012 2011 2010
Health care cost trend rate assumed for next year:
Pre-65 Non-reimbursement Plan 9.2% 9.8% 9.1%
Post-65 Non-reimbursement Plan 9.0% 9.5% 9.1%
Pre-65 Reimbursement Plan 9.2% 9.8% 9.1%
Post-65 Reimbursement Plan 9.2% 9.8% 9.1%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 4.5% 4.5% 4.5%
Year that the rate reaches the ultimate trend rate
Pre-65 Non-reimbursement Plan 2028 2028 2028
Post-65 Non-reimbursement Plan 2028 2028 2028
Pre-65 Reimbursement Plan 2028 2028 2028
Post-65 Reimbursement Plan 2028 2028 2028
Assumed health care cost trend rates have a signi cant e ect on the amounts reported for the health care plans. A one-percentage point change
in assumed health care cost trend rates would have the following e ects:
RetirementHealthBene ts
2012 2011 2010
One percentage point increase in health care cost trend rate
E ect on total of service and interest cost components $ 44 $ 62 $ 52
E ect on postretirement bene t obligation 727 863 695
One percentage point decrease in health care cost trend rate
E ect on total of service and interest cost components $ (66) $ (91) $ (67)
E ect on postretirement bene t obligation (1,031) (1,196) (838)
 e assets of the Plans are managed to maximize their long-term
pre-tax investment return, subject to the following dual constraints:
minimization of required contributions and maintenance of solvency
requirements. It is anticipated that periodic contributions to the Plans
will, for the foreseeable future, be su cient to meet bene t payments
thus allowing the balance to be managed according to a long-term
approach.  e Investment Committee for the Plans meets on a quarterly
basis and reviews the re-balancing of existing fund assets and the asset
allocation of new fund contributions.
 e goal of our asset strategy is to ensure that the growth in the value
of the fund over the long-term, both in real and nominal terms,
manages (controls) risk exposure. Risk is managed by investing in
a broad range of asset classes, and within those asset classes, a broad
range of individual securities. Diversi cation by asset classes stabilizes
total fund results over short-term time periods. Each asset class is
externally managed by outside investment managers appointed by the
Investment Committee. Derivatives may be used consistent with the
Plan’s investment objectives established by the Investment Committee.
All securities must be U.S. dollar denominated.