Assurant 2012 Annual Report Download - page 13

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ASSURANT, INC.2012 Form10-K 5
PARTI
ITEM 1 Business
Credit Insurance
Our credit insurance products o er protection from life events and
uncertainties that arise in purchasing and borrowing transactions.
Credit insurance programs generally o er consumers the option to
protect a credit card balance or installment loan in the event of death,
involuntary unemployment or disability, and are generally available
to all consumers without the underwriting restrictions that apply to
term life insurance.
Regulatory changes have reduced the demand for credit insurance
in the U.S. Consequently, we continue to experience a reduction in
credit insurance domestic gross written premiums, a trend we expect
to continue. Although there has been contraction in the domestic
credit insurance market, several international markets are experiencing
growth in the credit insurance business.
Marketing and Distribution
Assurant Solutions focuses on establishing strong, long-term relationships
with leading distributors of its products and services. We partner with
some of the largest consumer electronics and appliance retailers and
original equipment manufacturers to market our ESC and warranty
products. In our preneed business, we have an exclusive relationship
with Services Corporation International (“SCI”), the largest funeral
provider in NorthAmerica.
Several of our distribution agreements are exclusive. Typically these
agreements have terms of one to  ve years and allow us to integrate
our administrative systems with those of our clients.
In addition to the domestic market, we operate in Canada, the
United Kingdom (“U.K.”), Ireland, Argentina, Brazil, Puerto Rico,
Chile, Germany, Spain, Italy, Mexico, China, Colombia, Peru and
Ecuador. In these markets, we primarily sell ESC and credit insurance
products through agreements with  nancial institutions, retailers
and wireless service providers. Expertise gained in both our domestic
credit insurance and ESC and warranty markets have enabled us to
extend our administrative infrastructure internationally. Systems,
training, computer hardware and our overall market development
approach are customized to  t the particular needs of each targeted
international market.
Underwriting and Risk Management
We write a signi cant portion of our contracts on a retrospective
commission basis.  is allows us to adjust commissions based on claims
experience. Under these commission arrangements, the compensation
of our clients is based upon the actual losses incurred compared to
premiums earned after a speci ed net allowance to us. We believe that
these arrangements better align our clients’ interests with ours and help
us to better manage risk exposure.
Pro ts from our preneed life insurance programs are generally earned
from interest rate spreads—the di erence between the death bene t
growth rates on underlying policies and the investment returns generated
on the assets we hold related to those policies. To manage these spreads,
we regularly adjust pricing to re ect changes in new money yields.
Assurant Specialty Property
For the Years Ended
December31, 2012
December31, 2011
Net earned premiums and other considerations by major product grouping:
Homeowners (lender-placed and voluntary) $ 1,418,061 $ 1,274,485
Manufactured housing (lender-placed and voluntary) 207,675 216,613
Other(1) 428,305 413,540
TOTAL $ 2,054,041 $ 1,904,638
Segment net income $ 304,951 $ 303,723
Loss ratio(2) 46.2% 45.0%
Expense ratio(3) 39.2% 38.8%
Combined ratio(4) 83.3% 82.0%
Equity(5) $ 1,202,576 $ 1,093,642
(1) Other primarily includes multi-family housing, lender-placed flood, and miscellaneous insurance products.
(2) The loss ratio is equal to policyholder benefits divided by net earned premiums and other considerations.
(3) The expense ratio is equal to selling, underwriting and general expenses divided by net earned premiums and other considerations and fees and other income. (Fees and other income
are not included in the above table.)
(4) The combined ratio is equal to total benefits, losses and expenses divided by net earned premiums and other considerations and fees and other income. (Fees and other income are not
included in the above table.)
(5) Equity excludes accumulated other comprehensive income.