Assurant 2012 Annual Report Download - page 17

ASSURANT, INC.2012 Form10-K 9
PARTI
ITEM 1 Business
Group Life
Group term life insurance provided through the workplace provides
bene ts in the event of death. We also provide accidental death and
dismemberment insurance. Insurance consists primarily of renewable
term life insurance with the amount of coverage provided being either
a  at amount, a multiple of the employee’s earnings, or a combination
of the two. We also reinsure life policies written by other carriers
through DRMS.
Group Vision and Supplemental Products
Fully-insured vision coverage is o ered through our agreement with
Vision Service Plan, Inc., a leading national supplier of vision insurance.
Our plans cover eye exams, glasses, and contact lenses and are usually
sold in combination with one or more of our other products. In addition
to the traditional voluntary products, we provide group critical illness,
cancer, accident, and gap insurance.  ese products are generally paid
for by the employee through payroll deductions, and the employee is
enrolled in the coverage(s) at the worksite.
Marketing and Distribution
Our products and services are distributed through a group sales
force located in 34 o ces near major metropolitan areas. Our sales
representatives distribute our products and services through independent
brokers and employee-bene ts advisors. Daily account management
is provided through local sales o ces, further supported by regional
sales support centers and a home o ce customer service department.
Broker compensation in some cases includes an annual performance
incentive, based on volume and retention of business.
DRMS provides turnkey group disability and life insurance solutions to
insurance carriers that want to supplement their core product o erings.
Our services include product development, state insurance regulatory
 lings, underwriting, claims management, and other functions typically
performed by an insurer’s back o ce. Assurant Employee Bene ts
reinsures the risks written by DRMS’ clients, with the clients generally
retaining shares that vary by contract.
Underwriting and Risk Management
 e pricing of our products is based on the expected cost of bene ts,
calculated using assumptions for mortality, morbidity, interest, expenses
and persistency, and other underwriting factors. Our block of business
is diversi ed by industry and geographic location, which serves to
limit some of the risks associated with changing economic conditions.
Disability claims management focuses on helping claimants return to
work through a supportive network of services that may include physical
therapy, vocational rehabilitation, and workplace accommodation.
We employ or contract with a sta of doctors, nurses and vocational
rehabilitation specialists, and use a broad range of additional outside
medical and vocational experts to assist our claim specialists.
Ratings
Independent rating organizations periodically review the  nancial
strength of insurers, including our insurance subsidiaries. Financial
strength ratings represent the opinions of rating agencies regarding
the ability of an insurance company to meet its  nancial obligations
to policyholders and contractholders.  ese ratings are not applicable
to our common stock or debt securities. Ratings are an important
factor in establishing the competitive position of insurance companies.
Rating agencies also use an “outlook statement” of “positive,” “stable,”
“negative” or “developing” to indicate a medium- or long-term trend in
credit fundamentals which, if continued, may lead to a rating change.
A rating may have a stable outlook to indicate that the rating is not
expected to change; however, a stable rating does not preclude a rating
agency from changing a rating at any time, without notice.
Most of our active domestic operating insurance subsidiaries are rated
by the A.M. Best Company (“A.M. Best”). In addition, six of our
domestic operating insurance subsidiaries are also rated by Moody’s
Investor Services (“Moody’s”) and seven are rated by Standard& Poor’s
Inc., a division of McGraw Hill Companies, Inc. (“S&P”).
For further information on the risks of ratings downgrades, see “Item
1A—Risk Factors—Risks Related to our Company—A.M.Best,
Moody’s and S&P rate the  nancial strength of our insurance company
subsidiaries, and a decline in these ratings could a ect our standing in
the insurance industry and cause our sales and earnings to decrease.”
 e following table summarizes our  nancial strength ratings and outlook as of December31, 2012:
Outlook
A.M.Best(1) Moody’s(2) Standard&Poor’s(3)
Stable (4) (5)
COMPANY
American Bankers Insurance Company A A2 A-
American Bankers Life Assurance Company A- A3 A-
American Memorial Life Insurance Company A- N/A A-
American Reliable Insurance Company A N/A N/A
American Security Insurance Company A A2 A-
Assurant Life of Canada A- N/A N/A
Caribbean American Life Assurance Company A- N/A N/A
Caribbean American Property Insurance Company A N/A N/A
John Alden Life Insurance Company A- A3 BBB
Reliable Lloyds A N/A N/A
Standard Guaranty Insurance Company A N/A N/A