Assurant 2012 Annual Report Download - page 22

ASSURANT, INC.2012 Form10-K14
PARTI
ITEM 1A Risk Factors
ITEM 1A Risk Factors
Certain factors may have a material adverse e ect on our business,  nancial condition and results of operations and you should carefully consider
them. It is not possible to predict or identify all such factors.
Risks Related to Our Company
Our revenues and pro ts may decline if we were unable
tomaintain relationships with signi cant clients,
distributors and other parties important tothesuccess
ofour business.
Our relationships and contractual arrangements with signi cant clients,
distributors, original equipment manufacturers, mortgage lenders
and loan servicers, and other parties with whom we do business are
important to the success of our segments. Many of these arrangements
are exclusive and some rely on preferred provider or similar relationships.
For example, in Assurant Solutions, we have exclusive relationships
with retailers and  nancial and other institutions through which we
distribute our products, including an exclusive distribution relationship
with SCI relating to the distribution of our preneed insurance policies.
In Assurant Specialty Property, we have exclusive relationships with
mortgage lenders and manufactured housing lenders, manufacturers and
property managers, and we are eligible to insure loans of government-
sponsored entities that are serviced by the mortgage loan servicers with
whom we do business. In Assurant Health, we have exclusive distribution
relationships for our individual health insurance products with a major
mutual insurance company as well as a relationship with a well-known
association through which we provide many of our individual health
insurance products. We also have a new provider network arrangement
with a national PPO network. We also maintain contractual relationships
with several separate networks of health and dental care providers, each
referred to as a PPO, through which we obtain discounts. In Assurant
Employee Bene ts, we have relationships through DRMS with group
insurance carriers to reinsure their disability and life insurance product
o erings. Typically, these relationships and contractual arrangements
have terms ranging from one to  ve years.
Although we believe we have generally been successful in maintaining
our clients, distribution and associated relationships, if these parties
decline to renew or seek to terminate these arrangements or seek to
renew these contracts on terms less favorable to us, our results of
operations and  nancial condition could be materially adversely a ected.
For example, a loss of one or more of the discount arrangements with
PPOs could lead to higher medical or dental costs and/or a loss of
members to other medical or dental plans, and the loss of, or change in
requirements for, eligibility to insure loans of one or more government-
sponsored entities could a ect our ability to do business with certain
mortgage loan servicers, or the volume or pro tability of such business.
In addition, we are subject to the risk that these parties may face
 nancial di culties, reputational issues or problems with respect to
their own products and services, which may lead to decreased sales of
our products and services. Moreover, if one or more of our clients or
distributors consolidate or align themselves with other companies, we
may lose business or su er decreased revenues.
Sales of our products and services maybereduced
ifweareunable to attract and retain sales representatives
or to develop and maintain distribution sources.
We distribute many of our insurance products and services through
a variety of distribution channels, including independent employee
bene ts specialists, brokers, managing general agents, life agents,  nancial
institutions, mortgage lenders and servicers, retailers, funeral homes,
association groups and other third-party marketing organizations.
Our relationships with these distributors are signi cant both for our
revenues and pro ts. We do not distribute our insurance products and
services through captive or a liated agents. In Assurant Health, we
depend in large part on the services of independent agents and brokers
and on associations in the marketing of our products. In Assurant
Employee Bene ts, independent agents and brokers who act as advisors
to our customers market and distribute our products. Strong competition
exists among insurers to form relationships with agents and brokers of
demonstrated ability. We compete with other insurers for relationships
with agents, brokers, and other intermediaries primarily on the basis
of our  nancial position, support services, product features, and more
generally through our ability to meet the needs of their clients, our
customers. Independent agents and brokers are typically not exclusively
dedicated to us, but instead usually also market the products of our
competitors and therefore we face continued competition from our
competitors’ products. Moreover, our ability to market our products
and services depends on our ability to tailor our channels of distribution
to comply with changes in the regulatory environment in which we
and such agents and brokers operate.
 e minimum loss ratios imposed by the A ordable Care Act compelled
health insurers to decrease broker commission levels beginning in 2011.
Similarly, the Company decreased its commission levels for distribution
channels that market Assurant Health’s individual medical and small
employer group medical products. Although the Company believes that
its revised commission schedules are competitive with those of other
health insurers adapting to the new reform environment, this reduction
caused uncertainty among agents during 2012 as they evaluated the
e ect of new commission levels on their business, which contributed
to a decrease in sales.  e reduction could pressure our relationship
with the distribution channels that we rely on to market our Assurant
Health products and/or our ability to attract new brokers and agents,
which could materially adversely a ect our results of operations and
 nancial condition. In addition, many of the agents and brokers
who distribute Assurant Employee Bene ts products make a large
part of their living from sales of health insurance. To the extent that
some of them decide to pursue other occupations, the resulting loss
of distribution could have a material adverse impact on the sales of
Assurant Employee Bene ts’ products.