Assurant 2012 Annual Report Download - page 27

ASSURANT, INC.2012 Form10-K 19
PARTI
ITEM 1A Risk Factors
our investment in that country. As we continue to expand in select
worldwide markets, our business becomes increasingly exposed to
these risks identi ed above.
In addition, as we engage with international clients, we have made
certain up-front commission payments, which we may not recover if
the business does not materialize as we expect.  ese up-front payments
are typically supported by various protections, such as letters of credit,
but there can be no guarantee that we will recover fully or timely and
amounts owed to us under such letters of credit or any other guaranties
or contractual arrangements. As our international business grows, we
rely increasingly on fronting carriers or intermediaries in other countries
to maintain their licenses and product approvals, satisfy local regulatory
requirements and continue in business.
For information on the signi cant international regulations that
apply to our Company, please see Item1, “Business—Regulation—
International Regulation.”
Fluctuations in the exchange rate of the U.S. dollar
andother foreign currencies may materially and adversely
a ect our results of operations.
While most of our costs and revenues are in U.S. dollars, some are in
other currencies. Because our  nancial results in certain countries are
translated from local currency into U.S. dollars upon consolidation,
the results of our operations may be a ected by foreign exchange rate
 uctuations. We do not currently hedge foreign currency risk. If the
U.S. dollar weakens against the local currency, the translation of these
foreign-currency-denominated balances will result in increased net assets,
net revenue, operating expenses, and net income or loss. Similarly, our
net assets, net revenue, operating expenses, and net income or loss will
decrease if the U.S. dollar strengthens against local currency.  ese
 uctuations in currency exchange rates may result in gains or losses
that materially and adversely a ect our results of operations.
Unanticipated changes in tax provisions or exposure
toadditional income tax liabilities could materially and
adversely a ect our results.
In accordance with applicable income tax guidance, the Company
must determine whether its ability to realize the value of its deferred
tax asset in the future is classi ed as “more likely than not.” Under
the income tax guidance, a deferred tax asset should be reduced by a
valuation allowance if, based on the weight of all available evidence,
it is more likely than not that some portion of the deferred tax asset
will not be realized.  e realization of deferred tax assets depends upon
the existence of su cient taxable income of the same character during
the carryback or carryforward periods.
In determining the appropriate valuation allowance, management
made certain judgments relating to recoverability of deferred tax assets,
use of tax loss and tax credit carryforwards, levels of expected future
taxable income and available tax planning strategies.  e assumptions
in making these judgments are updated periodically on the basis of
current business conditions a ecting the Company and overall economic
conditions.  ese management judgments are therefore subject to
change due to factors that include, but are not limited to, changes in
our ability to realize su cient taxable income of the same character
in the same jurisdiction or in our ability to execute other tax planning
strategies. Management will continue to assess and determine the need
for, and the amount of, the valuation allowance in subsequent periods.
Any change in the valuation allowance could have a material impact
on our results of operations and  nancial condition.
Failure to protect our clients’ con dential information
andprivacy could result in the loss of reputation
andcustomers, reduce our pro tability and/or subject
us to nes, litigation and penalties, and the costs
ofcompliance with privacy and security laws could
adversely a ect our business.
Our businesses are subject to a variety of privacy regulations and
con dentiality obligations. If we do not properly comply with privacy
and security laws and regulations that require us to protect con dential
information, we could experience adverse consequences, including
loss of customers and related revenue, regulatory problems (including
 nes and penalties), loss of reputation and civil litigation, which could
adversely a ect our business and results of operations. As have other
entities in the insurance industry, we have incurred and will continue to
incur substantial costs in complying with the requirements of applicable
privacy and security laws. For more information on the privacy and
security laws that apply to us, please see Item1, “Business—Regulation.”
 e failure to e ectively maintain and modernize
ourinformation systems could adversely a ect our business.
Our business is dependent upon our ability to maintain the e ectiveness
of existing technology systems, enhance technology to support the
Company’s business in an e cient and cost-e ective manner, and keep
current with technological advances, evolving industry and regulatory
standards and customer needs. In addition, our ability to keep our
systems integrated with those of our clients is critical to the success of
our business. If we do not e ectively maintain our systems and update
them to address technological advancements, our relationships and
ability to do business with our clients may be adversely a ected. We
could also experience other adverse consequences, including unfavorable
underwriting and reserving decisions, internal control de ciencies and
security breaches resulting in loss of data. System development projects
may be more costly or time-consuming than anticipated and may not
deliver the expected bene ts upon completion.
Failure to successfully manage outsourcing activities could
adversely a ect our business.
As we continue to improve operating e ciencies across the business,
we have outsourced and may outsource selected functions to third
parties. We take steps to monitor and regulate the performance of these
independent third parties to whom the Company has outsourced these
functions. If these third parties fail to satisfy their obligations to the
Company as a result of their performance, changes in their operations,
 nancial condition or other matters beyond our control, the Company’s
operations, information, service standards and data could be compromised.
In addition, to the extent the Company outsources selected services or
functions to third parties outside the United States, the Company is
exposed to the risks that accompany operations in a foreign jurisdiction,
including international economic and political conditions, foreign laws
and  uctuations in currency values. For more information on the risks
associated with outsourcing to international third parties, please see