Assurant 2012 Annual Report Download - page 29

ASSURANT, INC.2012 Form10-K 21
PARTI
ITEM 1A Risk Factors
a resulting material adverse e ect on our results of operations and
 nancial condition. In addition, third parties to whom we have sold
businesses in the past may in turn sell these businesses to other third
parties, and we could face risks related to the new administrative systems
and capabilities of these third parties in administering these businesses.
For more information on these arrangements, including the reinsurance
recoverables and risk mitigation mechanisms used, please see “Item
7A—Quantitative and Qualitative Disclosures About Market Risks—
Credit Risk.”
Due to the structure of our commission program,
weareexposed to risks related to the creditworthiness
and reporting systems of some of our agents, third
party administrators and clients in Assurant Solutions
andAssurant Specialty Property.
We are subject to the credit risk of some of the clients and/or agents
with which we contract in Assurant Solutions and Assurant Specialty
Property. For example, we advance agents’ commissions as part of our
preneed insurance product o erings.  ese advances are a percentage of
the total face amount of coverage.  ere is a one-year payback provision
against the agency if death or lapse occurs within the  rst policy year.
If SCI, which receives the largest shares of such agent commissions,
were unable to ful ll its payback obligations, this could have an adverse
e ect on our operations and  nancial condition.
In addition, some of our clients, third party administrators and agents
collect and report premiums or pay claims on our behalf.  ese parties’
failure to remit all premiums collected or to pay claims on our behalf
on a timely and accurate basis could have an adverse e ect on our
results of operations.
We face signi cant competitive pressures in our businesses,
which could reduce our pro tability.
We compete for customers and distributors with many insurance
companies and other  nancial services companies for business and
individual customers, employer and other group customers, agents,
brokers and other distribution relationships. Some of our competitors
may o er a broader array of products than our subsidiaries or have a
greater diversity of distribution resources, better brand recognition,
more competitive pricing, lower costs, greater  nancial strength, more
resources, or higher ratings.
Many of our insurance products, particularly our group bene ts and
group health insurance policies, are underwritten annually.  ere is a
risk that group purchasers may be able to obtain more favorable terms
from competitors, rather than renewing coverage with us. Competition
may, as a result, adversely a ect the persistency of our policies, as well
as our ability to sell products.
Some of our competitors may have a lower target for returns on capital
allocated to their business than we do, which may enable them to
undercut our prices. In addition, in certain markets, we compete with
organizations that have a substantial market share. In particular, certain
large competitors of Assurant Health may be able to obtain favorable
 nancial arrangements from health care providers that are unavailable
to us, putting us at a competitive disadvantage and potentially adversely
a ecting our revenues and pro ts.
In addition, as  nancial institutions gain experience with debt protection
administration, their reliance on third party administrators, such as
Assurant Solutions may diminish, thereby reducing our revenues and
pro ts.
New competition could also cause the supply of insurance to change,
which could a ect our ability to price our products at attractive rates
and thereby adversely a ect our underwriting results. Although there
are some impediments facing potential competitors who wish to enter
the markets we serve, the entry of new competitors into our markets
can occur, a ording our customers signi cant  exibility in moving to
other insurance providers.
We may be unable to grow our business as we would
like ifwe cannot  nd suitable acquisition candidates
atattractive prices or integrate them e ectively.
Historically, acquisitions and new ventures have played a signi cant
role in the growth of some of our businesses, and we expect them to
continue to play an important role in our pro table growth strategy. We
may not, however, be able to identify suitable acquisition candidates or
new venture opportunities or to  nance or complete such transactions
on acceptable terms. Additionally, the integration of acquired businesses
may result in signi cant challenges, and we may be unable to accomplish
such integration smoothly or successfully.
 ere can be no assurance that any future acquisition will provide us
with the bene ts that we anticipate when entering into the transaction.
Acquisitions entail a number of risks including, among other things,
inaccurate assessment of liabilities; di culties in realizing projected
e ciencies, synergies and cost savings; di culties in integrating systems
and personnel; failure to achieve anticipated revenues, earnings or cash
 ow; an increase in our indebtedness; and a limitation in our ability
to access additional capital when needed. Our failure to adequately
address these acquisition risks could materially adversely a ect our
results of operations and  nancial condition.
 e inability of our subsidiaries to pay su cient dividends
to the holding company could prevent us from meeting
ourobligations and paying future stockholder dividends.
As a holding company whose principal assets are the capital stock
of our subsidiaries, Assurant, Inc. relies primarily on dividends and
other statutorily permissible payments from our subsidiaries to meet
our obligations for payment of interest and principal on outstanding
debt obligations and to pay dividends to stockholders and corporate
expenses.  e ability of our subsidiaries to pay dividends and to make
such other payments in the future will depend on their statutory
surplus, future statutory earnings and regulatory restrictions. Except
to the extent that Assurant, Inc. is a creditor with recognized claims
against our subsidiaries, claims of the subsidiaries’ creditors, including
policyholders, have priority over creditors’ claims with respect to the
assets and earnings of the subsidiaries. If any of our subsidiaries should
become insolvent, liquidate or otherwise reorganize, our creditors
and stockholders will have no right to proceed against their assets or
to cause the liquidation, bankruptcy or winding-up of the subsidiary
under applicable liquidation, bankruptcy or winding-up laws.  e
applicable insurance laws of the jurisdiction where each of our insurance
subsidiaries is domiciled would govern any proceedings relating to that
subsidiary, and the insurance authority of that jurisdiction would act