Assurant 2012 Annual Report Download - page 30

ASSURANT, INC.2012 Form10-K22
PARTI
ITEM 1A Risk Factors
as a liquidator or rehabilitator for the subsidiary. Both creditors and
policyholders of the subsidiary would be entitled to payment in full
from the subsidiary’s assets before Assurant, Inc., as a stockholder, would
be entitled to receive any distribution from the subsidiary.
 e payment of dividends by any of our regulated domestic insurance
company subsidiaries in excess of speci ed amounts (i.e., extraordinary
dividends) must be approved by the subsidiary’s domiciliary state
department of insurance. Ordinary dividends, for which no regulatory
approval is generally required, are limited to amounts determined by
a formula, which varies by state.  e formula for the majority of the
states in which our subsidiaries are domiciled is based on the prior year’s
statutory net income or 10% of the statutory surplus as of the end of
the prior year. Some states limit ordinary dividends to the greater of
these two amounts, others limit them to the lesser of these two amounts
and some states exclude prior year realized capital gains from prior year
net income in determining ordinary dividend capacity. Some states
have an additional stipulation that dividends may only be paid out of
earned surplus. If insurance regulators determine that payment of an
ordinary dividend or any other payments by our insurance subsidiaries
to us (such as payments under a tax sharing agreement or payments
for employee or other services) would be adverse to policyholders or
creditors, the regulators may block such payments that would otherwise
be permitted without prior approval. Future regulatory actions could
further restrict the ability of our insurance subsidiaries to pay dividends.
For more information on the maximum amount our subsidiaries could
pay us in 2013 without regulatory approval, see “Item 5—Market For
Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities—Dividend Policy.”
Assurant, Inc.’s credit facilities also contain limitations on our ability to pay
dividends to our stockholders if we are in default or such dividend payments
would cause us to be in default of our obligations under the credit facilities.
Any additional material restrictions on the ability of insurance subsidiaries
to pay dividends could adversely a ect Assurant, Inc.’s ability to pay
any dividends on our common stock and/or service our debt and pay
our other corporate expenses.
 e success of our business strategy depends
onthecontinuing service of key executives
andthemembers of our senior management team,
andanyfailure to adequately provide for the succession
ofsenior management and other key executives could have
an adverse e ect on our results of operations.
Our business and results of operations could be adversely a ected if
we fail to adequately plan for the succession of our senior management
and other key executives. Although we have succession plans for key
executives, this does not guarantee that they will stay with us.
Risks Related to Our Industry
Reform of the health insurance industry could materially
reduce the pro tability of certain of our businesses.
In March2010, President Obama signed the A ordable Care Act into
law. Provisions of the A ordable Care Act and related reforms have and
will continue to become e ective at various dates over the next several
years and will make sweeping and fundamental changes to the U.S.
health care system that are expected to signi cantly a ect the health
insurance industry. For more information on the A ordable Care
Act and its impact on our Assurant Health and Assurant Employee
Bene ts segments, please see Item1, “Business—Regulation—Federal
Regulation—Patient Protection and A ordable Care Act.”
Among other requirements, the A ordable Care Act requires Assurant
Health, for some products, to increase bene ts, to limit rescission
to cases of intentional fraud and, eventually, to insure pre-existing
conditions in all lines of insurance, among other things. If, for those
products, Assurant Health’s actual loss ratios fall short of required
minimum medical loss ratios (by state and legal entity), we are required
to rebate the di erence to consumers. Please see “Item 7—Management’s
Discussion& Analysis—Critical Accounting Estimates—Health
Insurance Premium Rebate Liability” for more information about
the minimum medical loss ratio and the Company’s rebate estimate
calculations. In addition, the A ordable Care Act imposes limitations
on the deductibility of compensation and certain other payments.
Assurant Health has made, and continues to make, signi cant changes
to its operations and products to adapt to the new environment.
However, Assurant Health could be adversely a ected if its plans for
operating in the new environment are unsuccessful or if there is less
demand than we expect for these products in the new environment.
Uncertainty remains with respect to a number of provisions of the
A ordable Care Act, including the mechanics of the public and private
exchanges and the application of the A ordable Care Act’s requirements
to various types of health insurance plans. In addition, the lack of clarity
surrounding the mechanics of inclusion of pediatric dental coverage
in the package of essential health bene ts could disrupt revenues in
our Assurant Employee Bene ts business.
New guidance and regulations continue to be issued under the A ordable
Care Act. If our businesses are unable to adapt to current and/or future
requirements of the A ordable Care Act, or if signi cant uncertainty
continues with respect to implementation of the A ordable Care Act,
this could lead to a material reduction in their pro tability.
We are subject to extensive laws and regulations,
whichincrease our costs and could restrict the conduct
ofour business.
Our insurance subsidiaries are subject to extensive regulation and
supervision in the jurisdictions in which they do business. Such regulation
is generally designed to protect the interests of policyholders. To that
end, the laws of the various states and other jurisdictions establish
insurance departments with broad powers over, among other things:
licensing and authorizing the transaction of business; capital, surplus
and dividends; underwriting limitations; companies’ ability to enter and
exit markets; statutory accounting and other disclosure requirements;
policy forms; coverage; companies’ ability to provide, terminate or
cancel certain coverages; premium rates, including regulatory ability to
disapprove or reduce the premium rates companies may charge; trade
and claims practices; certain transactions between a liates; content of