Assurant 2012 Annual Report Download - page 42

ASSURANT, INC.2012 Form10-K34
PARTII
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
 e following table provides reserve information for our major product lines for the years ended December31, 2012 and 2011:
December31, 2012 December31, 2011
Future Policy
Bene ts and
Expenses Unearned Premiums
Claims and Bene ts Payable
Future Policy
Bene ts and
Expenses Unearned Premiums
Claims and Bene ts Payable
Case Reserves
Incurred But
Not Reported
Reserves Case Reserves
Incurred But
Not Reported
Reserves
Long Duration Contracts:
Preneed funeral life
insurance policies and
investment-type annuity
contracts $ 4,306,947 $ 154,998 $ 13,139 $ 7,297 $ 4,086,025 $ 120,067 $ 11,342 $ 7,555
Life insurance no longer
o ered 445,347 574 3,110 4,437 456,860 626 1,428 4,487
Universal life and other
products no longer o ered 210,037 127 825 5,133 229,726 132 988 6,534
FFG, LTC and other
disposed businesses 3,424,511 35,862 713,258 55,661 3,491,994 38,039 641,238 55,151
Medical 89,540 10,293 6,831 10,016 86,456 11,097 8,385 10,170
All other 37,123 455 15,786 8,904 8,145 352 46,138 6,993
Short Duration Contracts:
Group term life 0 3,681 172,804 30,953 0 4,174 182,355 37,415
Group disability 0 2,143 1,189,656 119,431 0 2,390 1,243,975 133,441
Medical 0 111,351 99,549 148,209 0 135,557 97,964 170,970
Dental 0 4,648 2,442 15,896 0 4,634 2,788 17,436
Property and warranty 0 2,368,372 459,215 706,849 0 2,041,190 199,829 370,814
Credit life and disability 0 300,824 41,711 54,624 0 286,631 50,645 59,949
Extended service contracts 0 2,775,715 3,323 36,908 0 2,498,403 2,425 37,398
All other 0 423,217 11,643 22,980 0 338,725 9,999 19,307
TOTAL $ 8,513,505 $ 6,192,260 $ 2,733,292 $ 1,227,298 $ 8,359,206 $ 5,482,017 $ 2,499,499 $ 937,620
For a description of our reserving methodology, see Note12 to the
Consolidated Financial Statements included elsewhere in this report.
Long Duration Contracts
Reserves for future policy bene ts represent the present value of future
bene ts to policyholders and related expenses less the present value of
future net premiums. Reserve assumptions re ect best estimates for
expected investment yield, in ation, mortality, morbidity, expenses and
withdrawal rates.  ese assumptions are based on our experience to the
extent it is credible, modi ed where appropriate to re ect current trends,
industry experience and provisions for possible unfavorable deviation.
We also record an unearned revenue reserve which represents premiums
received which have not yet been recognized in our consolidated
statements of operations.
Historically, premium de ciency testing has not resulted in material
adjustments to deferred acquisition costs or reserves. Such adjustments
could occur, however, if economic or mortality conditions signi cantly
deteriorated.
Risks related to the reserves recorded for certain discontinued individual
life, annuity, and long-term care insurance policies have been 100%
ceded via reinsurance. While the Company has not been released from
the contractual obligation to the policyholders, changes in and deviations
from economic and mortality assumptions used in the calculation of
these reserves will not directly a ect our results of operations unless
there is a default by the assuming reinsurer.
Short Duration Contracts
Claims and bene ts payable reserves for short duration contracts include
(1)case reserves for known claims which are unpaid as of the balance
sheet date; (2)IBNR reserves for claims where the insured event has
occurred but has not been reported to us as of the balance sheet date;
and (3)loss adjustment expense reserves for the expected handling costs
of settling the claims. Periodically, we review emerging experience and
make adjustments to our reserves and assumptions where necessary.
Below are further discussions on the reserving process for our major
short duration products.
Group Disability and Group Term Life
Case or claim reserves are set for active individual claims on group
long term disability policies and for waiver of premium bene ts on
group term life policies. Reserve factors used to calculate these reserves
re ect assumptions regarding disabled life mortality and claim recovery
rates, claim management practices, awards for social security and other
bene t o sets and yield rates earned on assets supporting the reserves.
Group long term disability and group term life waiver of premium
reserves are discounted because the payment pattern and ultimate cost
are  xed and determinable on an individual claim basis.
Factors considered when setting IBNR reserves include patterns in
elapsed time from claim incidence to claim reporting, and elapsed
time from claim reporting to claim payment.