Assurant 2012 Annual Report Download - page 48

ASSURANT, INC.2012 Form10-K40
PARTII
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Based on our qualitative assessment, having considered the factors in
totality we determined that it was not necessary to perform a Step 1
quantitative goodwill impairment test for Assurant Specialty Property and
that it was more-likely-than-not that the fair value of Assurant Specialty
Property continued to exceed its net book value at year-end 2011.
 e determination of fair value of our reporting units requires many
estimates and assumptions.  ese estimates and assumptions primarily
include, but are not limited to, earnings and required capital projections
discussed above, discount rates, terminal growth rates, operating income
and dividend forecasts for each reporting unit and the weighting
assigned to the results of each of the three valuation methods described
above. Changes in certain assumptions could have a signi cant impact
on the goodwill impairment assessment. For example, an increase of
the discount rate of 100 basis points, with all other assumptions held
constant, for Assurant Solutions, would result in its estimated fair
value being less than its net book value as of December31, 2012.
Likewise, a reduction of 350 basis points in the terminal growth rate,
with all other assumptions held constant, for Assurant Solutions would
result in its estimated fair value being less than its net book value as of
December31, 2012. It would take more signi cant movements in our
estimates and assumptions in order for Assurant Specialty Property’s
estimated fair value to be less than its net book value.
We evaluated the signi cant assumptions used to determine the
estimated fair values of Assurant Solutions and Assurant Specialty
Property, both individually and in the aggregate, and concluded
they are reasonable. However, should the operating results of either
reporting unit decline substantially compared to projected results, or
should further interest rate declines further increase the net unrealized
investment portfolio gain position, we could determine that we need to
record an impairment charge related to goodwill in Assurant Solutions
and Assurant Specialty Property.
Recent Accounting Pronouncements—Adopted
On September30, 2012, the Company adopted the amended intangibles-
goodwill and other guidance.  is guidance allows an entity to  rst assess
qualitative factors to determine whether it is necessary to perform a
quantitative impairment test for inde nite-lived intangible assets. Under
this amended guidance, an entity would not be required to calculate
the fair value of an inde nite-lived intangible asset, unless the entity
determines, based on qualitative assessment, that it is more likely than
not that its fair value is less than its carrying amount.  e amended
guidance includes a number of events and circumstances for an entity
to consider in conducting the qualitative assessment and did not have
an impact on the Company’s  nancial position or results of operations.
On January1, 2012, the Company adopted the guidance on fair
value measurement.  is amended guidance changes certain fair value
measurement principles and expands required disclosures to include
quantitative and qualitative information about unobservable inputs
in Level 3 measurements to achieve common fair value measurement
and disclosure requirements in GAAP and International Financial
Reporting Standards.  e adoption of this guidance did not have an
impact on the Company’s  nancial position or results of operations.
On January1, 2012, the Company adopted the amendments to
existing guidance on accounting for costs associated with acquiring
or renewing insurance contracts.  e amendments modi ed the
de nition of the types of costs incurred by insurance entities that can
be capitalized in the acquisition of new and renewal contracts. Under
this amended guidance, only direct incremental costs associated with
successful insurance contract acquisitions or renewals are deferrable.
 is guidance was adopted retrospectively and has been applied to all
prior period  nancial information contained in these consolidated
 nancial statements. As of January1, 2010, the beginning of the
earliest period presented, the cumulative e ect adjustment recorded
to re ect this guidance resulted in a decrease of $148,242 in retained
earnings, an increase of $2,149 in accumulated other comprehensive
income and a decrease of $146,093 in total stockholders’ equity. For
more information, see Note2 to the Consolidated Financial Statements.
On December31, 2011, the Company adopted the new guidance related
to the presentation of comprehensive income.  is guidance provides
two alternatives for presenting comprehensive income. An entity can
report comprehensive income either in a single continuous  nancial
statement or in two separate but consecutive  nancial statements. Each
component of net income and each component of other comprehensive
income, together with totals for comprehensive income and its two
parts, net income and other comprehensive income, are displayed
under either alternative.  e statement(s) are to be presented with
equal prominence as the other primary  nancial statements.  e new
guidance eliminates the Company’s previously applied option to report
other comprehensive income and its components in the statement of
changes in stockholders’ equity.  e guidance does not change the
items that constitute net income or other comprehensive income,
and does not change when an item of other comprehensive income
must be reclassi ed to net income.  e Company chose to early adopt
this guidance and therefore is reporting comprehensive income in a
separate but consecutive statement, with full retrospective application
as required by the guidance.  e adoption of this guidance did not have
an impact on the Company’s  nancial position or results of operations.
On October1, 2011, the Company adopted the amended intangibles-
goodwill and other guidance.  is guidance allows an entity to  rst assess
qualitative factors to determine whether it is necessary to perform the
two-step quantitative goodwill impairment test. Under this amended
guidance, an entity would not be required to calculate the fair value
of a reporting unit unless the entity determines, based on a qualitative
assessment, that it is more likely than not that its fair value is less than
its carrying amount.  e amended guidance includes a number of
events and circumstances for an entity to consider in conducting the
qualitative assessment.  e Company chose to early adopt the revised
standard and applied the amended guidance to its fourth quarter annual
goodwill impairment test.  e adoption of the amended guidance
results in a change to the procedures for assessing goodwill impairment
and did not have an impact on the Company’s  nancial position or
results of operations. For more information, see Notes2 and 10 to the
Consolidated Financial Statements.
On January1, 2011, the Company adopted the new guidance on
multiple deliverable revenue arrangements.  is guidance requires
entities to use their best estimate of the selling price of a deliverable
within a multiple deliverable revenue arrangement if the entity and other
entities do not sell the deliverable separate from the other deliverables
within the arrangement. In addition, it requires both qualitative and
quantitative disclosures.  e adoption of this guidance did not have
an impact on the Company’s  nancial position or results of operations.