Assurant 2012 Annual Report Download - page 58

ASSURANT, INC.2012 Form10-K50
PARTII
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Year Ended December 31, 2011 Compared to the Year
Ended December 31, 2010
Net Income (Loss)
Segment results increased $74,724 to net income of $15,222 for
Twelve Months 2011 compared to a net loss of $(59,502) for Twelve
Months 2010.  is increase is mainly due to an $80,000 release of a
capital loss valuation allowance related to deferred tax assets during
Twelve Months 2011.
Total Revenues
Total revenues decreased $6,389, to $70,493 for Twelve Months 2011
compared with $76,882 for Twelve Months 2010.  is decrease is
primarily due to a decline of $15,823 in net realized gains on investments
partially o set by $10,055 of increased amortization of deferred gains
on disposal of businesses. During 2010 a portion of the deferred gain
liability was re-established resulting from re nements to assumptions
associated with policy run-o .
Total Benefi ts, Losses and Expenses
Total bene ts, losses and expenses increased $8,755 to $169,193 for
Twelve Months 2011 compared with $160,438 for Twelve Months
2010. e increase is primarily attributable to increased claims payable
accruals of $6,474 associated with discontinued businesses.
Goodwill Impairment
During 2010, the Company recorded goodwill impairments of $306,381.
No goodwill impairment was recorded during 2012 or 2011. Goodwill
accounting guidance requires that goodwill be tested at least annually
for impairment or more frequently if indicators of impairment exist.
Prior to 2011, goodwill could only be tested for impairment using a
two step process. Step 1 of the test identi es potential impairments
at the reporting unit level, which for the Company is the same as our
operating segments, by comparing the estimated fair value of each
reporting unit to its net book value. If the estimated fair value of a
reporting unit exceeds its net book value, there is no impairment of
goodwill and Step 2 is unnecessary. However, if the net book value
exceeds the estimated fair value, then Step 1 is failed, and Step 2 is
performed to determine the amount of the potential impairment.
Step 2 utilizes acquisition accounting guidance and requires the fair
value calculation of all individual assets and liabilities of the reporting
unit (excluding goodwill, but including any unrecognized intangible
assets).  e net fair value of assets less liabilities is then compared to the
reporting unit’s total estimated fair value as calculated in Step 1.  e
excess of fair value over the net asset value equals the implied fair value
of goodwill.  e implied fair value of goodwill is then compared to the
carrying value of goodwill to determine the reporting unit’s goodwill
impairment. During 2011, the FASB issued amended—guidance for
goodwill and other intangibles.  is guidance provides the option to
 rst assess qualitative factors to determine whether the existence of
events or circumstances leads to a determination that it is more likely
than not that the fair value of a reporting unit is less than its carrying
amount. If, after assessing the totality of events or circumstances, an
entity determines it is not more likely than not that the fair value of
a reporting unit is less than its carrying amount, then performing the
two-step impairment test is unnecessary. However, if an entity concludes
otherwise, then it is required to perform the  rst step of the two-step
impairment test, described above. For all reporting units in 2012
and 2010 and for the Assurant Solutions reporting unit in 2011, the
Company performed its goodwill impairment test using the two step
process. During 2011, for the Assurant Specialty Property reporting
unit, the Company chose the option to  rst perform the qualitative
assessment. See “Item 7-Management’s Discussion and Analysis of
Financial Condition and Results of Operations-Critical Factors A ecting
Results-Critical Accounting Estimates-Valuation and Recoverability of
Goodwill” and Notes5 and 10 to the Consolidated Financial Statements
contained elsewhere in this report for more information.
Investments
 e Company had total investments of $14,976,318 and $14,026,165 as of December31, 2012 and December31, 2011, respectively. For more
information on our investments see Note4 to the Consolidated Financial Statements included elsewhere in this report.
 e following table shows the credit quality of our  xed maturity securities portfolio as of the dates indicated:
Fixed Maturity Securities by Credit Quality (Fair Value)
As of
December31, 2012 December31, 2011
Aaa / Aa / A $ 7,319,006 60.1% $ 6,620,808 59.1%
Baa 4,014,606 33.0% 3,692,709 33.0%
Ba 542,756 4.5% 648,817 5.8%
B and lower 295,270 2.4% 230,265 2.1%
TOTAL $ 12,171,638 100.0% $ 11,192,599 100.0%