Assurant 2012 Annual Report Download - page 62

ASSURANT, INC.2012 Form10-K54
PARTII
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Generally, our subsidiaries’ premiums, fees and investment income,
along with planned asset sales and maturities, provide su cient cash
to pay claims and expenses. However, there may be instances when
unexpected cash needs arise in excess of that available from usual
operating sources. In such instances, we have several options to raise
needed funds, including selling assets from the subsidiaries’ investment
portfolios, using holding company cash (if available), issuing commercial
paper, or drawing funds from our revolving credit facility. In addition,
we have  led an automatically e ective shelf registration statement on
Form S-3 with the SEC.  is registration statement allows us to issue
equity, debt or other types of securities through one or more methods
of distribution.  e terms of any o ering would be established at the
time of the o ering, subject to market conditions. If we decide to
make an o ering of securities, we will consider the nature of the cash
requirement as well as the cost of capital in determining what type of
securities we may o er.
On January11, 2013, our Board of Directors declared a quarterly
dividend of $0.21 per common share payable on March11, 2013 to
stockholders of record as of February25, 2013. We paid dividends
of $0.21 per common share on December10, 2012 to stockholders
of record as of November26, 2012, $0.21 per common share on
September11, 2012 to stockholders of record as of August27, 2012,
$0.21 per common share on June12, 2012 to stockholders of record
as of May29, 2012, and $0.18 per common share on March12, 2012
to stockholders of record as of February27, 2012.
Any determination to pay future dividends will be at the discretion of
our Board of Directors and will be dependent upon: our subsidiaries’
payments of dividends and/or other statutorily permissible payments to
us; our results of operations and cash  ows; our  nancial position and
capital requirements; general business conditions; legal, tax, regulatory
and contractual restrictions on the payment of dividends; and other
factors our Board of Directors deems relevant.
On May14, 2012, our Board of Directors authorized the Company to
repurchase up to an additional $600,000 of its outstanding common
stock, making its total authorization $733,275 at that date. During
the year ended December31, 2012, we repurchased 10,899,460 shares
of our outstanding common stock at a cost of $402,492, exclusive of
commissions. As of December31, 2012, $502,900 remained under
the total repurchase authorization.  e timing and the amount of
future repurchases will depend on market conditions and other factors.
Management believes the Company will have su cient liquidity to
satisfy its needs over the next twelve months, including the ability to
pay interest on our Senior Notes and dividends on our common shares.
Retirement and Other Employee Benefi ts
We sponsor a quali ed pension plan, the (“Assurant Pension Plan”)
and various non-quali ed pension plans along with a retirement health
bene ts plan covering our employees who meet speci ed eligibility
requirements.  e reported expense and liability associated with these
plans requires an extensive use of assumptions which include, but are
not limited to, the discount rate, expected return on plan assets and
rate of future compensation increases. We determine these assumptions
based upon currently available market and industry data, and historical
performance of the plan and its assets.  e actuarial assumptions used
in the calculation of our aggregate projected bene t obligation vary
and include an expectation of long-term appreciation in equity markets
which is not changed by minor short-term market  uctuations, but
does change when large interim deviations occur.  e assumptions we
use may di er materially from actual results due to changing market
and economic conditions, higher or lower withdrawal rates or longer
or shorter life spans of the participants.
 e Pension Protection Act of 2006 (“PPA”) requires certain quali ed
plans, like the Assurant Pension Plan, to meet speci ed funding
thresholds. If these funding thresholds are not met, there are negative
consequences to the Assurant Pension Plan and participants. If the funded
percentage falls below 80%, full payment of lump sum bene ts as well
as implementation of amendments improving bene ts are restricted.
As of January1, 2012, the Assurant Pension Plan’s funded percentage
was 126.9% on a PPA calculated basis (based on an actuarial average
value of assets compared to the funding target).  erefore, bene t and
payment restrictions did not occur during 2012.  e 2012 funded
measure will also be used to determine restrictions, if any, that can
occur during the  rst nine months of 2012. Due to the funding status
of the Assurant Pension Plan in 2012, no restrictions will exist before
October2013 (the time that the January1, 2013 actuarial valuation
needs to be completed). Also, based on the estimated funded status as
of January1, 2013, we do not anticipate any restrictions on bene ts
for the remainder of 2013.
 e Assurant Pension Plan was under-funded by $107,666 and
$125,517 (based on the fair value of the assets compared to the
projected bene t obligation) on a GAAP basis at December31, 2012
and 2011, respectively.  is equates to an 87% and 83% funded
status at December31, 2012 and 2011, respectively.  e change in
under-funded status is mainly due to favorable investment returns as
well as contributions made to the plan, partially o set by a decrease in
the discount rate used to determine the projected bene t obligation.
 e Company’s funding policy is to contribute amounts to the plan
su cient to meet the minimum funding requirements in ERISA,
plus such additional amounts as the Company may determine to be
appropriate from time to time up to the maximum permitted.  e
funding policy considers several factors to determine such additional
amounts including items such as the amount of service cost plus
15% of the Assurant Pension Plan de cit and the capital position of
the Company. During 2012, we contributed $50,000 in cash to the
Assurant Pension Plan. We expect to contribute $50,000 in cash to
the Assurant Pension Plan over the course of 2013. See Note20 to the
Consolidated Financial Statements included elsewhere in this report
for the components of the net periodic bene t cost.
 e impact of a 25 basis point change in the discount rate on the
2013 projected bene t expense would result in a change of $2,900
for the Assurant Pension Plan and the various non-quali ed pension
plans and $50 for the retirement health bene t plan.  e impact of a
25 basis point change in the expected return on assets assumption on
the 2013 projected bene t expense would result in a change of $1,600
for the Assurant Pension Plan and the various non-quali ed pension
plans and $100 for the retirement health bene ts plan.