Assurant 2012 Annual Report Download - page 63

ASSURANT, INC.2012 Form10-K 55
PARTII
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Commercial Paper Program
Our commercial paper program requires us to maintain liquidity facilities
either in an available amount equal to any outstanding notes from the
program or in an amount su cient to maintain the ratings assigned
to the notes issued from the program. Our commercial paper is rated
AMB-2 by A.M. Best, P-2 by Moody’s and A-2 by S&P. Our subsidiaries
do not maintain commercial paper or other borrowing facilities.  is
program is currently backed up by a $350,000 senior revolving credit
facility, of which $330,240 was available at December31, 2012, due
to outstanding letters of credit.
On September21, 2011, we entered into a four-year unsecured
$350,000 revolving credit agreement (“2011 Credit Facility”) with a
syndicate of banks arranged by JP Morgan Chase Bank, N.A. and Bank
of America, N.A.  e 2011 Credit Facility replaced the Company’s prior
three-year $350,000 revolving credit facility (“2009 Credit Facility”),
which was entered into on December18, 2009 and was scheduled to
expire in December2012.  e 2009 Credit Facility terminated upon
the e ective date of the 2011 Credit Facility. Due to the termination,
the Company wrote o $1,407 of unamortized upfront arrangement
fees.  e 2011 Credit Facility provides for revolving loans and the
issuance of multi-bank, syndicated letters of credit and/or letters of
credit from a sole issuing bank in an aggregate amount of $350,000
and is available until September2015, provided we are in compliance
with all covenants.  e 2011 Credit Facility has a sublimit for letters of
credit issued thereunder of $50,000.  e proceeds of these loans may
be used for our commercial paper program or for general corporate
purposes.  e Company may increase the total amount available under
the 2011 Credit Facility to $525,000 subject to certain conditions. No
bank is obligated to provide commitments above their current share
of the $350,000 facility.
We did not use the commercial paper program during the twelve months
ended December31, 2012 and 2011 and there were no amounts relating
to the commercial paper program outstanding at December31, 2012
and December31, 2011.  e Company made no borrowings using the
2011 Credit Facility and no loans were outstanding at December31,
2012. We had $19,760 of letters of credit outstanding under the 2011
Credit Facility as of December31, 2012.
 e 2011 Credit Facility contains restrictive covenants, all of which
were met as of December31, 2011.  ese covenants include (but are
not limited to):
(i) Maintenance of a maximum debt to total capitalization ratio on
the last day of any  scal quarter of not greater than 35%, and
(ii) Maintenance of a consolidated adjusted net worth in an amount
not less than the “Minimum Amount”. For the purpose of
this calculation the “Minimum Amount” is an amount equal
to the sum of (a)the base amount $3,146,292 plus (b)50%
of consolidated net income for each  scal quarter (if positive)
ending after June30, 2011, plus (c)50% of the net proceeds of
any issuance of Capital Stock or Hybrid Securities received after
June30, 2011.
At December31, 2012, our ratio of debt to total capitalization was
18%, the consolidated Minimum Amount described in (ii)above
was $3,512,436 and our actual consolidated adjusted net worth as
calculated under the covenant was $4,507,949.
In the event of the breach of certain covenants all obligations under the
facility, including unpaid principal and accrued interest and outstanding
letters of credit, may become immediately due and payable.
Senior Notes
We have two series of senior notes outstanding in an aggregate principal
amount of $975,000.  e  rst series is $500,000 in principal amount,
bears interest at 5.63%per year and is due February15, 2014.  e
second series is $475,000 in principal amount, bears interest at 6.75%per
year and is due February15, 2034.
Interest on our Senior Notes is payable semi-annually on February15
and August15 of each year.  e interest expense incurred related to the
Senior Notes was $60,306, $60,360 and $60,646 for the years ended
December31, 2012, 2011 and 2010, respectively.  ere was $22,570
of accrued interested at December31, 2012 and 2011, respectively.
 e Senior Notes are unsecured obligations and rank equally with all
of our other senior unsecured indebtedness.  e Senior Notes are not
redeemable prior to maturity.
In management’s opinion, dividends from our subsidiaries together
with our income and gains from our investment portfolio will provide
su cient liquidity to meet our needs in the ordinary course of business.
Cash Flows
We monitor cash  ows at the consolidated, holding company and
subsidiary levels. Cash  ow forecasts at the consolidated and subsidiary
levels are provided on a monthly basis, and we use trend and variance
analyses to project future cash needs making adjustments to the
forecasts when needed.
 e table below shows our recent net cash  ows:
For the Years Ended December31,
2012 2011 2010
Net cash provided by (used in):
Operating activities(1) $ 673,215 $ 849,633 $ 540,313
Investing activities (449,883) (196,588) (8,876)
Financing activities (480,641) (636,848) (699,473)
NET CHANGE IN CASH $ 257,309 $ 16,197 $ 168,036
(1) Includes effect of exchange rates changes on cash and cash equivalents.