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ASSURANT, INC.2012 Form10-KF-12
2 Summary of Signi cant Accounting Policies
claims where the insured event has occurred but has not been reported
to the Company as of the balance sheet date; and (3)loss adjustment
expense reserves for the expected handling costs of settling the claims.
For group disability, the case reserves and the IBNR reserves are
recorded at an amount equal to the net present value of the expected
future claims payments. Group long-term disability and group term
life waiver of premiums reserves are discounted to the valuation date
at the valuation interest rate.  e valuation interest rate is reviewed
quarterly by taking into consideration actual and expected earned rates
on our asset portfolio. Group long term disability and group term life
reserve adequacy studies are performed annually, and morbidity and
mortality assumptions are adjusted where appropriate.
e Company has exposure to asbestos, environmental and other general
liability claims arising from its participation in various reinsurance pools
from 1971 through 1985.  is exposure arose from a short duration
contract that the Company discontinued writing many years ago.  e
Company carries case reserves for these liabilities as recommended by
the various pool managers and IBNR reserves. Any estimation of these
liabilities is subject to greater than normal variation and uncertainty
due to the general lack of su cient detailed data, reporting delays, and
absence of generally accepted actuarial methodology for determining
the exposures.  ere are signi cant unresolved industry legal issues,
including such items as whether coverage exists and what constitutes
an occurrence. In addition, the determination of ultimate damages
and the  nal allocation of losses to  nancially responsible parties are
highly uncertain.
Changes in the estimated liabilities are recorded as a charge or credit to
policyholder bene ts as estimates are revised. Amounts reimbursed by
the National Flood Insurance Program for processing and adjudication
services are reported as a reduction of policyholder bene ts.
Medical Loss Ratio Rebate Unearned Premium Reserve
e A ordable Care Act was signed into law in March2010. One
provision of the A ordable Care Act, e ective January1, 2011, established
a minimum medical loss ratio (“MLR”) designed to ensure that a
minimum percentage of premiums is paid for clinical services or
health care quality improvement activities.  e A ordable Care Act
established an MLR of 80% for individual and small group business
and 85% for large group business. If the actual loss ratios, calculated
in a manner prescribed by the Department of Health and Human
Services (“HHS”), are less than the required MLR, premium rebates
are payable to the policyholders by August1 of the subsequent year.
e Company has estimated its 2012 impact of this regulation based
on de nitions and calculation methodologies outlined in the Interim
Final Regulation from HHS released December1, 2010 with Technical
Corrections released December29, 2010 and the HHS Final Regulation
released December7, 2011.  e estimate was based on separate
projection models for the individual medical and small group businesses
using projections of expected premiums, claims, and enrollment by
state, legal entity, and market for medical business subject to MLR
requirements for the MLR reporting year. In addition, the projection
models include quality improvement expenses, state assessments and
taxes.  e premium rebate is presented as a reduction of net earned
premiums in the consolidated statement of operations and included
in unearned premiums in the consolidated balance sheets.
Deferred Gain on Disposal of Businesses
e Company recorded a deferred gain on disposal of businesses utilizing
reinsurance. On March1, 2000, the Company sold its LTC business
using a coinsurance contract. On April2, 2001, the Company sold its
FFG business using a modi ed coinsurance contract. Since the form of
sale did not discharge the Company’s primary liability to the insureds,
the gain on these disposals was deferred and reported as a liability.  e
liability is decreased and recognized as revenue over the estimated life of
the contracts’ terms.  e Company reviews and evaluates the estimates
a ecting the deferred gain on disposal of businesses annually or when
signi cant information a ecting the estimates becomes known to the
Company, and adjusts the revenue recognized accordingly. Based on
the Company’s annual review in the fourth quarters of 2012 and 2011,
there were no adjustments to the estimates a ecting the deferred gain.
Debt
e Company reports debt net of unamortized discount or premium.
Interest expense related to debt is expensed as incurred.
Premiums
Long Duration Contracts
Currently, the Company’s long duration contracts which are actively
being sold are preneed life insurance and certain group worksite insurance
policies.  e preneed life insurance policies include provisions for death
bene t growth that is either pegged to the changes in the Consumer
Price Index or determined periodically at the discretion of management.
For preneed life insurance policies issued prior to 2009, revenues are
recognized when due from policyholders. For preneed life insurance
policies with discretionary death bene t growth issued after 2008
and for preneed investment-type annuity contracts, revenues consist
of charges assessed against policy balances. Revenues are recognized
ratably as earned income over the premium-paying periods of the
policies for the group worksite insurance products.
For a majority of individual medical contracts issued prior to 2003, a
limited number of individual medical contracts currently issued from
2003 through 2006 in certain jurisdictions, individual voluntary
limited bene t health policies issued in 2007 and later and traditional
life insurance contracts previously sold by the preneed business (no
longer o ered), revenue is recognized when due from policyholders.
For universal life insurance and investment-type annuity contracts
previously sold by the Assurant Solutions segment (no longer o ered),
revenues consist of charges assessed against policy balances.
Premiums for LTC insurance and traditional life insurance contracts
within FFG are recognized as revenue when due from the policyholder.
For universal life insurance and investment-type annuity contracts
within FFG, revenues consist of charges assessed against policy balances.
For the FFG and LTC businesses previously sold, all revenue is ceded.