Assurant 2012 Annual Report Download - page 95

ASSURANT, INC.2012 Form10-K F-19
4 Investments
whose price decline is deemed other-than-temporary is written down
to its then current market value with the amount of the impairment
reported as a realized loss in that period.  e impairment of a  xed
maturity security that the Company has the intent to sell or that it
is more likely than not that the Company will be required to sell is
deemed other-than-temporary and is written down to its market value
at the balance sheet date with the amount of the impairment reported
as a realized loss in that period. For all other-than-temporarily impaired
 xed maturity securities that do not meet either of these two criteria,
the Company is required to analyze its ability to recover the amortized
cost of the security by calculating the net present value of projected
future cash  ows. For these other-than-temporarily impaired  xed
maturity securities, the net amount recognized in earnings is equal to
the di erence between the amortized cost of the  xed maturity security
and its net present value.
 e Company considers di erent factors to determine the amount of
projected future cash  ows and discounting methods for corporate debt
and residential and commercial mortgage-backed or asset-backed securities.
For corporate debt securities, the split between the credit and non-credit
losses is driven principally by assumptions regarding the amount and
timing of projected future cash  ows.  e net present value is calculated by
discounting the Company’s best estimate of projected future cash  ows at
the e ective interest rate implicit in the security at the date of acquisition.
For residential and commercial mortgage-backed and asset-backed securities,
cash  ow estimates, including prepayment assumptions, are based on data
from widely accepted third-party data sources or internal estimates. In
addition to prepayment assumptions, cash  ow estimates vary based on
assumptions regarding the underlying collateral including default rates,
recoveries and changes in value.  e net present value is calculated by
discounting the Company’s best estimate of projected future cash  ows
at the e ective interest rate implicit in the  xed maturity security prior to
impairment at the balance sheet date.  e discounted cash  ows become
the new amortized cost basis of the  xed maturity security.
In periods subsequent to the recognition of an OTTI, the Company
generally accretes the discount (or amortizes the reduced premium)
into net investment income, up to the non-discounted amount of
projected future cash  ows, resulting from the reduction in cost basis,
based upon the amount and timing of the expected future cash  ows
over the estimated period of cash  ows.
 e investment category and duration of the Company’s gross unrealized losses on  xed maturity securities and equity securities at December31,2012
and 2011 were as follows:
December31, 2012
Less than 12 months 12 Months or More Total
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
Fixed maturity securities:
United States Government and government
agencies and authorities $ 233,559 $ (127) $ 0 $ 0 $ 233,559 $ (127)
States, municipalities and political subdivisions 0 0 4,575 (96) 4,575 (96)
Foreign governments 41,917 (204) 8,925 (1,155) 50,842 (1,359)
Asset-backed 0 0 2,662 (422) 2,662 (422)
Residential mortgage-backed 56,674 (509) 9,300 (45) 65,974 (554)
Corporate 459,797 (5,802) 62,778 (3,748) 522,575 (9,550)
TOTAL FIXED MATURITY SECURITIES $ 791,947 $ 6,642 $ 88,240 $ 5,466 $ 880,187 $ 12,108
Equity securities:
NONREDEEMABLE PREFERRED
STOCKS $ 52,508 $ 416 $ 48,626 $ 4,700 $ 101,134 $ 5,116