Assurant 2013 Annual Report Download - page 100

ASSURANT, INC. – 2013 Form 10-KF-14
2 Summary of Signifi cant Accounting Policies
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. The 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.
The Company has exposure to asbestos, environmental and
other general liability claims arising from its participation
in various reinsurance pools from 1971 through 1985. This
exposure arose from a short duration contract that the
Company discontinued writing many years ago. The 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 suffi cient detailed
data, reporting delays, and absence of generally accepted
actuarial methodology for determining the exposures. There
are signifi 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 fi nal allocation of losses to fi nancially
responsible parties are highly uncertain.
Changes in the estimated liabilities are recorded as a charge
or credit to policyholder benefi 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 benefi ts.
Medical Loss Ratio Rebate Unearned Premium
Reserve
The Affordable Care Act was signed into law in March 2010. One
provision of the Affordable Care Act, effective 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.
The Affordable Care Act established an MLR of 80% for individual
and small group businesses 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.
The Company has estimated its 2013 impact of this regulation
based on defi nitions and calculation methodologies outlined
in the HHS regulations and guidance. The 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. The 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
The 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
modifi 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. The liability is decreased and recognized as revenue
over the estimated life of the contracts’ terms. The Company
reviews and evaluates the estimates affecting the deferred
gain on disposal of businesses annually or when signifi cant
information affecting 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 2013 and 2012, there were no adjustments to the estimates
affecting the deferred gain.
Debt
The Company reports debt net of unamortized discount or
premium and repurchases. 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. The preneed life insurance
policies include provisions for death benefi 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 benefi 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 benefi t health policies issued
in 2007 and later and traditional life insurance contracts
previously sold by the preneed business (no longer offered),
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 offered), 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