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ASSURANT, INC. – 2013 Form 10-KF-22
4 Investments
twelve months or more were concentrated in the Company’s
residential mortgage-backed and corporate fi xed maturity
securities, and in non-redeemable preferred stocks. Within the
Company’s corporate fi xed maturity securities, the majority
of the loss position relates to securities in the industrial
sector. The industrial sector’s gross unrealized losses of twelve
months or more were $354, or 44%, of the corporate fi xed
maturity total. The non-redeemable preferred stocks are
perpetual preferred securities that have characteristics of
both debt and equity securities. To evaluate these securities,
we apply an impairment model similar to that used for our
fi xed maturity securities. As of December 31, 2013, the
Company did not intend to sell these securities and it was
not more likely than not that the Company would be required
to sell them and no underlying cash fl ow issues were noted.
Therefore, the Company did not recognize an OTTI on those
perpetual preferred securities that had been in a continuous
unrealized loss position for twelve months or more. As of
December 31, 2013, the Company did not intend to sell the
fi xed maturity securities and it was not more likely than not
that the Company would be required to sell the securities
before the anticipated recovery of their amortized cost
basis. The gross unrealized losses are primarily attributable
to widening credit spreads associated with an underlying
shift in overall credit risk premium.
The cost or amortized cost and fair value of available-for-sale fi xed maturity securities in an unrealized loss position at
December 31, 2013, by contractual maturity, is shown below:
Cost or Amortized Cost Fair Value
Due in one year or less $ 22,707 $ 22,579
Due after one year through fi ve years 350,208 344,476
Due after fi ve years through ten years 1,048,031 1,017,945
Due after ten years 364,822 350,995
TOTAL 1,785,768 1,735,995
Asset-backed 1,498 1,442
Commercial mortgage-backed 5,118 5,036
Residential mortgage-backed 452,523 439,306
TOTAL $ 2,244,907 $ 2,181,779
The Company has exposure to sub-prime and related mortgages
within our fi xed maturity security portfolio. At December 31,
2013, approximately 3.1% of the residential mortgage-backed
holdings had exposure to sub-prime mortgage collateral. This
represented approximately 0.3% of the total fi xed income
portfolio and 2.3% of the total unrealized gain position. Of
the securities with sub-prime exposure, approximately 12.2%
are rated as investment grade. All residential mortgage-
backed securities, including those with sub-prime exposure,
are reviewed as part of the ongoing other-than-temporary
impairment monitoring process.
The Company has entered into commercial mortgage loans,
collateralized by the underlying real estate, on properties
located throughout the U.S. and Canada. At December 31,
2013, approximately 38% of the outstanding principal balance
of commercial mortgage loans was concentrated in the states
of California, New York, and Utah. Although the Company
has a diversifi ed loan portfolio, an economic downturn could
have an adverse impact on the ability of its debtors to repay
their loans. The outstanding balance of commercial mortgage
loans range in size from $9 to $15,574 at December 31, 2013
and from $36 to $15,939 at December 31, 2012.
Credit quality indicators for commercial mortgage loans are
loan-to-value and debt-service coverage ratios. Loan-to-value
and debt-service coverage ratios are measures commonly
used to assess the credit quality of commercial mortgage
loans. The loan-to-value ratio compares the principal amount
of the loan to the fair value of the underlying property
collateralizing the loan, and is commonly expressed as a
percentage. The debt-service coverage ratio compares a
property’s net operating income to its debt-service payments
and is commonly expressed as a ratio. The loan-to-value and
debt-service coverage ratios are generally updated annually
in the third quarter.
The following summarizes our loan-to-value and average debt-service coverage ratios as of the dates indicated:
Loan-to-Value
December 31, 2013
Carrying Value % of Gross Mortgage Loans Debt-Service Coverage Ratio
70% and less $ 1,143,200 88.5% 1.97
71 – 80% 73,603 5.7% 1.44
81 – 95% 58,752 4.6% 1.19
Greater than 95% 15,959 1.2% 0.87
Gross commercial mortgage loans 1,291,514 100.0% 1.89
Less valuation allowance (4,482)
Net commercial mortgage loans $ 1,287,032