Assurant 2013 Annual Report Download - page 109

ASSURANT, INC. – 2013 Form 10-K F-23
4 Investments
Loan-to-Value
December 31, 2012
Carrying Value % of Gross Mortgage Loans Debt-Service Coverage Ratio
70% and less $ 1,141,564 86.6% 1.95
71 – 80% 103,152 7.8% 1.30
81 – 95% 57,413 4.3% 1.04
Greater than 95% 16,550 1.3% 1.02
Gross commercial mortgage loans 1,318,679 100.0% 1.85
Less valuation allowance (6,997)
Net commercial mortgage loans $ 1,311,682
All commercial mortgage loans that are individually impaired
have an established mortgage loan valuation allowance for
losses. Changing economic conditions affect our valuation of
commercial mortgage loans. Changing vacancies and rents
are incorporated into the discounted cash fl ow analysis
that we perform for monitored loans and may contribute
to the establishment of (or an increase or decrease in) a
commercial mortgage loan valuation allowance for losses.
In addition, we continue to monitor the entire commercial
mortgage loan portfolio to identify risk. Areas of emphasis are
properties that have exposure to specifi c geographic events,
have deteriorating credits or have experienced a reduction
in debt-service coverage ratio. Where warranted, we have
established or increased a valuation allowance based upon
this analysis.
The commercial mortgage loan valuation allowance for losses
was $4,482 and $6,997 at December 31, 2013 and 2012,
respectively. In 2013 and 2012, the loan valuation allowance
was decreased $2,515 and $3,413, respectively, due to
changing economic conditions and geographic concentrations.
At December 31, 2013, the Company had mortgage loan
commitments outstanding of approximately $16,625. The
Company is also committed to fund additional capital
contributions of $26,815 to real estate joint ventures.
The Company has short term investments and fi xed maturities
of $543,344 and $580,953 at December 31, 2013 and 2012,
respectively, on deposit with various governmental authorities
as required by law.
The Company utilizes derivative instruments in managing the
Assurant Solutions segment preneed life insurance business
exposure to infl ation risk. The derivative instruments,
Consumer Price Index Caps (the “CPI CAPs”), limits the infl ation
risk on certain policies. The CPI CAPs do not qualify under
GAAP as effective hedges; therefore, they are marked-to-
market on a quarterly basis and the gain or loss is recognized
in the statement of operations in fees and other income. As
of December 31, 2013 and 2012, the CPI CAPs included in
other assets on the consolidated balance sheet amounted
to $2,491 and $5,886, respectively. The loss recorded in the
results of operations totaled $3,395, $2,635, and $1,304
for the years ended December 31, 2013, 2012 and 2011,
respectively.
Collateralized Transactions
The Company engages in transactions in which fi xed maturity
securities, primarily bonds issued by the U.S. government and
government agencies and authorities, and U.S. corporations,
are loaned to selected broker/dealers. Collateral, greater
than or equal to 102% of the fair value of the securities lent,
plus accrued interest, is received in the form of cash and cash
equivalents held by a custodian bank for the benefi t of the
Company. The use of cash collateral received is unrestricted.
The Company reinvests the cash collateral received, generally
in investments of high credit quality that are designated as
available-for-sale. The Company monitors the fair value of
securities loaned and the collateral received, with additional
collateral obtained, as necessary. The Company is subject
to the risk of loss to the extent there is a loss on the re-
investment of cash collateral.
As of December 31, 2013 and 2012, our collateral held
under securities lending, of which its use is unrestricted,
was $95,215 and $94,729, respectively, and is included in
the consolidated balance sheets under the collateral held/
pledged under securities agreements. Our liability to the
borrower for collateral received was $95,206 and $94,714,
respectively, and is included in the consolidated balance
sheets under the obligation under securities agreements.
The difference between the collateral held and obligations
under securities lending is recorded as an unrealized gain
and is included as part of AOCI. All securities are in an
unrealized gain position as of December 31, 2013 and 2012.
The Company includes the available-for-sale investments
purchased with the cash collateral in its evaluation of other-
than-temporary impairments.
Cash proceeds that the Company receives as collateral for
the securities it lends and subsequent repayment of the cash
are regarded by the Company as cash fl ows from fi nancing
activities, since the cash received is considered a borrowing.
Since the Company reinvests the cash collateral generally
in investments that are designated as available-for-sale,
the reinvestment is presented as cash fl ows from investing
activities.