Assurant 2013 Annual Report Download - page 135

ASSURANT, INC. – 2013 Form 10-K F-49
19 Statutory Information
19. Statutory Information
The Company’s insurance subsidiaries prepare fi nancial
statements on the basis of statutory accounting practices
(“SAP”) prescribed or permitted by the insurance departments
of their states of domicile. Prescribed SAP includes the
Accounting Practices and Procedures Manual of the National
Association of Insurance Commissioners (“NAIC”) as well as
state laws, regulations and administrative rules.
The principal differences between SAP and GAAP are: 1)
policy acquisition costs are expensed as incurred under SAP,
but are deferred and amortized under GAAP; 2) the value of
business acquired is not capitalized under SAP but is under
GAAP; 3) amounts collected from holders of universal life-
type and annuity products are recognized as premiums when
collected under SAP, but are initially recorded as contract
deposits under GAAP, with cost of insurance recognized as
revenue when assessed and other contract charges recognized
over the periods for which services are provided; 4) the
classifi cation and carrying amounts of investments in certain
securities are different under SAP than under GAAP; 5) the
criteria for providing asset valuation allowances, and the
methodologies used to determine the amounts thereof,
are different under SAP than under GAAP; 6) the timing of
establishing certain reserves, and the methodologies used to
determine the amounts thereof, are different under SAP than
under GAAP; 7) certain assets are not admitted for purposes
of determining surplus under SAP; 8) methodologies used to
determine the amounts of deferred taxes, intangible assets
and goodwill are different under SAP than under GAAP; and 9)
the criteria for obtaining reinsurance accounting treatment
is different under SAP than under GAAP.
The combined statutory net income, excluding intercompany dividends and surplus note interest, and capital and surplus
of the Company’s U.S. domiciled statutory insurance subsidiaries follow:
Years Ended December 31,
2013 2012 2011
Statutory net income
P&C companies $ 457,068 $ 371,520 $ 367,315
Life companies 148,851 223,519 148,554
TOTAL STATUTORY NET INCOME $ 605,919 $ 595,039 $ 515,869
December 31,
2013 2012
Statutory capital and surplus
P&C companies $ 1,440,394 $ 1,382,745
Life companies 923,660 973,446
TOTAL STATUTORY CAPITAL AND SURPLUS $ 2,364,054 $ 2,356,191
The Company also has non-insurance subsidiaries and foreign
insurance subsidiaries that are not subject to SAP. The
statutory net income and statutory capital and surplus
amounts presented above do not include foreign insurance
subsidiaries in accordance with SAP.
Insurance enterprises are required by state insurance
departments to adhere to minimum risk-based capital (“RBC”)
requirements developed by the NAIC. All of the Company’s
insurance subsidiaries exceed minimum RBC requirements.
The payment of dividends to the Company by any of the
Company’s regulated U.S domiciled insurance subsidiaries in
excess of a certain amount (i.e., extraordinary dividends) must
be approved by the subsidiary’s domiciliary state department of
insurance. Ordinary dividends, for which no regulatory approval
is generally required, are limited to amounts determined by a
formula, which varies by state. The formula for the majority of
the states in which the Company’s subsidiaries are domiciled
is based on the prior year’s statutory net income or 10% of the
statutory surplus as of the end of the prior year. Some states
limit ordinary dividends to the greater of these two amounts,
others limit them to the lesser of these two amounts and some
states exclude prior year realized capital gains from prior year
net income in determining ordinary dividend capacity. Some
states have an additional stipulation that dividends may only be
paid out of earned surplus. If insurance regulators determine
that payment of an ordinary dividend or any other payments
by the Company’s insurance subsidiaries to the Company (such
as payments under a tax sharing agreement or payments for
employee or other services) would be adverse to policyholders
or creditors, the regulators may block such payments that would
otherwise be permitted without prior approval. Based on the
dividend restrictions under applicable laws and regulations,
the maximum amount of dividends that the Company’s U.S
domiciled insurance subsidiaries could pay to the Company in
2014 without regulatory approval is approximately $484,000.
No assurance can be given that there will not be further
regulatory actions restricting the ability of the Company’s
insurance subsidiaries to pay dividends.
State regulators require insurance companies to meet minimum
capitalization standards designed to ensure that they can fulfi ll
obligations to policyholders. Minimum capital requirements
are expressed as a ratio of a company’s total adjusted capital
(“TAC”) to its risk-based capital (“RBC”) (the “RBC Ratio”). TAC
is equal to statutory surplus adjusted to exclude certain statutory
liabilities. RBC is calculated by applying specifi ed factors to
various asset, premium, expense, liability, and reserve items.