Assurant 2013 Annual Report Download - page 23

ASSURANT, INC. – 2013 Form 10-K 11
PART I
ITEM 1 Business
Outlook
A.M. Best(1) Moody’s(2) Standard & Poor’s
Stable (4) Stable
Union Security Insurance Company A- A3 A-
Union Security Life Insurance Company of New York A- N/A N/A
United Dental Care of Arizona A- N/A N/A
United Dental Care of Colorado A- N/A N/A
United Dental Care of Michigan NR N/A N/A
United Dental Care of Missouri A- N/A N/A
United Dental Care of New Mexico A- N/A N/A
United Dental Care of Ohio NR N/A N/A
United Dental Care of Texas A- N/A N/A
United Dental Care of Utah NR N/A N/A
Voyager Indemnity Insurance Company A N/A N/A
(1) A.M. Best financial strength ratings range from “A++” (superior) to “S” (suspended). Ratings of A and A- fall under the “excellent” category, which is
the second highest of ten ratings categories.
(2) Moody’s insurance financial strength ratings range from “Aaa” (exceptional) to “C” (extremely poor). A numeric modifier may be appended to ratings
from “Aa” to “Caa” to indicate relative position within a category, with 1 being the highest and 3 being the lowest. Ratings of A2 and A3 are considered
“good” and fall within the third highest of the nine ratings categories.
(3) S&P’s insurer financial strength ratings range from “AAA” (extremely strong) to “R” (under regulatory supervision). A “+” or “-” may be appended to
ratings from categories AA to CCC to indicate relative position within a category. Ratings of A- (strong) and BBB+ (adequate) are within the third and
fourth highest of the nine ratings categories, respectively.
(4) Moody’s has a stable outlook on all of the ratings of the above entities, except for John Alden Life Insurance Company and Time Insurance Company,
which have a negative outlook.
Enterprise Risk Management
As an insurer, we are exposed to a wide variety of fi nancial,
operational and other risks, as described in Item 1A, “Risk
Factors.” Enterprise risk management (“ERM”) is, therefore,
a key component of our business strategies, policies, and
procedures. Our ERM process is an iterative approach with
the following key phases:
1. Risk identifi cation;
2. High-level estimation of risk likelihood and severity;
3. Risk prioritization at the business and enterprise
levels;
4. Scenario analysis and detailed modeling of likelihood
and severity for key enterprise risks;
5. Utilization of quantitative results and subject matter
expert opinion to help guide business strategy and
decision making.
Through our ERM process and our enterprise risk quantifi cation
model we monitor a variety of risk metrics on an ongoing basis,
with a particular focus on impact to net income (both GAAP
and Statutory), company value and the potential need for
capital infusions to subsidiaries under severe stress scenarios.
The Company’s ERM activities are coordinated by an Enterprise
Risk Management Committee (“ERMC”), which includes
managers from across the Company with knowledge of the
Company’s business activities, including representation
from the Legal, Compliance, Actuarial, Audit, Finance, and
Asset Management Departments. The ERMC develops risk
assessment and risk management policies and procedures.
It facilitates the identifi cation, reporting and prioritizing of
risks faced by the Company, and is responsible for promoting
a risk-aware culture throughout the organization. The ERMC
also coordinates with each of the Company’s four Business
Unit Risk Committees (“BURCs”), which meet regularly and
are responsible for the identifi cation of signifi cant risks
affecting their respective business units. Those risks which
meet our internally-defi ned escalation criteria, including
emerging risks, are then reported to the ERMC.
Our Board of Directors and senior management are responsible
for overseeing signifi cant enterprise risks. The ERMC reports
regularly to the Chief Executive Offi cer and presents its work
periodically to both the Board of Directors and the Finance
and Investment Committee.
Through the use of regular committee meetings, business
unit and enterprise risk inventory templates, business unit
monthly risk reports, an enterprise risk dashboard, hypothetical
scenario analysis, and quantitative modeling, the Company
strives to identify, track, quantify, communicate and manage
our key risks within prescribed tolerances.
Our ERM process continues to evolve, and, when appropriate,
we incorporate methodology changes, policy modifi cations
and emerging best practices on an ongoing basis.