Assurant 2013 Annual Report Download - page 95

ASSURANT, INC. – 2013 Form 10-K F-9
2 Summary of Signifi cant Accounting Policies
as of the end of the period. Restricted stock and restricted
stock units which have non-forfeitable rights to dividends
or dividend equivalents are included in calculating basic
and diluted earnings per share under the two-class method.
Comprehensive Income
Comprehensive income is comprised of net income, net
unrealized gains and losses on foreign currency translation,
net unrealized gains and losses on securities classifi ed as
available for sale, net unrealized gains and losses on other-
than-temporarily impaired securities and expenses for pension
and post-retirement plans, less deferred income taxes.
Reclassifi cations
Certain prior period amounts have been reclassifi ed to
conform to the 2013 presentation.
Foreign Currency Translation
For foreign affi liates where the local currency is the functional
currency, unrealized foreign currency translation gains and losses
net of deferred income taxes have been refl ected in accumulated
other comprehensive income (“AOCI”). Other than for two of
our wholly owned Canadian subsidiaries, deferred taxes have
not been provided for unrealized currency translation gains
and losses since the Company intends to indefi nitely reinvest
the earnings in these other jurisdictions. Transaction gains and
losses on assets and liabilities denominated in foreign currencies
are recorded in underwriting, general and administration
expenses in the consolidated statements of operations during
the period in which they occur.
Fair Value
The Company uses an exit price for its fair value measurements.
An exit price is defi ned as the amount received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. In
measuring fair value, the Company gives the highest priority
to unadjusted quoted prices in active markets for identical
assets or liabilities and the lowest priority to unobservable
inputs. See Note 5 for further information.
Investments
Fixed maturity and equity securities are classifi ed as available-
for-sale, as defi ned in the investments guidance, and reported
at fair value. If the fair value is higher than the amortized
cost for fi xed maturity securities or the purchase cost for
equity securities, the excess is an unrealized gain; and, if
lower than cost, the difference is an unrealized loss. Net
unrealized gains and losses on securities classifi ed as available-
for-sale, less deferred income taxes, are included in AOCI.
Commercial mortgage loans on real estate are reported at
unpaid balances, adjusted for amortization of premium or
discount, less allowance for losses. The allowance is based on
management’s analysis of factors including actual loan loss
experience, specifi c events based on geographical, political
or economic conditions, industry experience, loan groupings
that have probable and estimable losses and individually
impaired loan loss analysis. A loan is considered individually
impaired when it becomes probable the Company will be
unable to collect all amounts due, including principal and
interest, according to the contractual terms of the loan
agreement. Indicative factors of impairment include, but
are not limited to, whether the loan is current, the value
of the collateral and the fi nancial position of the borrower.
If a loan is individually impaired, the Company uses one of
the following valuation methods based on the individual
loans’ facts and circumstances to measure the impairment
amount: (1) the present value of expected future cash fl ows,
(2) the loan’s observable market price, or (3) the fair value
of collateral. Changes in the allowance for loan losses are
recorded in net realized losses on investments, excluding
other-than-temporary impairment losses.
The Company places loans on non-accrual status after 90 days
of delinquent payments (unless the loans are both well secured
and in the process of collection). A loan may be placed on
non-accrual status before this time if information is available
that suggests its impairment is probable.
Policy loans are reported at unpaid principal balances, which
do not exceed the cash surrender value of the underlying
policies.
Short-term investments include money market funds and
short maturity investments. These amounts are reported at
cost, which approximates fair value.
The Company engages in collateralized transactions in which
fi xed maturity securities, especially bonds issued by the
U.S. government, government agencies and authorities, and
U.S. corporations, are loaned to selected broker/dealers. The
collateral held under these securities lending transactions is
reported at fair value and the obligation is reported at the
amount of the collateral received. The difference between
the collateral held and obligations under securities lending is
recorded as an unrealized loss and is included as part of AOCI.
Other investments consist primarily of investments in joint
ventures, partnerships, invested assets associated with a
modifi ed coinsurance arrangement, invested assets associated
with the Assurant Investment Plan (“AIP”), the American
Security Insurance Company Investment Plan (“ASIC”) and
the Assurant Deferred Compensation Plan (“ADC”). The joint
ventures and partnerships are valued according to the equity
method of accounting. In applying the equity method, the
Company uses fi nancial information provided by the investee,
generally on a three month lag. The invested assets related
to the modifi ed coinsurance arrangement, the AIP, ASIC and
ADC are classifi ed as trading securities as defi ned in the
investment guidance.
The Company monitors its investment portfolio to identify
investments that may be other-than-temporarily impaired.
In addition, securities, aggregated by issuer, whose market