Assurant 2013 Annual Report Download - page 98

ASSURANT, INC. – 2013 Form 10-KF-12
2 Summary of Signifi cant Accounting Policies
In the fourth quarter of 2013, the Company chose the option
to fi rst perform a qualitative assessment for our Assurant
Specialty Property reporting unit. Based on this assessment,
the Company determined that it was more likely than not
that the reporting unit’s fair value was more than its carrying
amount, therefore further impairment testing was not
necessary. For our Assurant Solutions reporting unit we
performed Step 1 and concluded that the estimated fair
value of the reporting unit exceeded its respective book
value and therefore goodwill was not impaired.
In the fourth quarter of 2012, we performed Step 1 for
both our Assurant Specialty Property and Assurant Solutions
reporting units and concluded that the estimated fair value
of the reporting units exceeded their respective book values
and therefore goodwill was not impaired.
For 2013 and 2012, the Assurant Employee Benefi ts and
Assurant Health reporting units did not have goodwill.
Value of Businesses Acquired
VOBA is an identifi able intangible asset representing the
value of the insurance businesses acquired. The amount
is determined using best estimates for mortality, lapse,
maintenance expenses and investment returns at date of
purchase. The amount determined represents the purchase
price paid to the seller for producing the business. Similar
to the amortization of DAC, the amortization of VOBA is over
the premium payment period for traditional life insurance
policies and a small block of limited payment policies.
For the remaining limited payment policies, preneed life
insurance policies, all universal life policies and annuities,
the amortization of VOBA is over the expected lifetime of
the policies.
VOBA is tested annually in the fourth quarter for recoverability.
If it is determined that future policy premiums and investment
income or gross profi ts are not adequate to cover related
losses or loss expenses, then an expense is reported in
current earnings. Based on 2013 and 2012 testing, future
policy premiums and investment income or gross profi ts were
deemed adequate to cover related losses or loss expenses.
Other Assets
Other assets consist primarily of investments in unconsolidated
entities and prepaid items. The Company accounts for
investments in unconsolidated entities using the equity
method of accounting since the Company can exert signifi cant
infl uence over the investee, but does not have effective
control over the investee. The Company’s equity in the net
income (loss) from equity method investments is recorded
as income (loss) with a corresponding increase (decrease) in
the investment. Judgment regarding the level of infl uence
over each equity method investee includes considering
factors such as ownership interest, board representation and
policy making decisions. In applying the equity method, the
Company uses fi nancial information provided by the investee,
which may be received on a lag basis.
Other Intangible Assets
Other intangible assets that have fi nite lives, including but not
limited to, customer contracts, customer relationships and
marketing relationships, are amortized over their estimated
useful lives. Other intangible assets deemed to have indefi nite
useful lives, primarily certain state licenses, are not amortized
and are subject to at least annual impairment tests. At the
time of the annual impairment test, the Company has the
option to fi rst assess qualitative factors to determine whether
it is necessary to perform a quantitative impairment test for
indefi nite-lived intangible assets. Impairment exists if the
carrying amount of the indefi nite-lived other intangible asset
exceeds its fair value. For other intangible assets with fi nite
lives, impairment is recognized if the carrying amount is not
recoverable and exceeds the fair value of the other intangible
asset. Generally other intangible assets with fi nite lives are
only tested for impairment if there are indicators (“triggers”)
of impairment identifi ed. Triggers include, but are not limited
to, a signifi cant adverse change in the extent, manner or length
of time in which the other intangible asset is being used or a
signifi cant adverse change in legal factors or in the business
climate that could affect the value of the other intangible
asset. In certain cases, the Company does perform an annual
impairment test for other intangible assets with fi nite lives
even if there are no triggers present. There were no material
impairment charges related to fi nite-lived other intangible
assets in 2013. The Company recorded an impairment charge
of $26,458 related to fi nite-lived intangible assets in 2012.
For both 2013 and 2012, there were no impairment charges
for indefi nite-lived other intangible assets.
Amortization expense and impairment charges are included
in underwriting, general and administrative expenses in the
consolidated statements of operations.
Separate Accounts
Assets and liabilities associated with separate accounts
relate to premium and annuity considerations for variable
life and annuity products for which the contract-holder,
rather than the Company, bears the investment risk. Separate
account assets (with matching liabilities) are reported at
fair value. Revenues and expenses related to the separate
account assets and liabilities, to the extent of benefi ts
paid or provided to the separate account policyholders, are
excluded from the amounts reported in the accompanying
consolidated statements of operations because the accounts
are administered by reinsurers.
Reserves
Reserves are established in accordance with GAAP, using
generally accepted actuarial methods. Factors used in their
calculation include experience derived from historical claim
payments and actuarial assumptions. Such assumptions
and other factors include trends, the incidence of incurred
claims, the extent to which all claims have been reported,
and internal claims processing charges. The process used in