Assurant 2015 Annual Report Download

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2015
Annual Report and Form 10-K

Table of contents

  • Page 1
    2015 Annual Report and Form 10-K

  • Page 2
    ... of net operating income to its most comparable GAAP measure. 2 Excluding Assurant Health runoff operations. Assurant Health runoff operations include results for the total segment, including major medical operations and portions of the business that Assurant sold to National General Holdings...

  • Page 3
    ...Alan B. Colberg President and CEO Assurant Our vision for the future is clear as we aspire to be a leading provider of housing and lifestyle risk management solutions with a proven record of outperformance. Our strategy starts with our customers and the actions we take each day to help them protect...

  • Page 4
    ...new clients. LIFESTYLE Three global business lines are focused on lifestyle specialty protection - Connected Living, Vehicle Protection and Pre-funded funeral insurance. We align with global market leaders in multiple distribution channels as we work with large distributors, mobile carriers as well...

  • Page 5
    ... of Assurant Employee Benefits, dividends from Assurant Health and cash flow from our ongoing businesses will provide significant financial flexibility. With this capital, we intend to return a total $1.5 billion to shareholders by the end of 2017 while also funding meaningful investments to build...

  • Page 6
    ... solutions is visible in the communities in which we live and work too. During the past two years, Assurant has made a series of impact investments to help address social and environmental challenges facing communities in the U.S. These investments provide support for affordable housing, charter...

  • Page 7
    ... built 15 Habitat for Humanity homes in Miami to provide affordable housing for low-income families in neighborhoods near Assurant's office. In Atlanta, employees donned their tool belts in the spring of 2015 to participate in their fourteenth home build with an annual, eightweek Habitat event in...

  • Page 8
    Assurant Management Committee Alan B. Colberg President and Chief Executive Officer, Assurant Gene E. Mergelmeyer President and Chief Executive Officer, Assurant Specialty Property and Chief Administrative Officer, Assurant Robyn Price Stonehill Executive Vice President, Chief Human Resources ...

  • Page 9
    ... business, because it excludes both the effect of net realized gains (losses) on investments that tend to be highly variable from period to period, and those events that are unusual and/or unlikely to recur. 2015 Assurant Solutions Assurant Specialty Property Assurant Employee Benefits Corporate...

  • Page 10
    ... following reconciliation table. 2015 Annual operating return on average equity (excluding AOCI and Assurant Health Runoff operations) Assurant Health runoff operations Net realized gains on investments Gain on divested business Change in tax liabilities Payment received related to previous sale of...

  • Page 11
    Form 10-K

  • Page 12
    ...FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2015 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission file number...

  • Page 13
    ...66 Controls and Procedures 66 Other Information 67 PART III ITEM 10 ITEM 11 ITEM 12 ITEM 13 ITEM 14 68 Directors, Executive Officers and Corporate Governance 68 Executive Compensation 68 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 69 Certain...

  • Page 14
    .... credit risk of some of our agents in Assurant Specialty Property and Assurant Solutions; xxviii. inability of our subsidiaries to pay sufficient dividends; xxix� failure to provide for succession of senior management and key executives; and xxx� cyclicality of the insurance industry� For...

  • Page 15
    ...related products; debt protection administration; credit insurance; manufactured housing homeowners insurance; group dental insurance; group disability insurance; and group life insurance. As previously announced, the Company will substantially exit the health insurance market in 2016 and has signed...

  • Page 16
    ... report. Assurant Solutions For the Years Ended December 31, 2015 December 31, 2014 Net earned premiums for selected product groupings: Extended service contracts and warranties-domestic(1) Extended service contracts and warranties-international(1) Preneed life insurance Credit insurance-domestic...

  • Page 17
    ...services for ESCs and warranties. These contracts provide consumers with coverage on mobile devices, personal computers, consumer electronics, appliances, automobiles and recreational vehicles, protecting them from certain covered losses. We pay the cost of repairing or replacing customers' property...

  • Page 18
    ... homeowners insurance The largest product line within Assurant Specialty Property is homeowners insurance, consisting principally of fire and dwelling hazard insurance offered through our lender-placed program. The lender-placed program provides collateral protection to lenders, mortgage servicers...

  • Page 19
    ... of our product lines (such as homeowners, manufactured housing, and other property policies) are exposed to catastrophe risks, we purchase reinsurance coverage to protect the capital of Assurant Specialty Property and to mitigate earnings volatility. Our reinsurance program generally incorporates...

  • Page 20
    ...Health also offered medical insurance to small employer groups� Affordable Care Act, as well as self-funded employer options and individual products sold through the workplace. On October 1, 2015, we sold our supplemental and smallgroup self funded lines of business and certain assets to National...

  • Page 21
    ... their plan provisions. Our products include both short- and long-term disability coverage options. We also reinsure disability policies written by other carriers through our DRMS subsidiary� Group Dental Dental benefit plans provide funding for necessary or elective dental care� Customers may...

  • Page 22
    ...Security Insurance Company Assurant Life of Canada Caribbean American Life Assurance Company Caribbean American Property Insurance Company John Alden Life Insurance Company Reliable Lloyds Standard Guaranty Insurance Company Time Insurance Company UDC Dental California Union Security Dental Care New...

  • Page 23
    ..., the Company announced a strategic realignment of its portfolio to focus on specialty housing and lifestyle protection products and services. As a result of the partial sale of Assurant Health and the runoff of the remaining business and the impending sale of Assurant Employee Benefits, a number of...

  • Page 24
    ... coverages; • statutory accounting and annual statement disclosure requirements; • product types, policy forms and mandated insurance benefits; • premium rates; • fines, penalties and assessments; • claims practices, including occasional regulatory requirements to pay claims on terms...

  • Page 25
    ... the Affordable Care Act and related reforms include a requirement that we pay premium rebates to customers if the loss ratios for some of our product lines are less than specified percentages; changes in the benefits provided under some of our products; elimination of limits on lifetime and annual...

  • Page 26
    ... be liable for the costs of addressing releases or threatened releases of hazardous substances at properties securing mortgage loans held by us� Other Non-Insurance Regulation As the Company continues to evolve its business mix to cover other non-insurance based products and services, it becomes...

  • Page 27
    ... SCI relating to the distribution of our preneed insurance policies. In Assurant Specialty Property, we have exclusive and non-exclusive relationships with certain mortgage lenders and manufactured housing lenders and property managers, and in turn we are eligible to insure properties securing loans...

  • Page 28
    ..., the evolving nature of consumer needs and preferences and improvements in technology, which could cause us to reduce the price of products and services we offer. For Assurant Specialty Property, our lender-placed homeowners insurance program and certain of our manufactured housing products are not...

  • Page 29
    ...the placement of hazard insurance under our lender-placed insurance programs. General inflationary pressures may affect the costs of medical and dental care, as well as repair and replacement costs on our real and personal property lines, increasing the costs of paying claims. Inflationary pressures...

  • Page 30
    ... Because Assurant Specialty Property's lender-placed homeowners and lender-placed manufactured housing insurance products are designed to automatically provide property coverage for client portfolios, our concentration in certain catastrophe-prone states like Florida, California, Texas and New York...

  • Page 31
    ... insurance premiums, fee income, cash flow from our investment portfolio and liquid assets, consisting mainly of cash or assets that are readily convertible into cash. Sources of liquidity in normal markets also include a variety of short-and long-term instruments. If our access to capital markets...

  • Page 32
    ... disability or for a stated period, during which time the life insurance coverage continues. If interest rates decline, reserves for open and new claims in Assurant Employee Benefits may need to be 20 ASSURANT, INC. - 2015 Form 10-K calculated using lower discount rates, thereby increasing the net...

  • Page 33
    ... past and may make more such investments in the future. Investments in equity securities generally provide higher expected total returns but present greater risk to preservation of capital than our fixed maturity investments. If treasury rates or credit spreads were to increase, the Company may have...

  • Page 34
    ... technology to support the Company's business in an efficient and cost-effective manner, and keep current with technological advances, evolving industry and regulatory standards and customer needs. In addition, our ability to keep our systems integrated with those of our clients is critical to the...

  • Page 35
    ... we contract in Assurant Solutions and Assurant Specialty Property. For example, we advance agents' commissions as part of our preneed insurance product offerings. These advances are a percentage of the total face amount of coverage. There is a one-year payback provision against the agency if death...

  • Page 36
    ... of business; capital, surplus and dividends; underwriting limitations; companies' ability to enter and exit markets; statutory accounting and other disclosure requirements; policy forms; coverage; companies' ability to provide, terminate or cancel certain coverages; premium rates, including...

  • Page 37
    ... as well as our own expenses, and which may result in fines, penalties, or other adverse consequences; • disputes regarding our lender-placed insurance products including those relating to rates, agent compensation, consumer disclosure, continuous coverage requirements, loan tracking services and...

  • Page 38
    ... or coverage determinations; • new benefit mandates; • increased regulation relating to lender-placed insurance; • limitations on the ability to manage health care and utilization due to direct access laws that allow insureds to seek services directly from specialty medical providers without...

  • Page 39
    ... Accounting Estimates - Health Insurance Premium Rebate Liability" for more information about the minimum medical loss ratio and the Company's rebate estimate calculations. In addition, the Affordable Care Act imposes limitations on the deductibility of compensation and certain other payments� In...

  • Page 40
    ... board of directors and executive officers, the applicant's plans for the future operations of the domestic insurer and any anti-competitive results that may arise from the consummation of the acquisition of control� We may also, under some circumstances involving a change of control, be obligated...

  • Page 41
    ... Employee Benefits has a headquarters building in Kansas City, Missouri. Assurant Health has a headquarters building in Milwaukee, Wisconsin. We lease office space for various offices and service centers located throughout the U�S� and internationally, including our New York, New York corporate...

  • Page 42
    PART II PART II ITEM 5 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stock Performance Graph The following chart compares the total stockholder returns (stock price increase plus dividends paid) on our common stock from December 31, ...

  • Page 43
    ... for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Annual Return Percentage Years Ending Company / Index Assurant, Inc� S&P 500 Index S&P 400 MidCap Index S&P 500 Multi-line Insurance Index* S&P 400 Multi-line Insurance Index* * 12/31/11 8�58...

  • Page 44
    ... 2011 ASSURANT, INC. FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA Consolidated Statement of Operations Data: Revenues Net earned premiums Net investment income Net realized gains on investments(1) Amortization of deferred gain on disposal of businesses Fees and other income Total revenues Benefits...

  • Page 45
    ... of $5,000, pre-tax and net of reinsurance. (3) During 2011, we had an $80,000 release of a capital loss valuation allowance related to deferred tax assets. (4) Policy liabilities include future policy benefits and expenses, unearned premiums and claims and benefits payable. (5) Total stockholders...

  • Page 46
    ... on 2015 individual major medical policies, a reduction in the 2014 estimated recoveries from the Affordable Care Act risk mitigation programs and $106,389 (after-tax) of exit and disposal costs, including premium deficiency reserve accruals, severance and retention costs, long-lived asset...

  • Page 47
    ... earned premiums while sales of administrative services are recognized as fee income� Under the universal life insurance guidance, income earned on preneed life insurance policies sold after January 1, 2009 are presented within policy fee income net of policyholder benefits. Under the limited pay...

  • Page 48
    ...to insurers for high cost individual business sold on or off the public marketplaces� The reinsurance entity established by HHS is funded by a per-member reinsurance fee assessed on all commercial medical plans, including self-insured group health plans� Only Affordable Care Act individual plans...

  • Page 49
    ...836 Short Duration Contracts: Group term life - 2,431 166,920 30,857 Group disability - 1,984 1,092,841 100,155 Medical - 25,401 235,516 253,295 Dental - 4,244 1,587 16,454 Property and warranty - 2,223,589 182,095 507,310 Credit life and disability - 181,466 25,966 35,718 Extended service contracts...

  • Page 50
    ... premium benefits on group term life policies. Reserve factors used to calculate these reserves reflect assumptions regarding disabled life mortality and claim recovery rates, claim management practices, awards for social security and other benefit offsets and yield rates earned on assets supporting...

  • Page 51
    ..., manufactured housing homeowners, multi-family housing, credit property, credit unemployment and warranty insurance and some longer-tail coverages (e�g� asbestos, environmental, other general liability and personal accident)� Claim reserves for these lines are calculated on a product line...

  • Page 52
    ...� Such testing involves the use of best estimate assumptions to determine if anticipated future policy premiums and investment income are adequate Short Duration Contracts Acquisition costs relating to property contracts, warranty and extended service contracts and single premium credit insurance...

  • Page 53
    ... relating to monthly pay credit insurance business consist mainly of direct response advertising costs and are deferred and amortized over the estimated average terms and balances of the underlying contracts� Acquisition costs relating to group term life, group disability, group dental and group...

  • Page 54
    ... market and industry data, and historical performance of the plan and its assets� The actuarial assumptions used in the calculation of our aggregate projected benefit obligation vary and include an expectation of long-term appreciation in equity markets which is not changed by minor short-term...

  • Page 55
    ... qualitative assessments for the Assurant Solutions and Assurant Specialty Property reporting units, we considered macro-economic, industry and reporting unitspecific factors. These included (i.) the effect of the current interest rate environment on our cost of capital; (ii�) each reporting unit...

  • Page 56
    ... claims development on 2015 individual major medical policies, a reduction in the 2014 estimated recoveries from the Affordable Care Act risk mitigation program and $106,389 (after-tax) of exit and disposal costs, including premium deficiency reserves, severance and retention costs, long-lived asset...

  • Page 57
    ... premiums since Assurant Solutions reinsures a portion of its premiums to insurance subsidiaries of its clients. (3) The combined ratio is equal to total benefits, losses and expenses divided by net earned premiums and fees and other income excluding the preneed business. ASSURANT, INC. - 2015 Form...

  • Page 58
    ... of our credit insurance business� These items were partially offset by growth from our auto warranty business and from a large domestic service contract client� Fees and other income increased $117,759 primarily driven by contributions from global mobile programs and related services� A few...

  • Page 59
    ... Matters In January 2015, NYDFS issued regulations regarding tracking costs associated with lender placed insurance rates� The Company reached an agreement with the NYDFS to file for a 6�2% reduction in lender-placed hazard insurance rates in New York. The rates have been filed and approved, and...

  • Page 60
    ... review of its portfolio and decided to sharpen its focus on specialty housing and lifestyle protection products and services� As a result, the Company will exit the health insurance market� For more information, see Notes 3 and 4 of the Notes to the Consolidated Financial Statements...

  • Page 61
    ...-Risk related to our industry-Reform of the health insurance industry could materially reduce the profitability of certain of our businesses or render them unprofitable" in this report. Because all individuals now have a guaranteed right to purchase health insurance policies, the Affordable Care Act...

  • Page 62
    ... to growth in the major medical product line� Net earned premiums from our small employer group business decreased $72,758, or 18%, due to policy lapses and the sale of supplemental and small-group self-funded lines of business and certain assets to National General on October 1, 2015� For more...

  • Page 63
    ... $1,647,203 for Twelve Months 2013� Net earned premiums from our individual medical business increased $370,827, or 32%, due to growth in individual major medical product sales, and estimated recoveries from the Affordable Care Act's risk adjustment program� Total Benefits, Losses and Expenses...

  • Page 64
    ...decreased 5% or $6,194 driven by lower investment income from real estate joint venture partnerships as well as lower investment yields� Total Benefits, Losses and Expenses Total benefits, losses and expenses increased $12,509, or 1%, to $1,128,949 for Twelve Months 2015 from $1,116,440 for Twelve...

  • Page 65
    ... in Twelve Months 2014, mentioned above� $20,753 one-time tax benefit related to the conversion of the Canadian branch operations of certain U�S� subsidiaries to foreign corporate entities, a $17,068 (after-tax) change in net realized gains on investments, lower employee-related costs and...

  • Page 66
    ... Equity securities Commercial mortgage loans on real estate Policy loans Short-term investments Other investments Cash and cash equivalents Total investment income Investment expenses NET INVESTMENT INCOME $ $ Net investment income decreased $30,212, or 5%, to $626,217 for Twelve Months 2015...

  • Page 67
    ...the Company cannot corroborate the non-binding broker quotes with Level 2 inputs, these securities are categorized as Level 3� A non-pricing service source prices certain privately placed corporate bonds using a model with observable inputs including, but not limited to, the credit rating, credit...

  • Page 68
    ... Security Insurance Company and Union Security Life Insurance Company of New York were placed under review with negative implications� • Ratings of Assurant's rated dental HMOs were placed under review with positive implications� • Ratings of John Alden Insurance Company and Time Insurance...

  • Page 69
    ... placed on CreditWatch positive� • Ratings of John Alden Life Insurance Company and Time Insurance Company were downgraded from BBB to BB+, and the outlook revised to stable� • Ratings of Assurant's Senior Debt (BBB+), American Bankers Insurance Company of Florida (A), American Bankers Life...

  • Page 70
    ... to time up to the maximum permitted� The funding policy considers several factors to determine such additional amounts including items such as the amount of service cost plus 15% of the Assurant Pension Plan deficit and the capital position of the Company. Retirement and Other Employee Benefits...

  • Page 71
    ... the net periodic benefit cost. The impact of a 25 basis point decrease in the discount rate assumption on the 2016 projected benefit expense would result in a reduction of $600 for the Assurant Pension Plan and the various non-qualified pension plans and a reduction of $100 on the retirement health...

  • Page 72
    ... 2015� For more information on the ARIC sale, please see Note 4 to the Consolidated Financial Statements contained elsewhere in this report� These increases are partially offset by changes in our short-term investments and an increase of purchases of fixed maturity securities. Net cash provided...

  • Page 73
    ...Insurance liabilities(1) $ 21,510,851 $ Debt and related interest 1,895,031 Operating leases 95,638 Pension obligations and postretirement benefit 762,960 Commitments: Investment purchases outstanding: Commercial mortgage loans on real estate 6,350 Capital contributions to real estate joint ventures...

  • Page 74
    ...� We manage interest rate risk by selecting investments with characteristics such as duration, yield, currency and liquidity tailored to the anticipated cash outflow characteristics of our insurance and reinsurance liabilities� Our group long-term disability and group term life waiver of premium...

  • Page 75
    ...from real estate joint venture partnerships. Credit Risk We have exposure to credit risk primarily from customers, as a holder of fixed maturity securities and by entering into reinsurance cessions� Our risk management strategy and investment policy is to invest in debt instruments of high credit...

  • Page 76
    ... derivative contracts with payments tied to the CPI� See "-Derivatives�" In addition, we have inflation risk in our individual and small employer group health insurance businesses to the extent that medical costs increase with inflation, and we have not been able to increase premiums to...

  • Page 77
    ...forward contracts� Under insurance statutes, our insurance companies may use derivative financial instruments to hedge actual or anticipated changes in their assets or liabilities, to replicate cash market instruments or for certain income-generating activities� These statutes generally prohibit...

  • Page 78
    ... to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the U�S� A company's internal control over financial reporting includes policies and...

  • Page 79
    PART II ITEM 9B Other Information Management, including the Company's Chief Executive Officer and its Chief Financial Officer, based on their evaluation of the Company's internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) or 15d-15(f)), have concluded that the ...

  • Page 80
    ... The information in the 2016 Proxy Statement regarding the Compensation Committee under the captions "Compensation Committee," "Compensation Committee Interlocks and Insider Participation" and "Compensation Committee Report" in "Corporate Governance" is incorporated herein by reference. 68 ASSURANT...

  • Page 81
    ... 14 Principal Accounting Fees and Services ITEM 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information in the 2016 Proxy Statement under the captions "Equity Compensation Plan Information," "Security Ownership of Certain Beneficial Owners...

  • Page 82
    ... (a) are filed with this report or (b) have previously been filed with the SEC and are incorporated herein by reference to those prior filings. Exhibits are available upon request at the investor relations section of our website, located at www.assurant.com� 70 ASSURANT, INC. - 2015 Form 10-K

  • Page 83
    ... 27, 2009).* Form of Assurant, Inc. Restricted Stock Unit Award Agreement for Time-based Awards under the Assurant, Inc. Long Term Equity Incentive Plan (incorporated by reference from Exhibit 10.1 to the Registrant's Form 8-K, originally filed on March 16, 2009).* ASSURANT, INC. - 2015 Form 10...

  • Page 84
    ... Stock Unit Award Agreement for Performance-based Awards under the Assurant, Inc. Long Term Equity Incentive Plan (incorporated by reference from Exhibit 10.20 to the Registrant's Form 10-K, originally filed on February 23, 2012).* Form of Restricted Stock Agreement for Executive Officers under...

  • Page 85
    ...Exhibit Description American Security Insurance Company Investment Plan Document (incorporated by reference from Exhibit 10.34 to the Registrant's Form 10-K, originally filed on March 3, 2008). Letter Agreement, dated October 11, 2010, by and between Assurant, Inc. and Alan Colberg (incorporated by...

  • Page 86
    ..., thereunto duly authorized on February 16, 2016. ASSURANT, INC. By: Name: Title: /s/ALAN B. COLBERG Alan B. Colberg Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the...

  • Page 87
    ... designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and...

  • Page 88
    ... in 2014) Equity securities available for sale, at fair value (cost-$450,563 in 2015 and $434,875 in 2014) Commercial mortgage loans on real estate, at amortized cost Policy loans Short-term investments Collateral held/pledged under securities agreements Other investments TOTAL INVESTMENTS Cash and...

  • Page 89
    ... and expenses Policyholder benefits Amortization of deferred acquisition costs and value of business acquired Underwriting, general and administrative expenses Interest expense TOTAL BENEFITS, LOSSES AND EXPENSES Income before provision for income taxes Provision for income taxes NET INCOME Earnings...

  • Page 90
    ... net periodic benefit cost and change in funded status, net of taxes of $(4,091), $26,534, and $(51,302), respectively Total other comprehensive (loss) income TOTAL COMPREHENSIVE (LOSS) INCOME $ See the accompanying notes to the consolidated financial statements Years Ended December 31, 2015...

  • Page 91
    ... income Balance, December 31, 2014 Stock plan exercises Stock plan compensation expense Change in tax benefit from sharebased payment arrangements Dividends Acquisition of common stock Net income Other comprehensive loss BALANCE, DECEMBER 31, 2015 Common Stock $ 1,474 8 1,482 8 1,490 7 1,497...

  • Page 92
    ... sale Commercial mortgage loans on real estate Other invested assets Property and equipment and other Subsidiary, net of cash transferred(1) Equity interest(2) Change in short-term investments Change in policy loans Change in collateral held/pledged under securities agreements NET CASH PROVIDED BY...

  • Page 93
    ... AT END OF PERIOD Supplemental information: Income taxes paid Interest on debt paid $ $ $ (1) 2015 includes the sale of American Reliable Insurance Co. and certain assets related to our vehicle title administration services business and supplemental and small group self-funded businesses; the...

  • Page 94
    ...protection administration; credit insurance; manufactured housing homeowners insurance; group dental insurance; group disability insurance; and group life insurance� As previously announced, the Company concluded a comprehensive review of its portfolio and decided to sharpen its focus on specialty...

  • Page 95
    ...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...

  • Page 96
    ... 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 financial information provided by the investee, generally on a three month lag� The invested assets related...

  • Page 97
    ...Note 3 for further information on the impairment of long-lived assets related to the exit of the health insurance market� Long Duration Contracts Acquisition costs for pre-funded funeral ("preneed") life insurance policies issued prior to 2009 and certain life insurance policies no longer offered...

  • Page 98
    ..., the Assurant Employee Benefits and Assurant Health reporting units did not have goodwill� Other Assets Other assets consist primarily of investments in unconsolidated entities, inventory associated with our mobile protection business and prepaid items� The Company accounts for investments in...

  • Page 99
    ...actual and expected earned rates on our asset portfolio� Changes in the estimated liabilities are reported as a charge or credit to policyholder benefits as the estimates are revised. Long Duration Contracts The Company's long duration contracts include preneed life insurance policies and annuity...

  • Page 100
    ...term life contracts, group disability contracts, medical contracts, dental contracts, vision contracts, property and warranty contracts, credit life and disability contracts and extended service contracts� For short duration contracts, claims and benefits payable reserves are recorded when insured...

  • Page 101
    ...to insurers for high cost individual business sold on or off the public marketplaces� The reinsurance entity established by HHS is funded by a per-member reinsurance fee assessed on all commercial medical plans, including self-insured group health plans� Only Affordable Care Act individual plans...

  • Page 102
    ... on preneed life insurance policies with discretionary death benefit growth issued after 2008 is presented within fees and other income� The Company also derives fees and other income from providing administrative services, mobile related services, and mortgage property risk management services...

  • Page 103
    ... eliminates specialized guidance for limited partnerships and similar legal entities, and removes the indefinite deferral for certain investment funds� The new guidance is effective for interim and annual periods beginning after December 15, 2015� Therefore, the Company is required to adopt...

  • Page 104
    ... and small-group self-funded lines of business and sold certain legal entities to National General Holdings Corp� ("National General"), effective October 1, 2015� On June 7, 2015, the Company concluded its comprehensive review of strategic alternatives for the Assurant Health business segment...

  • Page 105
    ...benefit related to the sale of these legal entities� See Note 8 for more information on the tax benefit. On September 9, 2015, the Company entered into a Master Transaction Agreement with Sun Life Assurance Company of Canada, a subsidiary of Sun Life Financial Inc�, to sell its Assurant Employee...

  • Page 106
    ... Cost Fixed maturity securities: United States Government and government agencies and authorities States, municipalities and political subdivisions Foreign governments Asset-backed Commercial mortgage-backed Residential mortgage-backed Corporate TOTAL FIXED MATURITY SECURITIES Equity securities...

  • Page 107
    ...,360) 650,296 Fixed maturity securities Equity securities Commercial mortgage loans on real estate Policy loans Short-term investments Other investments Cash and cash equivalents Total investment income Investment expenses NET INVESTMENT INCOME $ $ No material investments of the Company were non...

  • Page 108
    ...and timing of projected future cash flows. The net present value is calculated by discounting the Company's best estimate of projected future cash flows at the effective interest rate implicit in the security at the date of acquisition. For residential and commercial mortgage-backed and asset-backed...

  • Page 109
    ... estimated period of cash flows. The investment category and duration of the Company's gross unrealized losses on fixed maturity securities and equity securities at December 31, 2015 and 2014 were as follows: Less than 12 months Unrealized Fair Value Losses Fixed maturity securities: United States...

  • Page 110
    ... estate, on properties located throughout the U�S� and Canada� At December 31, 2015, approximately 41% of the outstanding principal balance of commercial mortgage loans was concentrated in the states of California, New York, and Oregon� Although the Company has a diversified loan portfolio...

  • Page 111
    ... support or in which the equity investors, as a group, do not have the characteristic of a controlling financial interest. The Company's investments in VIE's include private equity limited partnerships and real estate joint ventures� These investments are generally accounted for under the equity...

  • Page 112
    ... management's own assumptions about the assumptions a market participant would use in pricing the asset� The Company reviews fair value hierarchy classifications on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities...

  • Page 113
    ... certain investments or certain assets and liabilities within these line items are measured at estimated fair value� Other investments are comprised of investments in the Assurant Investment Plan, American Security Insurance Company Investment Plan, Assurant Deferred Compensation Plan, a modified...

  • Page 114
    ... United States Government and government agencies and authorities State, municipalities and political subdivisions Foreign governments Asset-backed Commercial mortgage-backed Residential mortgage-backed Corporate Equity securities: Common stocks Non-redeemable preferred stocks Short-term investments...

  • Page 115
    .... For certain privately placed corporate bonds and certain derivatives, the Company generally uses the income valuation technique. For the periods ended December 31, 2015 and 2014, the application of the valuation technique applied to the Company's classes of financial assets and liabilities has...

  • Page 116
    ...credit information, perceived market movements and sector news� Commercial mortgage-backed, residential mortgagebacked and asset-backed: Commercial mortgage-backed, residential mortgage-backed and asset-backed securities are priced by the Company's pricing service using monthly payment information...

  • Page 117
    ...These assets include commercial mortgage loans, goodwill and finite-lived intangible assets. For its 2015 fourth quarter annual goodwill impairment tests, a qualitative assessment was performed for the Assurant Solutions and Assurant Specialty Property reporting units. Based on these assessments, it...

  • Page 118
    ... of policy loans reported in the consolidated balance sheets approximates fair value� Other investments: Other investments include equity investments accounted for under the cost method, real estate held for sale, Certified Capital Company and low income housing tax credits, business debentures...

  • Page 119
    ... Commercial mortgage loans on real estate Policy loans Other investments TOTAL FINANCIAL ASSETS Financial Liabilities Policy reserves under investment products (Individual and group annuities, subject to discretionary withdrawal)(1) Funds withheld under reinsurance Debt Obligations under securities...

  • Page 120
    ...foreign tax credits for certain other subsidiaries. In addition, 2015 reflects a 6.5% benefit related to a Latin American reorganization and 2014 reflects a 2.6% benefit related to the conversion of Canadian branch operations of certain U.S. companies to foreign corporate entities. A reconciliation...

  • Page 121
    ... of businesses Compensation related Employee and post-retirement benefits Unearned fee income Other Total deferred tax asset Less valuation allowance Deferred tax assets, net of valuation allowance Deferred Tax Liabilities Deferred acquisition costs Net unrealized appreciation on securities Total...

  • Page 122
    10 Property and Equipment 9� Deferred Acquisition Costs December 31, 2014 3,128,931 $ 1,306,390 (1,477,581) 2,957,740 $ Information about deferred acquisition costs is as follows: 2015 2,957,740 $ 1,587,453 (1,394,259) 3,150,934 $ 2013 2,861,163 1,729,613 (1,461,845) 3,128,931 Beginning ...

  • Page 123
    ... planning cycle, which is a significant element in the testing process. This change in annual testing date did not delay, accelerate or avoid an impairment charge� In 2015 for both Assurant Solutions and Assurant Specialty Property reporting units and in 2013 for the Assurant Specialty Property...

  • Page 124
    ... balance of VOBA is from the Assurant Solutions segment with the majority related to the preneed life insurance business� VOBA in the preneed life insurance business assumes an interest rate ranging from 5�4% to 7�5%� At December 31, 2015 the estimated amortization of VOBA for the next...

  • Page 125
    ... policies and investment-type annuity contracts Life insurance no longer offered Universal life and other products no longer offered FFG, LTC and other disposed businesses Medical All other Short Duration Contracts: Group term life Group disability Medical Dental Property and warranty Credit life...

  • Page 126
    ... table provides a rollforward of the Company's product lines with the most significant claims and benefits payable balances: group term life, group disability, medical and property and warranty lines of business. Claims and benefits payable is comprised of case and IBNR reserves� Group Term Life...

  • Page 127
    13 Reserves Short Duration Contracts The Company's short duration contracts are comprised of group term life, group disability, medical, dental, property and warranty, credit life and disability, extended service contract and all other� The principal products and services included in these ...

  • Page 128
    ...issue, risk class, face amount and grade to zero over a period not longer than 20 years� PreNeed Business - AMLIC Division Interest and discount rates for preneed life insurance issued or acquired after September 2000 and prior to 2009 vary by year of issuance and are based on pricing assumptions...

  • Page 129
    ... the form of funds withheld, trusts, and letters of credit) as security� The Not Rated category also includes recoverables from the Department of Health and Human Services, the National Flood Insurance Program and the Florida Hurricane Catastrophe Fund� An allowance for doubtful accounts related...

  • Page 130
    ... 2014, respectively, for the benefit of others related to certain reinsurance arrangements� The Company utilizes ceded reinsurance for loss protection and capital management, business dispositions, and in the Assurant Solutions and Assurant Specialty Property segments, for client risk and profit...

  • Page 131
    ...there have been no disputes� Segment Client Risk and Profit Sharing The Assurant Solutions and Assurant Specialty Property segments write business produced by their clients, such as mobile providers, mortgage lenders and servicers, and financial institutions and reinsures all or a portion of such...

  • Page 132
    ... 2019, provided the Company is in compliance with all covenants� The 2014 Credit Facility has a sublimit for letters of credit issued thereunder of $50,000. The proceeds of these loans may be used for the Company's commercial paper program or for general corporate purposes� The Company may...

  • Page 133
    ... annual statement of operations� Total stockholder return is defined as appreciation in Company stock plus dividend yield to stockholders� Payouts will be determined by measuring performance against the average performance of companies included in an insurance industry market index� From 2009...

  • Page 134
    ... prices of the Company's stock and peer insurance group� The expected term for grants issued during the years ended December 31, 2015, 2014 and 2013 was assumed to equal the average of the vesting period of the PSUs� The risk-free rate was based on the U�S� Treasury yield curve in effect...

  • Page 135
    ... awards were granted under the 2004 Assurant Long-Term Incentive Plan ("ALTIP"), which authorized the granting of up to 10,000,000 new shares of the Company's common stock to employees and officers under the ALTIP, Business Value Rights Program and CEO Equity Grants Program. Under the ALTIP, the...

  • Page 136
    .... During the year ended December 31, 2015, the Company repurchased 4,184,889 shares of the Company's outstanding common stock at a cost of $284,567, exclusive of commissions, leaving $952,103 remaining under the total repurchase authorization at December 31, 2015. The timing and the amount of future...

  • Page 137
    ... before tax Provision for income taxes Net of tax NET OF TAX (1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost. See Note 21-Retirement and Other Employee Benefits for additional information ASSURANT, INC. - 2015 Form 10-K F-51

  • Page 138
    ...claims development on 2015 individual major medical policies, a reduction in the 2014 estimated recoveries from the Affordable Care Act risk mitigation programs and $106,389 (after-tax) of exit and disposal costs, including premium deficiency reserves, severance and retention costs, long-lived asset...

  • Page 139
    ... plans (including an Executive Pension Plan) were frozen. No additional benefits will be earned after February 29, 2016. In addition, the Company provides certain life and health care benefits ("Retirement Health Benefits") for retired employees and their dependents. On July 1, 2011, the Company...

  • Page 140
    ... Employee Benefits Summarized information on the Company's Pension Benefits and Retirement Health Benefits plans (together the "Plans") for the years ended December 31 is as follows: 2015 Change in projected benefit obligation Projected benefit obligation at beginning of year Service cost Interest...

  • Page 141
    ... returns for the Plans will be fully reflected in the market-related value of plan assets over the next five years using the methodology described above. Other post-employment benefit assets under the Retirement Health Benefits are valued at fair value. The estimated net loss and prior service cost...

  • Page 142
    ...77% 4�64% 3�71% - - - Retirement Health Benefits 2015 2014 2013 4�07% 4�99% 4�12% 6�75% 6�75% 6�75% Discount rate Expected long-term return on plan assets * Assumed rates of compensation increases are also used to determine net periodic benefit cost. Assumed rates varied by age and...

  • Page 143
    ... Corporate- U�S� & foreign investment grade Corporate- U�S� & foreign high yield Alternative investment fund: Multi-strategy hedge fund Commingled real estate fund Private equity fund High 10�0% 20�0% 10�0% 11�5% 36�0% 10�0% 10�5% 8�5% 8�5% (1) The Plans' long-term asset...

  • Page 144
    ... for the Company's qualified pension plan and other post retirement benefit plan assets at December 31, 2015 by asset category, is as follows: Qualified Pension Benefits Financial Assets Cash and cash equivalents: Short-term investment funds Equity securities: Common stock- U�S� listed small cap...

  • Page 145
    ... the Company's qualified pension plan and other post retirement benefit plan assets at December 31, 2014 by asset category, is as follows: Qualified Pension Benefits Financial Assets Cash and cash equivalents: Short-term investment funds $ Equity securities: Common stock- U�S� listed small cap...

  • Page 146
    ... services offered: Assurant Solutions, Assurant Specialty Property, Assurant Health, Assurant Employee Benefits, and Corporate & Other. Assurant Solutions provides mobile device protection products and services; debt protection administration; credit insurance; extended service products and related...

  • Page 147
    ...Company concluded a comprehensive review of its portfolio and decided to sharpen its focus on specialty housing and lifestyle protection products and services. As a result, the Company will exit the health insurance market and has signed a definitive agreement to sell its Assurant Employee Benefits...

  • Page 148
    ... Specialty Employee Corporate Property Health Benefits & Other - 19,320 60,783 (1,506) 685 79,282 - - 143,078 58,395 201,473 (122,191) (47,460) (74,731) $ $ 14,260,609 $ 4,010,393 $1,210,615 $ 2,242,145 $ 8,997,465 470,907 Solutions Revenues Net earned premiums Net investment income Net realized...

  • Page 149
    ...: 2015 Solutions: Credit Service contracts Preneed Other TOTAL Specialty Property: Homeowners (lender-placed and voluntary) Manufactured housing (lender-placed and voluntary) Other TOTAL Health: Individual Small employer group TOTAL Employee Benefits: Group disability Group dental Group life Group...

  • Page 150
    ..., the weighted average common shares used in calculating basic earnings per common share and those used in calculating diluted earnings per common share for each period presented below� Years Ended December 31, 2015 2014 Numerator Net income Deduct dividends paid Undistributed earnings Denominator...

  • Page 151
    ... individual major medical policies, premium deficiency reserve strengthening and severance and other exit-related charges associated with our exit from the health insurance market� Fourth quarter 2014 results were primarily affected by increased claims in the Assurant Health segment, decreased net...

  • Page 152
    ... of goodwill is the future expected growth of this business within Assurant Solutions� On September 3, 2014, the Company acquired eMortgage Logic, LLC, a national provider of residential valuation products and valuation technology services. The acquisitiondate fair value of the consideration...

  • Page 153
    ...backed Corporate TOTAL FIXED MATURITY SECURITIES Equity securities: Common stocks Non-redeemable preferred stocks TOTAL EQUITY SECURITIES Commercial mortgage loans on real estate, at amortized cost Policy loans Short-term investments Other investments TOTAL INVESTMENTS $ ASSURANT, INC. - 2015 Form...

  • Page 154
    ...(Parent Only) ASSURANT, INC� (in thousands except number of shares) December 31, 2015 2014 Assets Investments: Equity investment in subsidiaries Fixed maturity securities available for sale, at fair value (amortized cost-$143,069 in 2015 and $265,433 in 2014) Equity securities available for sale...

  • Page 155
    ...,180 Revenues Net investment income Net realized gains on investments Fees and other income Equity in net income of subsidiaries TOTAL REVENUES Expenses General and administrative expenses Interest expense TOTAL EXPENSES Income before benefit for income taxes Benefit for income taxes NET INCOME See...

  • Page 156
    ... gains on securities, net of taxes of $8,787, $(3,273), and $1,863, respectively Change in foreign currency translation, net of taxes of $(45), $(68), and $32, respectively Amortization of pension and postretirement unrecognized net periodic benefit cost and change in funded status, net of taxes...

  • Page 157
    ...of: Fixed maturity securities available for sale Equity securities available for sale Other invested assets Property and equipment and other Capital contributed to subsidiaries Return of capital contributions from subsidiaries Change in short-term investments NET CASH (USED IN) PROVIDED BY INVESTING...

  • Page 158
    ... statements and notes thereto of Assurant, Inc. and subsidiaries included in the Registrant's 2015 Annual Report on Form 10-K for the year ended December 31, 2015 (2015 Annual Report on Form 10-K) filed with the Securities and Exchange Commission on February 16, 2016� F-72 ASSURANT, INC. - 2015...

  • Page 159
    ... Acquisition costs Claims and benefits payable Net Premium investment revenue income Segment (in thousands) Unearned premiums 2015 Solutions $ 3,148,081 $ 5,234,257 $ 5,086,399 $ Specialty Property 134,035 2,089 1,382,668 Employee Benefits 33,475 32,763 9,331 Health - 78,723 29,607 Corporate and...

  • Page 160
    ... 6.4% Life Insurance in Force Premiums: Life insurance Accident and health insurance Property and liability insurance TOTAL EARNED PREMIUMS Benefits: Life insurance Accident and health insurance Property and liability insurance TOTAL POLICYHOLDER BENEFITS $ $ $ F-74 ASSURANT, INC. - 2015 Form 10...

  • Page 161
    ... 2013 Valuation allowance tax carryforward Valuation allowance real estate Valuation allowance balances Valuation allowance Valuation allowance recoverables TOTAL for foreign NOL deferred $ for mortgage loans on 3,399 for uncollectible agents for uncollectible accounts for reinsurance $ for foreign...

  • Page 162

  • Page 163
    ... of the Assurant Annual Report or Assurant news releases, please visit our website: http://ir.assurant.com FORWARD-LOOKING STATEMENTS Some of the statements included in this Annual Report are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995...

  • Page 164
    Assurant, Inc. 28 Liberty Street 41st Floor New York, NY 10005 Telephone: 212.859.7000 www.assurant.com