Assurant 2015 Annual Report Download - page 110

ASSURANT, INC. – 2015 Form 10-KF-24
5 Investments
each security� As of December 31, 2015, the gross unrealized
losses that have been in a continuous loss position for twelve
months or more were concentrated in the Company’s corporate
xed maturity securities and in non-redeemable preferred
stocks� The non-redeemable preferred stocks are perpetual
preferred securities that have characteristics of both debt and
equity securities. To evaluate these securities, the Company
applies an impairment model similar to that used for the
Company’s xed maturity securities. As of December 31, 2015,
the Company did not intend to sell these securities and it was
not more likely than not that the Company would be required
to sell them and no underlying cash ow issues were noted.
Therefore, the Company did not recognize an OTTI on those
perpetual preferred securities that had been in a continuous
unrealized loss position for twelve months or more� As of
December 31, 2015, the Company did not intend to sell the
xed maturity securities and it was not more likely than not that
the Company would be required to sell the securities before
the anticipated recovery of their amortized cost basis� The
gross unrealized losses are primarily attributable to widening
credit spreads associated with an underlying shift in overall
credit risk premium�
The cost or amortized cost and fair value of available-for-sale xed maturity securities in an unrealized loss position at
December 31, 2015, by contractual maturity, is shown below:
Cost or Amortized Cost Fair Value
Due in one year or less $ 52,077 $ 51,667
Due after one year through ve years 469,320 459,930
Due after ve years through ten years 754,402 720,632
Due after ten years 660,716 607,020
TOTAL 1,936,515 1,839,249
Asset-backed 1,340 1,136
Residential mortgage-backed 275,176 271,767
TOTAL $2,213,031 $2,112,152
The Company has exposure to sub-prime and related mortgages
within the Company’s xed maturity security portfolio. At
December 31, 2015, approximately 2% of the residential
mortgage-backed holdings had exposure to sub-prime mortgage
collateral. This represented less than 1% of the total xed
income portfolio and approximately 2% of the total unrealized
gain position� Of the securities with sub-prime exposure,
approximately 9% are rated as investment grade. All residential
mortgage-backed securities, including those with sub-prime
exposure, are reviewed as part of the ongoing other-than-
temporary impairment monitoring process�
The Company has entered into commercial mortgage loans,
collateralized by the underlying real 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 diversied loan portfolio, an economic downturn could
have an adverse impact on the ability of its debtors to repay
their loans� The outstanding balance of commercial mortgage
loans range in size from $17 to $14,625 at December 31, 2015
and from $77 to $15,190 at December 31, 2014�
Credit quality indicators for commercial mortgage loans are
loan-to-value and debt-service coverage ratios� Loan-to-value
and debt-service coverage ratios are measures commonly
used to assess the credit quality of commercial mortgage
loans� The loan-to-value ratio compares the principal amount
of the loan to the fair value of the underlying property
collateralizing the loan, and is commonly expressed as a
percentage� The debt-service coverage ratio compares a
property’s net operating income to its debt-service payments
and is commonly expressed as a ratio� The loan-to-value and
debt-service coverage ratios are generally updated annually
in the third quarter.
The following summarizes the Company’s loan-to-value and average debt-service coverage ratios as of the dates indicated:
Loan-to-Value
December 31, 2015
Carrying Value % of Gross Mortgage Loans Debt-Service Coverage Ratio
70% and less $ 1,101,572 95�5%2�01
71 – 80% 39,080 3�4%1�19
81 – 95% 8,370 0�7%1�05
Greater than 95% 4,816 0�4%3�52
Gross commercial mortgage loans 1,153,838 100�0%1�98
Less valuation allowance (2,582)
Net commercial mortgage loans $ 1,151,256