Assurant 2015 Annual Report Download - page 115

ASSURANT, INC. – 2015 Form 10-K F-29
6 Fair Value Disclosures
Financial Assets
Year Ended December 31, 2014
Balance,
beginning
of period
Total
(losses)
gains
(realized/
unrealized)
included in
earnings(1)
Net unrealized
(losses) gains
included in
other
comprehensive
income(2) Purchases Sales
Transfers
in(3)
Transfers
out(3)
Balance,
end of
period
Fixed Maturity Securities
States, municipalities and
political subdivisions $ 22,657 $ —$—$—$—$—
$ (22,657) $ —
Foreign governments 16,857 (2) 18 — — — (16,873) —
Commercial mortgage-backed 598 —(18) —(177) — — 403
Residential mortgage-backed 4,167 —(78) 4,723 — — (4,167) 4,645
Corporate 115,344 2,438 1,546 23,578 (16,958) 1,515 (23,188) 104,275
Equity Securities
Non-redeemable preferred
stocks 7,510 562 (517) —(3,779) —(1,776) 2,000
Other investments 4,171 (2,174) 10 440 (128) —(198) 2,121
Other assets 2,491 (1,684) — — — — — 807
Financial Liabilities
Other liabilities (20,330) (822) —(4,081) — — — (25,233)
TOTAL LEVEL 3 ASSETS AND
LIABILITIES
$153,465 $(1,682) $ 961 $24,660 $(21,042) $ 1,515 $(68,859) $ 89,018
(1) Included as part of net realized gains on investments in the consolidated statement of operations.
(2) Included as part of change in unrealized gains on securities in the consolidated statement of comprehensive income.
(3) Transfers are primarily attributable to changes in the availability of observable market information and re-evaluation of the observability of
pricing inputs.
Three different valuation techniques can be used in
determining fair value for nancial assets and liabilities:
the market, income or cost approaches� The three valuation
techniques described in the fair value measurements and
disclosures guidance are consistent with generally accepted
valuation methodologies� The market approach valuation
techniques use prices and other relevant information generated
by market transactions involving identical or comparable assets
or liabilities. When possible, quoted prices (unadjusted) in
active markets are used as of the period-end date (such as
for mutual funds and money market funds)� Otherwise, the
Company uses valuation techniques consistent with the market
approach including matrix pricing and comparables� Matrix
pricing is a mathematical technique employed principally to
value debt securities without relying exclusively on quoted
prices for those securities but, rather, relying on the securities’
relationship to other benchmark quoted securities. Market
approach valuation techniques often use market multiples
derived from a set of comparables� Multiples might lie in
ranges with a different multiple for each comparable� The
selection of where within the range the appropriate multiple
falls requires judgment, considering both qualitative and
quantitative factors specic to the measurement.
Income approach valuation techniques convert future amounts,
such as cash ows or earnings, to a single present amount,
or a discounted amount. These techniques rely on current
market expectations of future amounts as of the period-end
date. Examples of income approach valuation techniques
include present value techniques, option-pricing models,
binomial or lattice models that incorporate present value
techniques and the multi-period excess earnings method.
Cost approach valuation techniques are based upon the amount
that would be required to replace the service capacity of an
asset at the period-end date, or the current replacement
cost� That is, from the perspective of a market participant
(seller), the price that would be received for the asset is
determined based on the cost to a market participant (buyer)
to acquire or construct a substitute asset of comparable
utility, adjusted for obsolescence�
While not all three approaches are applicable to all nancial
assets or liabilities, where appropriate, the Company may
use one or more valuation techniques. For all the classes of
nancial assets and liabilities included in the above hierarchy,
excluding certain derivatives and certain privately placed
corporate bonds, the Company generally uses the market
valuation technique. 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 nancial assets
and liabilities has been consistent�
•Level 1 Securities
The Company’s investments and liabilities classied as Level 1
as of December 31, 2015 and 2014, consisted of mutual
funds and money market funds, foreign government xed
maturities and common stocks that are publicly listed and/
or actively traded in an established market�
•Level 2 Securities
The Company values Level 2 securities using various observable
market inputs obtained from a pricing service� The pricing