Assurant 2015 Annual Report Download - page 53

41ASSURANT, INC. – 2015 Form 10-K
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Acquisition costs 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 vision consist primarily of compensation
to sales representatives� These acquisition costs are front-
end loaded; thus, they are deferred and amortized over the
estimated terms of the underlying contracts�
Investments
We regularly monitor our investment portfolio to ensure
investments that may be other-than-temporarily impaired are
identied in a timely fashion, properly valued, and charged
against earnings in the proper period� The determination
that a security has incurred an other-than-temporary decline
in value requires the judgment of management� Assessment
factors include, but are not limited to, the length of time
and the extent to which the market value has been less than
cost, the nancial condition and rating of the issuer, whether
any collateral is held, the intent and ability of the Company
to retain the investment for a period of time sufcient to
allow for recovery for equity securities, and the intent to
sell or whether it is more likely than not that the Company
will be required to sell for xed maturity securities.
Any equity security whose price decline is deemed other-than-
temporary is written down to its then current market value
with the amount of the impairment reported as a realized loss
in that period. The impairment of a xed maturity security
that the Company has the intent to sell or that it is more
likely than not that the Company will be required to sell is
deemed other-than-temporary and is written down to its
market value at the balance sheet date, with the amount of
the impairment reported as a realized loss in that period� For
all other-than-temporarily impaired xed maturity securities
that do not meet either of these two criteria, the Company
analyzes its ability to recover the amortized cost of the
security by calculating the net present value of projected
future cash ows. For these other-than-temporarily impaired
xed maturity securities, the net amount recognized in
earnings is equal to the difference between its amortized
cost and its net present value�
Inherently, there are risks and uncertainties involved in making
these judgments� Changes in circumstances and critical
assumptions such as a continued weak economy, or unforeseen
events which affect one or more companies, industry sectors
or countries could result in additional impairments in future
periods for other-than-temporary declines in value� See also
Note 5 to the Consolidated Financial Statements included
elsewhere in this report and “Item 1A—Risk Factors—Risks
Related to our Company—The value of our investments could
decline, affecting our protability and nancial strength”
and “Investments” contained later in this item�
Reinsurance
Reinsurance recoverables include amounts we are owed
by reinsurers� Reinsurance costs are expensed over the
terms of the underlying reinsured policies using assumptions
consistent with those used to account for the policies�
Amounts recoverable from reinsurers are estimated in a
manner consistent with claim and claim adjustment expense
reserves or future policy benets reserves and are reported
in our consolidated balance sheets� An estimated allowance
for doubtful accounts is recorded on the basis of periodic
evaluations of balances due from reinsurers (net of collateral),
reinsurer solvency, management’s experience and current
economic conditions� The ceding of insurance does not
discharge our primary liability to our insureds�
The following table sets forth our reinsurance recoverables as of the dates indicated:
December 31, 2015 December 31, 2014
Reinsurance recoverables $ 7,470,403 $ 7,254,585
We have used reinsurance to exit certain businesses, including blocks of individual life, annuity, and long-term care business�
The reinsurance recoverables relating to these dispositions amounted to $4,607,056 and $4,549,699 at December 31, 2015
and 2014, respectively�
In the ordinary course of business, we are involved in both the assumption and cession of reinsurance with non-afliated
companies� The following table provides details of the reinsurance recoverables balance for the years ended December 31:
2015 2014
Ceded future policyholder benets and expense $ 4,037,682 $ 4,052,976
Ceded unearned premium 1,667,228 1,587,583
Ceded claims and benets payable 1,429,128 1,283,510
Ceded paid losses 336,365 330,516
TOTAL $ 7,470,403 $ 7,254,585
We utilize reinsurance for loss protection and capital management, business dispositions and, in Assurant Solutions and Assurant
Specialty Property, client risk and prot sharing. See also “Item 1A—Risk Factors—Reinsurance may not be available or adequate
to protect us against losses and we are subject to the credit risk of reinsurers,” and “Item 7A—Quantitative and Qualitative
Disclosures About Market Risk—Credit Risk�”