Assurant 2015 Annual Report Download - page 68

56 ASSURANT, INC. – 2015 Form 10-K
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
basis; term loans were not permitted� The Company received
collateral, greater than or equal to 102% of the fair value
of the securities lent, plus accrued interest, in the form
of cash and cash equivalents held by a custodian bank for
the benet of the Company. The use of cash collateral
received was unrestricted� The Company reinvested the
cash collateral received, generally in investments of high
credit quality that are designated as available-for-sale� The
Company monitored the fair value of securities loaned and
the collateral received, with additional collateral obtained,
as necessary� The Company was subject to the risk of loss
on the re-investment of cash collateral�
As of December 31, 2014, the Company’s collateral held
under securities lending agreements, of which its use was
unrestricted, was $95,985, and is included in the consolidated
balance sheets under the collateral held/pledged under
securities agreements� The Company’s liability to the borrower
for collateral received was $95,986, and is included in the
consolidated balance sheets under the obligation under
securities agreements� The difference between the collateral
held and obligations under securities lending was recorded
as an unrealized gain (loss) and included as part of AOCI�
The Company included the available-for-sale investments
purchased with the cash collateral in its evaluation of other-
than-temporary impairments�
Cash proceeds that the Company received as collateral for
the securities it lent and subsequent repayment of the cash
were regarded by the Company as cash ows from nancing
activities, since the cash received was considered a borrowing�
Since the Company reinvested the cash collateral generally
in investments that were designated as available-for-sale,
the reinvestment is presented as cash ows from investing
activities�
Liquidity and Capital Resources
Regulatory Requirements
Assurant, Inc� is a holding company and, as such, has limited
direct operations of its own� Our holding company’s assets consist
primarily of the capital stock of our subsidiaries� Accordingly,
our holding company’s future cash ows depend upon the
availability of dividends and other statutorily permissible
payments from our subsidiaries, such as payments under our
tax allocation agreement and under management agreements
with our subsidiaries� The ability to pay such dividends and to
make such other payments will be limited by applicable laws
and regulations of the states in which our subsidiaries are
domiciled, which subject our subsidiaries to signicant regulatory
restrictions� The dividend requirements and regulations vary
from state to state and by type of insurance provided by the
applicable subsidiary� These laws and regulations require,
among other things, our insurance subsidiaries to maintain
minimum solvency requirements and limit the amount of
dividends they can pay to the holding company� For further
information on pending amendments to state insurance holding
company laws, including the NAIC’s “Solvency Modernization
Initiative,” see “Item 1A—Risk Factors—Risks Related to Our
Industry—Changes in regulation may reduce our protability
and limit our growth�” Along with solvency regulations, the
primary driver in determining the amount of capital used for
dividends is the level of capital needed to maintain desired
nancial strength ratings from A.M. Best.
Regulators or rating agencies could become more conservative in
their methodology and criteria, increasing capital requirements
for our insurance subsidiaries� This in turn, could negatively
affect our capital resources� During 2015, the Company
announced that it will exit the health insurance market and
has signed a denitive agreement to sell its Assurant Employee
Benets segment. As a result of these announcements, the
following actions were taken by the rating agencies:
A�M� Best
• Ratings of Union 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
Company were downgraded from A- to B+�
• Ratings of Assurant’s senior debt were upgraded from bbb
to bbb+�
• Ratings of Assurant’s commercial paper were upgraded
from AMB-2 to AMB-1�
• Ratings of all other rated entities were afrmed with a
stable outlook�
Moody’s Investor Services (“Moody’s”)
•Rating of Union Security Insurance Company was afrmed
and the outlook revised from developing to stable�
• Ratings of John Alden Life Insurance Company and Time
Insurance Company were downgraded from Baa2 to Ba1,
and the outlook revised to negative�
• Ratings of Assurant’s Senior Debt (Baa2), American Security
Insurance Company (A2), American Bankers Insurance
Company of Florida (A2) and American Bankers Life Assurance
Company of Florida (A3) were afrmed with a stable outlook.