Assurant 2015 Annual Report Download - page 77

65ASSURANT, INC. – 2015 Form 10-K
PART II
ITEM 7A Quantitative and Qualitative Disclosures About Market Risk
As of December 31, 2014
Foreign exchange spot rate at December 31,
2014, US Dollar to Canadian Dollar -10%
-5% 0 5% 10%
Total market value $ 11,104,148 $ 11,183,661 $ 11,263,174 $ 11,342,687 $ 11,422,200
% change of market value from base case (1�41)% (0�71)% —% 0�71% 1�41%
$ change of market value from base case $ (159,026) $ (79,513) $ — $ 79,513 $ 159,026
The foreign exchange risk sensitivity of our consolidated net
income is assessed using hypothetical test scenarios that
assume earnings in Canadian dollars are recognized evenly
throughout a period� Our actual results may differ from the
results noted below particularly due to assumptions utilized
or if events occur that were not included in the methodology�
For more information on this risk, please see “Item 1A—Risk
Factors—Risk Related to Our Company�” Fluctuations in the
exchange rate of the U�S� dollar and other foreign currencies
may materially and adversely affect our results of operations�
The following tables summarize the results of this analysis
on our reported net income as of the dates indicated:
FOREIGN EXCHANGE MOVEMENT ANALYSIS OF NET INCOME
As of December 31, 2015
Foreign exchange daily average rate for the year
ended December 31, 2015, US Dollar to Canadian Dollar -10%
-5% 0 5% 10%
Net Income $ 138,360 $ 139,957 $ 141,555 $ 143,153 $ 144,750
% change of net income from base case (2�26)% (1�13)% —% 1�13% 2�26%
$ change of net income from base case $ (3,195) $ (1,598) $ — $ 1,598 $ 3,195
As of December 31, 2014
Foreign exchange daily average rate for the year
ended December 31, 2014, US Dollar to Canadian Dollar -10% -5% 0 5% 10%
Net income $ 466,706 $ 468,807 $ 470,907 $ 473,007 $ 475,108
% change of net income from base case (0�89)% (0�45)% —% 0�45% 0�89%
$ change of net income from base case $ (4,201) $ (2,100) $ — $ 2,100 $ 4,201
Derivatives
Derivatives are nancial instruments whose values are derived
from interest rates, foreign exchange rates, nancial indices
or the prices of securities or commodities. Derivative nancial
instruments may be exchange-traded or contracted in the
over-the-counter market and include swaps, futures, options
and forward contracts�
Under insurance statutes, our insurance companies may use
derivative nancial 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 the use of derivatives for
speculative purposes� We generally do not use derivative
nancial instruments.
We have purchased contracts to cap the ination risk exposure
inherent in some of our preneed insurance policies�
In accordance with the guidance on embedded derivatives,
we have bifurcated the modied coinsurance agreement with
The Hartford into its debt host and embedded derivative (total
return swap) and recorded the embedded derivative at fair
value in the consolidated balance sheets� The invested assets
related to this modied coinsurance agreement are included
in other investments in the consolidated balance sheets�