Assurant 2015 Annual Report Download - page 96

ASSURANT, INC. – 2015 Form 10-KF-10
2 Summary of Signicant Accounting Policies
received� The difference between the collateral held and
obligations under securities lending was recorded as an
unrealized loss as part of AOCI�
Other investments consist primarily of investments in joint
ventures, partnerships, invested assets associated with a
modied coinsurance arrangement, invested assets associated
with the Assurant Investment Plan (“AIP”), ASIC and the
Assurant Deferred Compensation Plan (“ADC”). The joint
ventures and partnerships are valued according to the equity
method of accounting. In applying the equity method, the
Company uses nancial information provided by the investee,
generally on a three month lag� The invested assets related
to the modied coinsurance arrangement, the AIP, ASIC and
ADC are classied as trading securities as dened in the
investment guidance�
The Company monitors its investment portfolio to identify
investments that may be other-than-temporarily impaired�
In addition, securities, aggregated by issuer, whose market
price is equal to 80% or less of their original purchase price
or which had a discrete credit event resulting in the debtor
defaulting or seeking bankruptcy protection are added to
a potential write-down list, which is discussed at quarterly
meetings attended by members of the Company’s investment,
accounting and nance departments. See Note 5 for further
information�
Realized gains and losses on sales of investments are recognized
on the specic identication basis.
Investment income is recorded as earned and reported net
of investment expenses� The Company uses the interest
method to recognize interest income on its commercial
mortgage loans�
The Company anticipates prepayments of principal in the
calculation of the effective yield for mortgage-backed
securities and structured securities� The retrospective method
is used to adjust the effective yield�
Cash and Cash Equivalents
The Company considers cash on hand, all operating cash and
working capital cash to be cash equivalents. These amounts
are carried at cost, which approximates fair value� Cash
balances are reviewed at the end of each reporting period
to determine if negative cash balances exist� If negative cash
balances do exist, the cash accounts are netted with other
positive cash accounts of the same bank provided the right
of offset exists between the accounts� If the right of offset
does not exist, the negative cash balances are reclassied
to accounts payable�
Uncollectible Receivable Balance
The Company maintains allowances for doubtful accounts for
probable losses resulting from the inability to collect payments�
Reinsurance
Reinsurance recoverables include amounts related to paid
benets and estimated amounts related to unpaid policy and
contract claims, future policyholder benets and policyholder
contract deposits� The cost of reinsurance is recognized
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 the consolidated balance sheets� The cost of
reinsurance related to long-duration contracts is recognized
over the life of the underlying reinsured policies� The ceding of
insurance does not discharge the Company’s primary liability
to insureds, thus a credit exposure exists to the extent that
any reinsurer is unable to meet the obligation assumed in
the reinsurance agreements� To mitigate this exposure to
reinsurance insolvencies, the Company evaluates the nancial
condition of its reinsurers and holds collateral (in the form of
funds withheld, trusts, and letters of credit) as security under
the reinsurance agreements� An 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.
Funds withheld under reinsurance represent amounts
contractually held from assuming companies in accordance
with reinsurance agreements�
Reinsurance premiums assumed are calculated based upon
payments received from ceding companies together with
accrual estimates, which are based on both payments received
and in force policy information received from ceding companies�
Any subsequent differences arising on such estimates are
recorded in the period in which they are determined�
Income Taxes
Current federal income taxes are recognized based upon
amounts estimated to be payable or recoverable as a result
of taxable operations for the current year� Deferred income
taxes are recorded for temporary differences between the
nancial reporting basis and income tax basis of assets and
liabilities, based on enacted tax laws and statutory tax rates
applicable to the periods in which the Company expects the
temporary differences to reverse� A valuation allowance is
established for deferred tax assets when it is more likely
than not that an amount will not be realized�
The Company classies net interest expense related to tax
matters and any applicable penalties as a component of
income tax expense�
Deferred Acquisition Costs
Only direct incremental costs associated with the successful
acquisition of new or renewal insurance contracts are deferred
to the extent that such costs are deemed recoverable from