Assurant 2015 Annual Report Download - page 98

ASSURANT, INC. – 2015 Form 10-KF-12
2 Summary of Signicant Accounting Policies
If the Company does not take the option to perform the
qualitative assessment or the qualitative assessment performed
indicates that it is more likely than not that the reporting
unit’s fair value is less than the carrying value, the Company
will then compare the estimated fair value of the reporting
unit with its net book value (“Step 1”)� If the estimated fair
value exceeds its net book value, goodwill is deemed not to
be impaired, and no further testing is necessary� If the net
book value exceeds its estimated fair value, we perform a
second test to measure the amount of impairment, if any� To
determine the amount of any impairment, we determine the
implied fair value of goodwill in the same manner as if the
reporting unit were being acquired in a business combination
(“Step 2”). Specically, we determine the fair value of all of
the assets and liabilities of the reporting unit, including any
unrecognized intangible assets, in a hypothetical calculation
that yields the implied fair value of goodwill� If the implied
fair value of goodwill is less than the recorded goodwill, we
record an impairment charge for the difference�
In the fourth quarter 2015, the Company chose the option to
rst perform a qualitative assessment for both our Assurant
Specialty Property and Assurant Solutions reporting units.
Based on this assessment, the Company determined that it
was more likely than not that the reporting units’ fair value
was more than their carrying amount, therefore further
impairment testing was not necessary�
In the fourth quarter of 2014, we performed a Step 1 test for
both our Assurant Specialty Property and Assurant Solutions
reporting units and concluded that the estimated fair value
of the reporting units exceeded their respective book values
and therefore goodwill was not impaired�
For 2015 and 2014, the Assurant Employee Benets and
Assurant Health reporting units did not have goodwill�
Value of Businesses Acquired
VOBA is an identiable intangible asset representing the
value of the insurance businesses acquired. The amount
is determined using best estimates for mortality, lapse,
maintenance expenses and investment returns at date of
purchase� The amount determined represents the purchase
price paid to the seller for producing the business� Similar
to the amortization of DAC, the amortization of VOBA is over
the premium payment period for traditional life insurance
policies and a small block of limited payment policies�
For the remaining limited payment policies, preneed life
insurance policies, all universal life policies and annuities,
the amortization of VOBA is over the expected lifetime of
the policies�
VOBA is tested annually in the fourth quarter for recoverability.
If it is determined that future policy premiums and investment
income or gross prots are not adequate to cover related
losses or loss expenses, then an expense is reported in
current earnings� Based on 2015 and 2014 testing, future
policy premiums and investment income or gross prots were
deemed adequate to cover related losses or loss expenses.
Other Assets
Other assets consist primarily of investments in unconsolidated
entities, inventory associated with our mobile protection
business and prepaid items� The Company accounts for
investments in unconsolidated entities using the equity
method of accounting since the Company can exert signicant
inuence over the investee, but does not have effective
control over the investee. The Company’s equity in the net
income (loss) from equity method investments is recorded
as income (loss) with a corresponding increase (decrease) in
the investment. Judgment regarding the level of inuence
over each equity method investee includes considering
factors such as ownership interest, board representation and
policy making decisions. In applying the equity method, the
Company uses nancial information provided by the investee,
which may be received on a lag basis�
Other Intangible Assets
Other intangible assets that have nite lives, including but
not limited to, customer contracts, customer relationships
and marketing relationships, are amortized over their
estimated useful lives� Other intangible assets deemed
to have indenite useful lives, primarily certain state
licenses, are not amortized and are subject to at least annual
impairment tests� At the time of the annual impairment
test, the Company has the option to rst assess qualitative
factors to determine whether it is necessary to perform a
quantitative impairment test for indenite-lived intangible
assets� Impairment exists if the carrying amount of the
indenite-lived other intangible asset exceeds its fair value.
For other intangible assets with nite lives, impairment
is recognized if the carrying amount is not recoverable
and exceeds the fair value of the other intangible asset�
Generally other intangible assets with nite lives are only
tested for impairment if there are indicators (“triggers”) of
impairment identied. Triggers include, but are not limited
to, a signicant adverse change in the extent, manner or
length of time in which the other intangible asset is being
used or a signicant adverse change in legal factors or in
the business climate that could affect the value of the other
intangible asset� In certain cases, the Company does perform
an annual impairment test for other intangible assets with
nite lives even if there are no triggers present. There were
no material impairment charges related to nite-lived and
indenite-lived other intangible assets in 2015 or 2014.
Amortization expense and impairment charges, if any,
are included in underwriting, general and administrative
expenses in the consolidated statements of operations�
Separate Accounts
Assets and liabilities associated with separate accounts
relate to premium and annuity considerations for variable
life and annuity products for which the contract-holder,
rather than the Company, bears the investment risk� Separate
account assets (with matching liabilities) are reported at