UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2015

OR

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Assurant, Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-31978	39-1126612
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

28 Liberty Street, 41st Floor

New York, New York 10005

(212) 859-7000

(Address, including zip code, and telephone number, including area code, of Registrant’s Principal Executive Offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	(Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

The number of shares of the registrant’s Common Stock outstanding at April 30, 2015 was 67,916,445.

ASSURANT, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2015

TABLE OF CONTENTS

Item Number		Page Number
	PART I FINANCIAL INFORMATION
1.	Financial Statements of Assurant, Inc.:
	Consolidated Balance Sheets (unaudited) at March 31, 2015 and December 31, 2014	2
	Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2015 and 2014	3
	Consolidated Statements of Comprehensive Income (unaudited) for the three months ended March 31, 2015 and 2014	4
	Consolidated Statement of Changes in Stockholders’ Equity (unaudited) from December 31, 2014 through March 31, 2015	5
	Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2015 and 2014	6
	Notes to Consolidated Financial Statements (unaudited) for the three months ended March 31, 2015 and 2014	7
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
3.	Quantitative and Qualitative Disclosures About Market Risk	57
4.	Controls and Procedures	57
	PART II OTHER INFORMATION
1.	Legal Proceedings	58
1A.	Risk Factors	58
2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
6.	Exhibits	61
	Signatures	62

Amounts are presented in United States of America (“U.S.”) dollars and all amounts are in thousands, except number of shares and per share amounts.

1

Assurant, Inc.

Consolidated Balance Sheets (unaudited)

At March 31, 2015 and December 31, 2014

	March 31, 2015			December 31, 2014
	(in thousands except number of shares and per share amounts)
Assets
Investments:
Fixed maturity securities available for sale, at fair value (amortized cost - $10,019,473 in 2015 and    $10,048,100 in 2014)	$	11,387,311		$	11,263,174
Equity securities available for sale, at fair value (cost - $456,697 in 2015 and $434,875 in 2014)	530,509			499,407
Commercial mortgage loans on real estate, at amortized cost	1,255,459			1,272,616
Policy loans	46,555			48,272
Short-term investments	247,525			345,246
Collateral held/pledged under securities agreements	93,242			95,985
Other investments	611,927			606,752
Total investments	14,172,528			14,131,452
Cash and cash equivalents	1,065,165			1,318,656
Premiums and accounts receivable, net	1,573,984			1,445,630
Reinsurance recoverables	7,205,284			7,254,585
Accrued investment income	144,591			138,868
Deferred acquisition costs	2,827,411			2,957,740
Property and equipment, at cost less accumulated depreciation	286,186			277,645
Tax receivable	—			15,132
Goodwill	828,564			841,239
Value of business acquired	43,457			45,462
Other intangible assets, net	331,338			381,960
Other assets	388,190			847,860
Assets held in separate accounts	1,933,658			1,906,237
Total assets	$	30,800,356		$	31,562,466
Liabilities
Future policy benefits and expenses	$	9,417,564		$	9,483,672
Unearned premiums	6,259,389			6,529,675
Claims and benefits payable	3,784,275			3,698,606
Commissions payable	451,238			487,322
Reinsurance balances payable	104,566			157,089
Funds held under reinsurance	87,146			75,161
Deferred gain on disposal of businesses	97,559			100,817
Obligation under securities agreements	93,241			95,986
Accounts payable and other liabilities	2,241,162			2,675,515
Tax payable	31,193			—
Debt	1,171,153			1,171,079
Liabilities related to separate accounts	1,933,658			1,906,237
Total liabilities	25,672,144			26,381,159
Commitments and contingencies (Note 14)
Stockholders’ equity
Common stock, par value $0.01 per share, 800,000,000 shares authorized, 68,270,067 and 69,299,559    shares outstanding at March 31, 2015 and December 31, 2014, respectively	1,493			1,490
Additional paid-in capital	3,135,397			3,131,274
Retained earnings	4,840,497			4,809,287
Accumulated other comprehensive income	548,997			555,767
Treasury stock, at cost; 80,632,242 and 79,338,142 shares at March 31, 2015 and December 31, 2014,    respectively	(3,398,172		)	(3,316,511		)
Total stockholders’ equity	5,128,212			5,181,307
Total liabilities and stockholders’ equity	$	30,800,356		$	31,562,466

See the accompanying notes to the consolidated financial statements

2

Assurant, Inc.

Consolidated Statements of Operations (unaudited)

Three Months Ended March 31, 2015 and 2014

	Three Months Ended March 31,
	2015			2014
	(in thousands except number of shares and per share amounts)
Revenues
Net earned premiums	$	2,159,562		$	2,060,462
Net investment income	152,273			168,058
Net realized gains on investments, excluding other-than-temporary impairment losses	6,525			19,751
Total other-than-temporary impairment losses	(3,208		)	(29		)
Portion of net loss recognized in other comprehensive income, before taxes	638			29
Net other-than-temporary impairment losses recognized in earnings	(2,570		)	—
Amortization of deferred gain on disposal of businesses	3,258			3,660
Fees and other income	279,562			196,441
Total revenues	2,598,610			2,448,372
Benefits, losses and expenses
Policyholder benefits	1,210,727			1,008,032
Amortization of deferred acquisition costs and value of business acquired	369,003			344,782
Underwriting, general and administrative expenses	921,909			843,240
Interest expense	13,778			17,065
Total benefits, losses and expenses	2,515,417			2,213,119
Income before provision for income taxes	83,193			235,253
Provision for income taxes	33,149			98,008
Net income	$	50,044		$	137,245
Earnings Per Share
Basic	$	0.72		$	1.88
Diluted	$	0.71		$	1.86
Dividends per share	$	0.27		$	0.25
Share Data
Weighted average shares outstanding used in basic per share calculations	69,770,224			72,848,756
Plus: Dilutive securities	987,325			1,025,196
Weighted average shares used in diluted per share calculations	70,757,549			73,873,952

See the accompanying notes to the consolidated financial statements

3

Assurant, Inc.

Consolidated Statements of Comprehensive Income (unaudited)

Three Months Ended March 31, 2015 and 2014

	Three Months Ended March 31,
	2015			2014
	(in thousands)
Net income	$	50,044		$	137,245
Other comprehensive (loss) income:
Change in unrealized gains on securities, net of taxes of $(28,349) and $(86,876),    respectively	57,459			171,033
Change in other-than-temporary impairment gains, net of taxes of $481 and $(883),    respectively	(894		)	1,640
Change in foreign currency translation, net of taxes of $2,654 and $3,341, respectively	(65,951		)	(18,053		)
Amortization of pension and postretirement unrecognized net periodic benefit cost, net    of taxes of $(1,409) and $(1,094), respectively	2,616			2,031
Total other comprehensive (loss) income	(6,770		)	156,651
Total comprehensive income	$	43,274		$	293,896

See the accompanying notes to the consolidated financial statements

4

Assurant, Inc.

Consolidated Statement of Stockholders’ Equity (unaudited)

From December 31, 2014 through March 31, 2015

	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Total
	(in thousands)
Balance at December 31, 2014	$	1,490	$	3,131,274		$	4,809,287		$	555,767		$	(3,316,511	)	$	5,181,307
Stock plan exercises	3		(3,326		)	—			—			—			(3,323		)
Stock plan compensation   expense	—		5,890			—			—			—			5,890
Change in tax benefit from   share-based payment   arrangements	—		1,559			—			—			—			1,559
Dividends	—		—			(18,834		)	—			—			(18,834		)
Acquisition of common   stock	—		—			—			—			(81,661		)	(81,661		)
Net income	—		—			50,044			—			—			50,044
Other comprehensive  loss	—		—			—			(6,770		)	—			(6,770		)
Balance, March 31, 2015	$	1,493	$	3,135,397		$	4,840,497		$	548,997		$	(3,398,172	)	$	5,128,212

See the accompanying notes to the consolidated financial statements

5

Assurant, Inc.

Consolidated Statements of Cash Flows (unaudited)

Three Months Ended March 31, 2015 and 2014

	Three Months Ended March 31,
	2015			2014
	(in thousands)
Net cash (used in) provided by operating activities	$	(177,666	)	$	127,178
Investing activities
Sales of:
Fixed maturity securities available for sale	452,944			461,894
Equity securities available for sale	14,660			64,223
Other invested assets	6,685			22,764
Property and equipment and other	10			—
Subsidiary, net of cash transferred (3)	65,002			—
Maturities, calls, prepayments, and scheduled redemption of:
Fixed maturity securities available for sale	179,339			214,058
Commercial mortgage loans on real estate	45,887			50,498
Purchases of:
Fixed maturity securities available for sale	(708,069		)	(791,994		)
Equity securities available for sale	(37,886		)	(48,822		)
Commercial mortgage loans on real estate	(36,180		)	(23,050		)
Other invested assets	(5,303		)	(7,959		)
Property and equipment and other	(22,157		)	(13,105		)
Equity interest (1)	(457		)	(20,950		)
Change in short-term investments	95,250			(99,008		)
Change in policy loans	1,544			1,105
Change in collateral held/pledged under securities agreements	2,746			(791		)
Net cash provided by (used in) investing activities	54,015			(191,137		)
Financing activities
Repayment of debt	—			(467,330		)
Change in tax benefit from share-based payment arrangements	1,559			8,509
Acquisition of common stock	(84,329		)	(26,107		)
Dividends paid	(18,834		)	(18,180		)
Payment of contingent obligations (2)	—			(31,871		)
Change in obligation under securities agreements	(2,746		)	791
Net cash used in financing activities	(104,350		)	(534,188		)
Effect of exchange rate changes on cash and cash equivalents	(22,277		)	(13,125		)
Cash included in held for sale assets	(3,213		)	—
Change in cash and cash equivalents	(253,491		)	(611,272		)
Cash and cash equivalents at beginning of period	1,318,656			1,717,184
Cash and cash equivalents at end of period	$	1,065,165		$	1,105,912

(1) Relates to the purchase of equity interest in Iké Asistencia.

(2) Relates to the delayed and contingent liability payments established at the time of acquisition of Lifestyle Services Group.

(3) Relates to the sale of American Reliable Insurance Company to Global Indemnity Group, Inc., in January 2015.

See the accompanying notes to the consolidated financial statements

6

Assurant, Inc.

Notes to Consolidated Financial Statements (unaudited)

Three Months Ended March, 2015 and 2014

(In thousands, except number of shares and per share amounts)

1. Nature of Operations

Assurant, Inc. (the “Company”) is a holding company whose subsidiaries provide specialty protection products and related services in North America, Latin America, Europe and other select worldwide markets.

The Company is traded on the New York Stock Exchange under the symbol "AIZ."

Through its operating subsidiaries, the Company provides mobile device protection products and services; debt protection administration; credit-related insurance; warranties and extended service products and related services for consumer electronics, appliances and vehicles; pre-funded funeral insurance; lender-placed homeowners insurance; property, appraisal, preservation and valuation services; flood insurance; renters insurance and related products; manufactured housing homeowners insurance; individual health and small employer group health insurance; group dental insurance; group disability insurance; and group life insurance.

2. Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, these statements do not include all of the information and footnotes required by GAAP for complete financial statements.

The interim financial data as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014 is unaudited; in the opinion of management, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. The unaudited interim consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries. All inter-company transactions and balances are eliminated in consolidation.

The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, and the rules and regulations thereunder (together, the “Affordable Care Act”) introduced new and significant premium stabilization programs in 2014. These programs require the Company to record amounts to our consolidated financial statements based on assumptions and estimates that could materially change as experience develops.

Operating results for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

3. Recent Accounting Pronouncements

Not Yet Adopted

In April 2015, the Financial Accounting Standards Board (“FASB”) issued amended guidance on presentation of debt issuance costs. This amended guidance requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs is not affected by the amendments. The amended guidance is effective for interim and annual periods beginning after December 15, 2015. Therefore, the Company is required to adopt the guidance on January 1, 2016. Early adoption of the amended guidance is permitted for financial statements that have not been previously issued. An entity should apply the amended guidance on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. The Company does not expect the adoption of this presentation guidance to impact the Company’s financial position or results of operations.

7

Assurant, Inc.

Notes to Consolidated Financial Statements (unaudited)

Three Months Ended March, 2015 and 2014

(In thousands, except number of shares and per share amounts)

In February 2015, the FASB issued new consolidation guidance that affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. The new guidance eliminates specialized guidance for limited partnerships and similar legal entities, and removes the indefinite deferral for certain investment funds. The new guidance is effective for interim and annual periods beginning after December 15, 2015. Therefore, the Company is required to adopt the guidance on January 1, 2016. Early adoption is permitted, including adoption in an interim period. The new guidance may be applied retrospectively or through a cumulative effect adjustment to retained earnings as of the beginning of the year of adoption. The Company is evaluating the requirements of this new consolidation guidance and the potential impact on the Company’s financial position and results of operations.

In May 2014, the FASB issued amended guidance on revenue recognition. The amended guidance affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. Insurance contracts are within the scope of other standards and therefore are specifically excluded from the scope of the amended revenue recognition guidance. The core principle of the amended guidance is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve the core principle, the entity applies a five step process outlined in the amended guidance. The amended guidance also includes a cohesive set of disclosure requirements. The amended guidance is effective for interim and annual periods beginning after December 15, 2016 and early adoption is not permitted. Therefore, the Company is required to adopt the guidance on January 1, 2017. An entity can choose to apply the amended guidance using either the full retrospective approach or a modified retrospective approach. The Company is evaluating the requirements of the revenue recognition guidance as it relates to its non-insurance contract revenue and the potential impact on the Company’s financial position and results of operations.

4. Dispositions

In January 2015, the Company completed the sale of its general agency business and primary insurance carrier, American Reliable Insurance Company (“ARIC”), to Global Indemnity Group, Inc., a subsidiary of Global Indemnity plc, for $117,860 in net cash consideration. The business was part of the Assurant Specialty Property segment and offers specialty personal lines and agricultural insurance through general and independent agents. The sale price was based on the GAAP book value of the business from June 30, 2014 adjusted as of January 1, 2015. In accordance with held for sale accounting, the Company recorded a loss of $21,526 for the period ended December 31, 2014. Upon final settlement, the Company recorded a gain of $5,284 for the quarter ended March 31, 2015, which is classified in underwriting, general and administrative expenses on the Consolidated Statements of Operations.

8

Assurant, Inc.

Notes to Consolidated Financial Statements (unaudited)

Three Months Ended March, 2015 and 2014

(In thousands, except number of shares and per share amounts)

5. Investments

The following tables show the cost or amortized cost, gross unrealized gains and losses, fair value and other-than-temporary impairment (“OTTI”) of our fixed maturity and equity securities as of the dates indicated:

	March 31, 2015
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		OTTI in AOCI (a)
Fixed maturity securities:
United States government and   government agencies and authorities	$	179,565	$	6,068	$	(49	)	$	185,584	$	—
States, municipalities and political   subdivisions	699,664		67,263		(483		)	766,444		—
Foreign governments	519,059		96,260		(1,327		)	613,992		—
Asset-backed	3,775		1,634		(116		)	5,293		1,526
Commercial mortgage-backed	34,375		1,043		—			35,418		—
Residential mortgage-backed	973,193		69,758		(479		)	1,042,472		16,117
Corporate	7,609,842		1,137,179		(8,913		)	8,738,108		21,897
Total fixed maturity securities	$	10,019,473	$	1,379,205	$	(11,367	)	$	11,387,311	$	39,540
Equity securities:
Common stocks	$	21,984	$	16,834	$	—		$	38,818	$	—
Non-redeemable preferred stocks	434,713		58,171		(1,193		)	491,691		—
Total equity securities	$	456,697	$	75,005	$	(1,193	)	$	530,509	$	—
	December 31, 2014
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		OTTI in AOCI (a)
Fixed maturity securities:
United States government and   government agencies and authorities	$	172,070	$	5,201	$	(429	)	$	176,842	$	—
States, municipalities and political   subdivisions	703,167		67,027		(353		)	769,841		—
Foreign governments	591,981		74,339		(1,457		)	664,863		—
Asset-backed	3,917		1,680		(78		)	5,519		1,570
Commercial mortgage-backed	44,907		1,109		—			46,016		—
Residential mortgage-backed	911,004		58,876		(1,154		)	968,726		17,732
Corporate	7,621,054		1,026,927		(16,614		)	8,631,367		21,612
Total fixed maturity securities	$	10,048,100	$	1,235,159	$	(20,085	)	$	11,263,174	$	40,914
Equity securities:
Common stocks	$	22,300	$	15,651	$	(1	)	$	37,950	$	—
Non-redeemable preferred stocks	412,575		50,975		(2,093		)	461,457		—
Total equity securities	$	434,875	$	66,626	$	(2,094	)	$	499,407	$	—

(a) Represents the amount of OTTI recognized in accumulated other comprehensive income (“AOCI”). Amount includes unrealized gains and losses on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date.

9

Assurant, Inc.

Notes to Consolidated Financial Statements (unaudited)

Three Months Ended March, 2015 and 2014

(In thousands, except number of shares and per share amounts)

Our states, municipalities and political subdivisions holdings are highly diversified across the U.S. and Puerto Rico, with no individual state’s exposure (including both general obligation and revenue securities) exceeding 0.5% of the overall investment portfolio as of March 31, 2015 and December 31, 2014. At March 31, 2015 and December 31, 2014, the securities include general obligation and revenue bonds issued by states, cities, counties, school districts and similar issuers, including $326,676 and $270,107, respectively, of advance refunded or escrowed-to-maturity bonds (collectively referred to as “pre-refunded bonds”), which are bonds for which an irrevocable trust has been established to fund the remaining payments of principal and interest. As of March 31, 2015 and December 31, 2014, revenue bonds account for 51% of the holdings. Excluding pre-refunded revenue bonds, the activities supporting the income streams of the Company’s revenue bonds are across a broad range of sectors, primarily highway, water, airport and marina, higher education, specifically pledged tax revenues, and other miscellaneous sources such as bond banks, finance authorities and appropriations.

The Company’s investments in foreign government fixed maturity securities are held mainly in countries and currencies where the Company has policyholder liabilities, which allow the assets and liabilities to be more appropriately matched. At March 31, 2015, approximately 79%, 7% and 5% of the foreign government securities were held in the Canadian government/provincials and the governments of Brazil and Germany, respectively. At December 31, 2014, approximately 76%, 10% and 5% of the foreign government securities were held in the Canadian government/provincials and the governments of Brazil and Germany, respectively. No other country represented more than 2% and 3% of our foreign government securities as of March 31, 2015 and December 31, 2014, respectively.

The Company has European investment exposure in its corporate fixed maturity and equity securities of $1,065,643 with a net unrealized gain of $135,396 at March 31, 2015 and $1,060,655 with a net unrealized gain of $116,975 at December 31, 2014. Approximately 21% and 22% of the corporate European exposure is held in the financial industry at March 31, 2015 and December 31, 2014, respectively. Our largest European country exposure represented approximately 5% of the fair value of our corporate securities as of March 31, 2015 and December 31, 2014. Approximately 5% of the fair value of the corporate European securities are pound and euro-denominated and are not hedged to U.S. dollars, but held to support those foreign-denominated liabilities. Our international investments are managed as part of our overall portfolio with the same approach to risk management and focus on diversification.

The Company has exposure to the energy sector in its corporate fixed maturity securities of $1,000,301 with a net unrealized gain of $104,360 at March 31, 2015 and $992,012 with a net unrealized gain of $89,590 at December 31, 2014. Approximately 87% and 89% of the energy exposure is rated as investment grade as of March 31, 2015 and December 31, 2014, respectively.

The cost or amortized cost and fair value of fixed maturity securities at March 31, 2015 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

	Cost or Amortized Cost		Fair Value
Due in one year or less	$	295,436	$	300,908
Due after one year through five years	2,193,375		2,327,168
Due after five years through ten years	2,410,792		2,575,843
Due after ten years	4,108,527		5,100,209
Total	9,008,130		10,304,128
Asset-backed	3,775		5,293
Commercial mortgage-backed	34,375		35,418
Residential mortgage-backed	973,193		1,042,472
Total	$	10,019,473	$	11,387,311

10

Assurant, Inc.

Notes to Consolidated Financial Statements (unaudited)

Three Months Ended March, 2015 and 2014

(In thousands, except number of shares and per share amounts)

The following table summarizes the proceeds from sales of available-for-sale securities and the gross realized gains and gross realized losses that have been included in earnings as a result of those sales.

	Three Months Ended   March 31,
	2015		2014
Proceeds from sales	$	552,513	$	552,999
Gross realized gains	12,343		22,783
Gross realized losses	5,599		5,267

The following table sets forth the net realized gains, including OTTI, recognized in the statement of operations as follows:

	Three Months Ended   March 31,
	2015			2014
Net realized gains related to sales and other:
Fixed maturity securities	$	5,513		$	15,190
Equity securities	874			5,124
Other investments	138			(563		)
Total net realized gains related to sales and other	6,525			19,751
Net realized losses related to other-than-temporary impairments:
Fixed maturity securities	(2,570		)	—
Total net realized losses related to other-than-temporary impairments	(2,570		)	—
Total net realized gains	$	3,955		$	19,751

Other-Than-Temporary Impairments

The Company follows the OTTI guidance, which requires entities to separate an OTTI of a debt security into two components when there are credit related losses associated with the impaired debt security for which the Company asserts that it does not have the intent to sell, and it is more likely than not that it will not be required to sell before recovery of its cost basis. Under the OTTI guidance, the amount of the OTTI related to a credit loss is recognized in earnings, and the amount of the OTTI related to other, non-credit factors (e.g., interest rates, market conditions, etc.) is recorded as a component of other comprehensive income. In instances where no credit loss exists but the Company intends to sell the security or it is more likely than not that the Company will have to sell the debt security prior to the anticipated recovery, the decline in market value below amortized cost is recognized as an OTTI in earnings. In periods after the recognition of an OTTI on debt securities, the Company accounts for such securities as if they had been purchased on the measurement date of the OTTI at an amortized cost basis equal to the previous amortized cost basis less the OTTI recognized in earnings. For debt securities for which OTTI was recognized in earnings, the difference between the new amortized cost basis and the cash flows expected to be collected will be accreted or amortized into net investment income.

For the three months ended March 31, 2015, the Company recorded $3,208 of OTTI, of which $2,570 was related to credit losses and recorded as net OTTI losses recognized in earnings, with the remaining $638 related to all other factors and recorded as an unrealized loss component of AOCI. For the three months ended March 31, 2014, the Company recorded $29 of OTTI, all of which was related to non-credit factors and recorded as an unrealized loss component of AOCI.

11

Assurant, Inc.

Notes to Consolidated Financial Statements (unaudited)

Three Months Ended March, 2015 and 2014

(In thousands, except number of shares and per share amounts)

The following table sets forth the amount of credit loss impairments recognized within the results of operations on fixed maturity securities held by the Company as of the dates indicated, for which a portion of the OTTI loss was recognized in AOCI, and the corresponding changes in such amounts.

	Three Months Ended March 31,
	2015			2014
Balance, January 1,	$	35,424		$	45,278
Additions for credit loss impairments recognized in the current period on securities not   previously impaired	2,570			—
Reductions for increases in cash flows expected to be collected that are recognized over   the remaining life of the security	(472		)	(482		)
Reductions for credit loss impairments previously recognized on securities which   matured, paid down, prepaid or were sold during the period	(1,465		)	(495		)
Balance, March 31,	$	36,057		$	44,301

We regularly monitor our investment portfolio to ensure investments that may be other-than-temporarily impaired are timely identified, 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 financial 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 sufficient 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 fixed maturity securities. Inherently, there are risks and uncertainties involved in making these judgments. Changes in circumstances and critical assumptions such as a continued weak economy, a more pronounced economic downturn 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. 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 fixed 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 fixed maturity securities that do not meet either of these two criteria, the Company is required to analyze its ability to recover the amortized cost of the security by calculating the net present value of projected future cash flows. For these other-than-temporarily impaired fixed maturity securities, the net amount recognized in earnings is equal to the difference between the amortized cost of the fixed maturity security and its net present value. 

The Company considers different factors to determine the amount of projected future cash flows and discounting methods for corporate debt and residential and commercial mortgage-backed or asset-backed securities. For corporate debt securities, the split between the credit and non-credit losses is driven principally by assumptions regarding the amount and timing of projected future cash flows. The net present value is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the security at the date of acquisition. For residential and commercial mortgage-backed and asset-backed securities, cash flow estimates, including prepayment assumptions, are based on data from widely accepted third-party data sources or internal estimates. In addition to prepayment assumptions, cash flow estimates vary based on assumptions regarding the underlying collateral including default rates, recoveries and changes in value. The net present value is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the fixed maturity security prior to impairment at the balance sheet date. The discounted cash flows become the new amortized cost basis of the fixed maturity security.

In periods subsequent to the recognition of an OTTI, the Company generally accretes the discount (or amortizes the reduced premium) into net investment income, up to the non-discounted amount of projected future cash flows, resulting from the reduction in cost basis, based upon the amount and timing of the expected future cash flows over the estimated period of cash flows.

The investment category and duration of the Company’s gross unrealized losses on fixed maturity securities and equity securities at March 31, 2015 and December 31, 2014 were as follows:

12

Assurant, Inc.

Notes to Consolidated Financial Statements (unaudited)

Three Months Ended March, 2015 and 2014

(In thousands, except number of shares and per share amounts)

	March 31, 2015
	Less than 12 months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Fixed maturity securities:
United States Government and   government agencies and authorities	$	11,159	$	(10	)	$	8,579	$	(39	)	$	19,738	$	(49	)
States, municipalities and political   subdivisions	4,688		(20		)	2,870		(463		)	7,558		(483		)
Foreign governments	9,611		(176		)	26,279		(1,151		)	35,890		(1,327		)
Asset-backed	—		—			1,246		(116		)	1,246		(116		)
Residential mortgage-backed	45,587		(177		)	17,290		(302		)	62,877		(479		)
Corporate	402,717		(6,893		)	29,596		(2,020		)	432,313		(8,913		)
Total fixed maturity securities	$	473,762	$	(7,276	)	$	85,860	$	(4,091	)	$	559,622	$	(11,367	)
Equity securities:
Non-redeemable preferred stocks	$	28,234	$	(230	)	$	19,860	$	(963	)	$	48,094	$	(1,193	)

	December 31, 2014
	Less than 12 months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Fixed maturity securities:
United States Government and   government agencies and authorities	$	34,551	$	(188	)	$	21,488	$	(241	)	$	56,039	$	(429	)
States, municipalities and political   subdivisions	3,050		(282		)	4,633		(71		)	7,683		(353		)
Foreign governments	19,886		(67		)	37,741		(1,390		)	57,627		(1,457		)
Asset-backed	—		—			1,348		(78		)	1,348		(78		)
Residential mortgage-backed	22,337		(71		)	61,682		(1,083		)	84,019		(1,154		)
Corporate	640,641		(13,132		)	113,918		(3,482		)	754,559		(16,614		)
Total fixed maturity securities	$	720,465	$	(13,740	)	$	240,810	$	(6,345	)	$	961,275	$	(20,085	)
Equity securities:
Common stock	$	—	$	—		$	196	$	(1	)	$	196	$	(1	)
Non-redeemable preferred stocks	8,844		(264		)	24,784		(1,829		)	33,628		(2,093		)
Total equity securities	$	8,844	$	(264	)	$	24,980	$	(1,830	)	$	33,824	$	(2,094	)

13

Assurant, Inc.

Notes to Consolidated Financial Statements (unaudited)

Three Months Ended March, 2015 and 2014

(In thousands, except number of shares and per share amounts)

Total gross unrealized losses represent approximately 2% of the aggregate fair value of the related securities at March 31, 2015 and December 31, 2014. Approximately 60% and 63% of these gross unrealized losses have been in a continuous loss position for less than twelve months at March 31, 2015 and December 31, 2014, respectively. The total gross unrealized losses are comprised of 238 and 385 individual securities at March 31, 2015 and December 31, 2014, respectively. In accordance with its policy described above, the Company concluded that for these securities an adjustment to its results of operations for other-than-temporary impairments of the gross unrealized losses was not warranted at March 31, 2015 and December 31, 2014. These conclusions were based on a detailed analysis of the underlying credit and expected cash flows of each security. As of March 31, 2015, the gross unrealized losses that have been in a continuous loss position for twelve months or more were concentrated in the Company’s foreign governments and corporate fixed maturity securities, and in non-redeemable preferred stocks. Within the Company’s corporate fixed maturity securities, the majority of the loss position relates to securities in the industrial sector. The industrial sector’s gross unrealized losses of twelve months or more were $1,795, or 89%, of the corporate fixed maturity securities total. The non-redeemable preferred stocks are perpetual preferred securities that have characteristics of both debt and equity securities. To evaluate these securities, we apply an impairment model similar to that used for our fixed maturity securities. As of March 31, 2015, the Company did not intend to sell these securities and it was not more likely than not that the Company would be required to sell them and no underlying cash flow issues were noted. Therefore, the Company did not recognize an OTTI on those perpetual preferred securities that had been in a continuous unrealized loss position for twelve months or more. As of March 31, 2015, the Company did not intend to sell the fixed maturity securities and it was not more likely than not that the Company would be required to sell the securities before the anticipated recovery of their amortized cost basis. The gross unrealized losses are primarily attributable to widening credit spreads associated with an underlying shift in overall credit risk premium.

The Company has entered into commercial mortgage loans, collateralized by the underlying real estate, on properties located throughout the U.S. and Canada. At March 31, 2015, approximately 39% of the outstanding principal balance of commercial mortgage loans was concentrated in the states of California, New York, and Utah. Although the Company has a diversified loan portfolio, an economic downturn could have an adverse impact on the ability of its debtors to repay their loans. The outstanding balance of commercial mortgage loans range in size from $50 to $15,091 at March 31, 2015 and from $77 to $15,190 at December 31, 2014.

Credit quality indicators for commercial mortgage loans are loan-to-value and debt-service coverage ratios. Loan-to-value and debt-service coverage ratios are measures commonly used to assess the credit quality of commercial mortgage loans. The loan-to-value ratio compares the principal amount of the loan to the fair value of the underlying property collateralizing the loan, and is commonly expressed as a percentage. The debt-service coverage ratio compares a property’s net operating income to its debt-service payments and is commonly expressed as a ratio. The loan-to-value and debt-service coverage ratios are generally updated annually in the third quarter.

14

Assurant, Inc.

Notes to Consolidated Financial Statements (unaudited)

Three Months Ended March, 2015 and 2014

(In thousands, except number of shares and per share amounts)

The following summarizes our loan-to-value and average debt-service coverage ratios as of the dates indicated:

	March 31, 2015
Loan-to-Value	Carrying Value			% of Gross Mortgage Loans		Debt-Service Coverage Ratio
70% and less	$	1,157,193		91.9	%	1.97
71 – 80%	67,900			5.4	%	1.26
81 – 95%	27,234			2.2	%	1.04
Greater than 95%	6,531			0.5	%	0.43
Gross commercial mortgage loans	1,258,858			100	%	1.91
Less valuation allowance	(3,399		)
Net commercial mortgage loans	$	1,255,459
	December 31, 2014
Loan-to-Value	Carrying Value			% of Gross Mortgage Loans		Debt-Service Coverage Ratio
70% and less	$	1,168,454		91.6	%	2.01
71 – 80%	73,762			5.8	%	1.26
81 – 95%	27,268			2.1	%	1.04
Greater than 95%	6,531			0.5	%	0.43
Gross commercial mortgage loans	1,276,015			100	%	1.94
Less valuation allowance	(3,399		)
Net commercial mortgage loans	$	1,272,616

All commercial mortgage loans that are individually impaired have an established mortgage loan valuation allowance for losses. Changing economic conditions affect our valuation of commercial mortgage loans. Changing vacancies and rents are incorporated into the discounted cash flow analysis that we perform for monitored loans and may contribute to the establishment of (or an increase or decrease in) a commercial mortgage loan valuation allowance for losses. In addition, we continue to monitor the entire commercial mortgage loan portfolio to identify risk. Areas of emphasis are properties that have exposure to specific geographic events, have deteriorating credits or have experienced a reduction in debt-service coverage ratio. Where warranted, we have established or increased a valuation allowance based upon this analysis.

Collateralized Transactions

The Company lends fixed maturity securities, primarily bonds issued by the U.S. government and government agencies and authorities, and U.S. corporations, to selected broker/dealers. All such loans are negotiated on an overnight basis; term loans are not permitted. The Company receives 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 benefit of the Company. The use of cash collateral received is unrestricted. The Company reinvests the cash collateral received, generally in investments of high credit quality that are designated as available-for-sale. The Company monitors the fair value of securities loaned and the collateral received, with additional collateral obtained, as necessary. The Company is subject to the risk of loss on the re-investment of cash collateral. The Company's investment portfolio is readily marketable and convertible to cash sufficient to provide for short term needs related to the securities lending transactions.

As of March 31, 2015 and December 31, 2014, our collateral held under securities lending agreements, of which its use is unrestricted, was $93,242 and $95,985, respectively, and is included in the consolidated balance sheets under the collateral held/pledged under securities agreements. Our liability to the borrower for collateral received was $93,241 and $95,986, respectively, 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 is recorded as an unrealized gain (loss) and is included as part of AOCI. All securities were in an unrealized gain position as of March 31, 2015. All securities with unrealized losses have

15

Assurant, Inc.

Notes to Consolidated Financial Statements (unaudited)

Three Months Ended March, 2015 and 2014

(In thousands, except number of shares and per share amounts)

been in a continuous loss position for less than 12 months as of December 31, 2014. The Company includes the available-for-sale investments purchased with the cash collateral in its evaluation of other-than-temporary impairments. 

As of March 31, 2015, 98% of the obligation under securities agreements is invested in corporate fixed maturities, money market funds and daily repurchase agreements with a remaining contractual maturity of one year or less.

Cash proceeds that the Company receives as collateral for the securities it lends and subsequent repayment of the cash are regarded by the Company as cash flows from financing activities, since the cash received is considered a borrowing. Since the Company reinvests the cash collateral generally in investments that are designated as available-for-sale, the reinvestment is presented as cash flows from investing activities.

6. Fair Value Disclosures

Fair Values, Inputs and Valuation Techniques for Financial Assets and Liabilities Disclosures

The fair value measurements and disclosures guidance defines fair value and establishes a framework for measuring fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In accordance with this guidance, the Company has categorized its recurring basis financial assets and liabilities into a three-level fair value hierarchy based on the priority of the inputs to the valuation technique.

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and takes into account factors specific to the asset or liability.

The levels of the fair value hierarchy are described below:

• Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access.

• Level 2 inputs utilize other than quoted prices included in Level 1 that are observable for the asset, either directly or indirectly, for substantially the full term of the asset. Level 2 inputs include quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active and inputs other than quoted prices that are observable in the marketplace for the asset. The observable inputs are used in valuation models to calculate the fair value for the asset.

• Level 3 inputs are unobservable but are significant to the fair value measurement for the asset, and include situations where there is little, if any, market activity for the asset. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset.

We review fair value hierarchy classifications on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

16

Assurant, Inc.

Notes to Consolidated Financial Statements (unaudited)

Three Months Ended March, 2015 and 2014

(In thousands, except number of shares and per share amounts)

The following tables present the Company’s fair value hierarchy for assets and liabilities measured at fair value on a recurring basis as of March 31, 2015 and December 31, 2014. The amounts presented below for Collateral held/pledged under securities agreements, Other investments, Cash equivalents, Other assets, Assets and Liabilities held in separate accounts and Other liabilities differ from the amounts presented in the consolidated balance sheets because only certain investments or certain assets and liabilities within these line items are measured at estimated fair value. Other investments are comprised of investments in the Assurant Investment Plan, American Security Insurance Company Investment Plan, Assurant Deferred Compensation Plan, a modified coinsurance arrangement and other derivatives. Other liabilities are comprised of investments in the Assurant Investment Plan and other derivatives. The fair value amount and the majority of the associated levels presented for Other investments and Assets and Liabilities held in separate accounts are received directly from third parties.

	March 31, 2015
	Total		Level 1			Level 2			Level 3
Financial Assets
Fixed maturity securities:
United States Government and government agencies   and authorities	$	185,584	$	—		$	185,584		$	—
State, municipalities and political subdivisions	766,444		—			766,444			—
Foreign governments	613,992		937			613,055			—
Asset-backed	5,293		—			5,293			—
Commercial mortgage-backed	35,418		—			35,064			354
Residential mortgage-backed	1,042,472		—			1,042,472			—
Corporate	8,738,108		—			8,637,118			100,990
Equity securities:
Common stocks	38,818		38,135			683			—
Non-redeemable preferred stocks	491,691		—			489,631			2,060
Short-term investments	247,525		156,907		b	90,618		c	—
Collateral held/pledged under securities agreements	73,242		68,040		b	5,202		c	—
Other investments	277,948		71,306		a	204,182		c	2,460		d
Cash equivalents	596,285		594,880		b	1,405		c	—
Other assets	1,633		—			689		f	944		e
Assets held in separate accounts	1,882,913		1,717,771		a	165,142		c	—
Total financial assets	$	14,997,366	$	2,647,976		$	12,242,582		$	106,808
Financial Liabilities
Other liabilities	$	92,994	$	66,778	a	$	35	f	$	26,181	f
Liabilities related to separate accounts	1,882,913		1,717,771		a	165,142		c	—
Total financial liabilities	$	1,975,907	$	1,784,549		$	165,177		$	26,181

17

Assurant, Inc.

Notes to Consolidated Financial Statements (unaudited)

Three Months Ended March, 2015 and 2014

(In thousands, except number of shares and per share amounts)

	December 31, 2014
	Total		Level 1			Level 2			Level 3
Financial Assets
Fixed maturity securities:
United States Government and government agencies   and authorities	$	176,842	$	—		$	176,842		$	—
State, municipalities and political subdivisions	769,841		—			769,841			—
Foreign governments	664,863		757			664,106			—
Asset-backed	5,519		—			5,519			—
Commercial mortgage-backed	46,016		—			45,613			403
Residential mortgage-backed	968,726		—			964,081			4,645
Corporate	8,631,367		—			8,527,092			104,275
Equity securities:
Common stocks	37,950		37,266			684			—
Non-redeemable preferred stocks	461,457		—			459,457			2,000
Short-term investments	345,246		266,980		b	78,266		c	—
Collateral held/pledged under securities agreements	74,985		67,783		b	7,202		c	—
Other investments	272,755		59,358		a	211,276		c	2,121		d
Cash equivalents	683,142		635,804		b	47,338		c	—
Other assets	1,674		—			867		f	807		e
Assets held in separate accounts	1,854,193		1,682,671		a	171,522		c	—
Total financial assets	$	14,994,576	$	2,750,619		$	12,129,706		$	114,251
Financial Liabilities
Other liabilities	$	84,660	$	59,358	a	$	69	f	$	25,233	f
Liabilities related to separate accounts	1,854,193		1,682,671		a	171,522		c	—
Total financial liabilities	$	1,938,853	$	1,742,029		$	171,591		$	25,233

a. Mainly includes mutual funds.

b. Mainly includes money market funds.

c. Mainly includes fixed maturity securities.

d. Mainly includes fixed maturity securities and other derivatives.

e. Mainly includes the Consumer Price Index Cap Derivatives (“CPI Caps”).

f. Mainly includes other derivatives.

There were no transfers between Level 1 and Level 2 financial assets during either period. However, there were transfers between Level 2 and Level 3 financial assets during the periods, which are reflected in the “Transfers in” and “Transfers out” columns below. Transfers between Level 2 and Level 3 most commonly occur from changes in the availability of observable market information and re-evaluation of the observability of pricing inputs. Any remaining unpriced securities are submitted to independent brokers who provide non-binding broker quotes or are priced by other qualified sources.

18

Assurant, Inc.

Notes to Consolidated Financial Statements (unaudited)

Three Months Ended March, 2015 and 2014

(In thousands, except number of shares and per share amounts)

The following tables summarize the change in balance sheet carrying value associated with Level 3 financial assets and liabilities carried at fair value during the three months ended March 31, 2015 and 2014:

	Three Months Ended March 31, 2015
	Balance, beginning  of period			Total  (losses) gains (realized/ unrealized) included in earnings (1)			Net unrealized gains (losses)  included in other comprehensive income (2)			Sales			Transfers in (3)		Transfers out (3)			Balance, end of period
Financial Assets
Fixed Maturity Securities
Commercial mortgage-backed	$	403		$	—		$	(3	)	$	(46	)	$	—	$	—		$	354
Residential mortgage-backed	4,645			—			—			—			—		(4,645		)	—
Corporate	104,275			(8		)	880			(2,155		)	2,130		(4,132		)	100,990
Equity Securities
Non-redeemable preferred stocks	2,000			—			60			—			—		—			2,060
Other investments	2,121			128			(4		)	(21		)	236		—			2,460
Other assets	807			137			—			—			—		—			944
Financial Liabilities
Other liabilities	(25,233		)	(948		)	—			—			—		—			(26,181		)
Total level 3 assets and liabilities	$	89,018		$	(691	)	$	933		$	(2,222	)	$	2,366	$	(8,777	)	$	80,627

	Three Months Ended March 31, 2014
	Balance, beginning of period			Total (losses) gains (realized/ unrealized) included in earnings  (1)			Net unrealized gains (losses) included in other comprehensive income (2)			Purchases			Sales			Transfers in (3)		Transfers out (3)			Balance, end of period
Financial Assets
Fixed Maturity Securities
States, municipalities and   political subdivisions	$	22,657		$	—		$	—		$	—		$	—		$	—	$	(22,657	)	$	—
Foreign governments	16,857			(2		)	18			—			—			—		—			16,873
Commercial mortgage-   backed	598			—			(5		)	—			(43		)	—		—			550
Residential mortgage-   backed	4,167			—			—			—			—			—		(4,167		)	—
Corporate	115,344			98			3,206			—			(3,079		)	—		(7,356		)	108,213
Equity Securities
Non-redeemable preferred   stocks	7,510			328			(294		)	—			(1,830		)	—		—			5,714
Other investments	4,171			(1,095		)	4			—			(20		)	—		—			3,060
Other assets	2,491			(191		)	—			—			—			—		—			2,300
Financial Liabilities
Other liabilities	(20,330		)	1,285			—			(4,000		)	—			—		—			(23,045		)
Total level 3 assets and   liabilities	$	153,465		$	423		$	2,929		$	(4,000	)	$	(4,972	)	$	—	$	(34,180	)	$	113,665

(1) Included as part of net realized gains on investments in the consolidated statement of operations.

(2) Included as part of change in unrealized gains on securities in the consolidated statement of comprehensive income.

(3) Transfers are primarily attributable to changes in the availability of observable market information and re-evaluation of the observability of pricing inputs.

19

Assurant, Inc.

Notes to Consolidated Financial Statements (unaudited)

Three Months Ended March, 2015 and 2014

(In thousands, except number of shares and per share amounts)

Three different valuation techniques can be used in determining fair value for financial assets and liabilities: the market, income or cost approaches. The three valuation techniques described in the fair value measurements and disclosures guidance are consistent with generally accepted valuation methodologies. The market approach valuation techniques use prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. When possible, quoted prices (unadjusted) in active markets are used as of the period-end date (such as for mutual funds and money market funds). Otherwise, the Company uses valuation techniques consistent with the market approach including matrix pricing and comparables. Matrix pricing is a mathematical technique employed principally to value debt securities without relying exclusively on quoted prices for those securities but, rather, relying on the securities’ relationship to other benchmark quoted securities. Market approach valuation techniques often use market multiples derived from a set of comparables. Multiples might lie in ranges with a different multiple for each comparable. The selection of where within the range the appropriate multiple falls requires judgment, considering both qualitative and quantitative factors specific to the measurement.

Income approach valuation techniques convert future amounts, such as cash flows or earnings, to a single present amount, or a discounted amount. These techniques rely on current market expectations of future amounts as of the period-end date. Examples of income approach valuation techniques include present value techniques, option-pricing models, binomial or lattice models that incorporate present value techniques and the multi-period excess earnings method.

Cost approach valuation techniques are based upon the amount that would be required to replace the service capacity of an asset at the period-end date, or the current replacement cost. That is, from the perspective of a market participant (seller), the price that would be received for the asset is determined based on the cost to a market participant (buyer) to acquire or construct a substitute asset of comparable utility, adjusted for obsolescence.

While not all three approaches are applicable to all financial assets or liabilities, where appropriate, the Company may use one or more valuation techniques. For all the classes of financial assets and liabilities included in the above hierarchy, excluding the CPI Caps and certain privately placed corporate bonds, the Company generally uses the market valuation technique. For certain privately placed corporate bonds, the CPI Caps and certain derivatives, we generally use the income valuation technique. For the periods ended March 31, 2015 and December 31, 2014, the application of the valuation technique applied to the Company’s classes of financial assets and liabilities has been consistent.

Level 1 Securities

The Company’s investments and liabilities classified as Level 1 as of March 31, 2015 and December 31, 2014, consisted of mutual funds and money market funds, foreign government fixed maturities and common stocks that are publicly listed and/or actively traded in an established market.

Level 2 Securities

The Company values Level 2 securities using various observable market inputs obtained from a pricing service. The pricing service prepares estimates of fair value measurements for our Level 2 securities using proprietary valuation models based on techniques such as matrix pricing which include observable market inputs. The fair value measurements and disclosures guidance defines observable market inputs as the assumptions market participants would use in pricing the asset or liability developed on market data obtained from sources independent of the Company. The extent of the use of each observable market input for a security depends on the type of security and the market conditions at the balance sheet date. Depending on the security, the priority of the use of observable market inputs may change as some observable market inputs may not be relevant or additional inputs may be necessary. The Company uses the following observable market inputs (“standard inputs”), listed in the approximate order of priority, in the pricing evaluation of Level 2 securities: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research data. Further details for Level 2 investment types follow:

United States Government and government agencies and authorities: U.S. government and government agencies and authorities securities are priced by our pricing service utilizing standard inputs. Included in this category are U.S. Treasury securities which are priced using vendor trading platform data in addition to the standard inputs.

State, municipalities and political subdivisions: State, municipalities and political subdivisions securities are priced by our pricing service using material event notices and new issue data inputs in addition to the standard inputs.

Foreign governments: Foreign government securities are primarily fixed maturity securities denominated in Canadian dollars which are priced by our pricing service using standard inputs. The pricing service also evaluates each security based on relevant market information including relevant credit information, perceived market movements and sector news.

Commercial mortgage-backed, residential mortgage-backed and asset-backed: Commercial mortgage-backed, residential mortgage-backed and asset-backed securities are priced by our pricing service using monthly payment information and collateral

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Assurant, Inc.

Notes to Consolidated Financial Statements (unaudited)

Three Months Ended March, 2015 and 2014

(In thousands, except number of shares and per share amounts)

performance information in addition to the standard inputs. Additionally, commercial mortgage-backed securities and asset-backed securities utilize new issue data while residential mortgage-backed securities utilize vendor trading platform data.

Corporate: Corporate securities are priced by our pricing service using standard inputs. Non-investment grade securities within this category are priced by our pricing service using observations of equity and credit default swap curves related to the issuer in addition to the standard inputs. Certain privately placed corporate bonds are priced by a non-pricing service source using a model with observable inputs including, but not limited to, the credit rating, credit spreads, sector add-ons, and issuer specific add-ons. 

Non-redeemable preferred stocks: Non-redeemable preferred stocks are priced by our pricing service using observations of equity and credit default swap curves related to the issuer in addition to the standard inputs.

Short-term investments, collateral held/pledged under securities agreements, other investments, cash equivalents, and assets/liabilities held in separate accounts: To price the fixed maturity securities in these categories, the pricing service utilizes the standard inputs.

Valuation models used by the pricing service can change period to period, depending on the appropriate observable inputs that are available at the balance sheet date to price a security. When market observable inputs are unavailable to the pricing service, the remaining unpriced securities are submitted to independent brokers who provide non-binding broker quotes or are priced by other qualified sources. If the Company cannot corroborate the non-binding broker quotes with Level 2 inputs, these securities are categorized as Level 3 securities.

Level 3 Securities

The Company’s investments classified as Level 3 as of March 31, 2015 and December 31, 2014 consisted of fixed maturity and equity securities and derivatives. All of the Level 3 fixed maturity and equity securities are priced using non-binding broker quotes which cannot be corroborated with Level 2 inputs. Of our total Level 3 fixed maturity and equity securities, $62,605 and $63,614 were priced by a pricing service using single broker quotes due to insufficient information to provide an evaluated price as of March 31, 2015 and December 31, 2014, respectively. The single broker quotes are provided by market makers or broker-dealers who are recognized as market participants in the markets in which they are providing the quotes. The remaining $41,225 and $47,923 were priced internally using independent and non-binding broker quotes as of March 31, 2015 and December 31, 2014, respectively. The inputs factoring into the broker quotes include trades in the actual bond being priced, trades of comparable bonds, quality of the issuer, optionality, structure and liquidity. Significant changes in interest rates, issuer credit, liquidity, and overall market conditions would result in a significantly lower or higher broker quote. The prices received from both the pricing service and internally are reviewed for reasonableness by management and if necessary, management works with the pricing service or broker to further understand how they developed their price. Further details on Level 3 derivative investment types follow:

Other investments and other liabilities: The Company prices swaptions using a Black-Scholes pricing model incorporating third-party market data, including swap volatility data. The Company prices credit default swaps using non-binding quotes provided by market makers or broker-dealers who are recognized as market participants. Inputs factored into the non-binding quotes include trades in the actual credit default swap which is being priced, trades in comparable credit default swaps, quality of the issuer, structure and liquidity. The net option related to the investment in Iké is valued using an income approach; specifically, a Monte Carlo simulation option pricing model. The inputs to the model include, but are not limited to, the projected normalized earnings before interest, tax, depreciation, and amortization (EBITDA) and free cash flow for the underlying asset, the discount rate, and the volatility of and the correlation between the normalized EBITDA and the value of the underlying asset. Significant increases (decreases) in the projected normalized EBITDA relative to the value of the underlying asset in isolation would result in a significantly higher (lower) fair value.

Other assets: A non-pricing service source prices the CPI Cap derivatives using a model with inputs including, but not limited to, the time to expiration, the notional amount, the strike price, the forward rate, implied volatility and the discount rate.

Management evaluates the following factors in order to determine whether the market for a financial asset is inactive. The factors include, but are not limited to:

• There are few recent transactions,

• Little information is released publicly,

• The available prices vary significantly over time or among market participants,

• The prices are stale (i.e., not current), and

• The magnitude of the bid-ask spread. 

21

Assurant, Inc.

Notes to Consolidated Financial Statements (unaudited)

Three Months Ended March, 2015 and 2014

(In thousands, except number of shares and per share amounts)

Illiquidity did not have a material impact in the fair value determination of the Company’s financial assets.

The Company generally obtains one price for each financial asset. The Company performs a monthly analysis to assess if the evaluated prices represent a reasonable estimate of their fair value. This process involves quantitative and qualitative analysis and is overseen by investment and accounting professionals. Examples of procedures performed include, but are not limited to, initial and on-going review of pricing service methodologies, review of the prices received from the pricing service, review of pricing statistics and trends, and comparison of prices for certain securities with two different appropriate price sources for reasonableness. Following this analysis, the Company generally uses the best estimate of fair value based upon all available inputs. On infrequent occasions, a non-pricing service source may be more familiar with the market activity for a particular security than the pricing service. In these cases the price used is taken from the non-pricing service source. The pricing service provides information to indicate which securities were priced using market observable inputs so that the Company can properly categorize our financial assets in the fair value hierarchy.

For the net option, the Company performs a periodic analysis to assess if the evaluated price represents a reasonable estimate of the fair value for the financial liability. This process involves quantitative and qualitative analysis overseen by finance and accounting professionals. Examples of procedures performed include, but are not limited to, initial and on-going review of the pricing methodology and review of the projection for the underlying asset including the probability distribution of possible scenarios.

Disclosures for Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis

The Company also measures the fair value of certain assets on a non-recurring basis, generally on an annual basis, or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. These assets include commercial mortgage loans, goodwill and finite-lived intangible assets.

The Company uses both the income and market valuation approaches to measure the fair value of its reporting units when required. Under the income approach, the Company determines the fair value of the reporting units considering distributable earnings, which are estimated from operating plans. The resulting cash flows are then discounted using a market participant weighted average cost of capital estimated for the reporting units. After discounting the future discrete earnings to their present value, the Company estimates the terminal value attributable to the years beyond the discrete operating plan period. The discounted terminal value is then added to the aggregate discounted distributable earnings from the discrete operating plan period to estimate the fair value of the reporting units. Under the market approach, the Company derives the fair value of the reporting units based on various financial multiples, including but not limited to: price to tangible book value of equity, price to estimated 2014 earnings and price to estimated 2015 earnings, which are estimated based on publicly available data related to comparable guideline companies. In addition, the Company also estimates financial multiples from publicly available purchase price data for acquisitions of companies operating in the insurance industry. The estimated fair value of the reporting units is more heavily weighted towards the income approach because in the current economic environment the earnings capacity of a business is generally considered the most important factor in the valuation of a business enterprise. This fair value determination was categorized as Level 3 (unobservable) in the fair value hierarchy.

Fair Value of Financial Instruments Disclosures

The financial instruments guidance requires disclosure of fair value information about financial instruments, for which it is practicable to estimate such fair value. Therefore, it requires fair value disclosure for financial instruments that are not recognized or are not carried at fair value in the consolidated balance sheets. However, this guidance excludes certain financial instruments, including those related to insurance contracts and those accounted for under the equity method and joint ventures guidance (such as real estate joint ventures).

For the financial instruments included within the following financial assets and financial liabilities, the carrying value in the consolidated balance sheets equals or approximates fair value. Please refer to the Fair Value Inputs and Valuation Techniques for Financial Assets and Liabilities Disclosures section above for more information on the financial instruments included within the following financial assets and financial liabilities and the methods and assumptions used to estimate fair value:

• Cash and cash equivalents

• Fixed maturity securities

• Equity securities

• Short-term investments

• Collateral held/pledged under securities agreements

• Other investments

• Other assets

22

Assurant, Inc.

Notes to Consolidated Financial Statements (unaudited)

Three Months Ended March, 2015 and 2014

(In thousands, except number of shares and per share amounts)

• Assets held in separate accounts

• Other liabilities

• Liabilities related to separate accounts

In estimating the fair value of the financial instruments that are not recognized or are not carried at fair value in the consolidated balance sheets, the Company used the following methods and assumptions:

Commercial mortgage loans: the fair values of mortgage loans are estimated using discounted cash flow models. The model inputs include mortgage amortization schedules and loan provisions, an internally developed credit spread based on the credit risk associated with the borrower and the U.S. Treasury spot curve. Mortgage loans with similar characteristics are aggregated for purposes of the calculations.

Policy loans: the carrying value of policy loans reported in the consolidated balance sheets approximates fair value.

Other investments: Other investments include Certified Capital Company tax credits, business debentures, credit tenant loans and social impact loans which are recorded at amortized cost. The carrying value reported for these investments approximates fair value. Due to the nature of these investments, there is a lack of liquidity in the primary market which results in the holdings being classified as Level 3.

Policy reserves under investment products: the fair values for the Company’s policy reserves under investment products are determined using discounted cash flow analysis. Key inputs to the valuation include projections of policy cash flows, reserve run-off, market yields and risk margins.

Funds held under reinsurance: the carrying value reported approximates fair value due to the short maturity of the instruments.

Debt: the fair value of debt is based upon matrix pricing performed by the pricing service utilizing the standard inputs.

Obligation under securities agreements: obligation under securities agreements is reported at the amount of cash received from the selected broker/dealers.

23

Assurant, Inc.

Notes to Consolidated Financial Statements (unaudited)

Three Months Ended March, 2015 and 2014

(In thousands, except number of shares and per share amounts)

The following tables disclose the carrying value, fair value amount and hierarchy level of the financial instruments that are not recognized or are not carried at fair value in the consolidated balance sheets:

	March 31, 2015
			Fair Value
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets
Commercial mortgage loans on real estate	$	1,255,459	$	1,412,568	$	—	$	—	$	1,412,568
Policy loans	46,555		46,555		46,555		—		—
Other investments	12,287		12,287		—		—		12,287
Total financial assets	$	1,314,301	$	1,471,410	$	46,555	$	—	$	1,424,855
Financial Liabilities
Policy reserves under investment products   (Individual and group annuities, subject   to discretionary withdrawal) (1)	$	710,825	$	742,479	$	—	$	—	$	742,479
Funds withheld under reinsurance	87,146		87,146		87,146		—		—
Debt	1,171,153		1,328,952		—		1,328,952		—