10-K 1 aiz1231201510k.htm 10-K 10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-K 
 
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 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             
 
Commission file number 001-31978 
 
Assurant, Inc.
(Exact name of registrant as specified in its charter)
 
 
Delaware
 
39-1126612
(State or Other Jurisdiction
of Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
28 Liberty Street, 41st Floor
New York, New York
 
10005
(Address of Principal Executive Offices)
 
(Zip Code)
                                                                                                                              
 
Registrant’s telephone number, including area code:
(212) 859-7000
 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Name of Each Exchange on Which Registered
Common Stock, $0.01 Par Value
 
New York Stock Exchange
 
Securities registered pursuant to Section 12(g) of the Act:
None 
 
 
 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
 
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.
 
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
 
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. (Check one):
x
 
Large accelerated filer
¨
 
Accelerated filer
 
¨
 
Non-accelerated filer
 
¨
 
Smaller reporting company
 
 
 
 
 
 
 
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
 
The aggregate market value of the Common Stock held by non-affiliates of the registrant was $4,458 million at June 30, 2015 based on the closing sale price of $67.00 per share for the common stock on such date as traded on the New York Stock Exchange.
 
The number of shares of the registrant’s Common Stock outstanding at February 10, 2016 was 64,777,357.
 
Documents Incorporated by Reference
 
Certain information contained in the definitive proxy statement for the annual meeting of stockholders to be held on May 12, 2016 (2016 Proxy Statement) is incorporated by reference into Part III hereof.


 



ASSURANT, INC.
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 2015
TABLE OF CONTENTS
Item
Number
 
 
Page
Number
 
 
PART I
 
1.
 
1A.
 
1B.
 
2.
 
3.
 
4.
 
 
 
 
 
 
 
PART II
 
5.
 
6.
 
7.
 
7A.
 
8.
 
9.
 
9A.
 
9B.
 
 
 
 
 
 
 
PART III
 
10.
 
11.
 
12.
 
13.
 
14.
 
 
 
 
 
 
 
PART IV
 
15.
 
EX-23.1: CONSENT OF PRICEWATERHOUSECOOPERS LLP
 
EX-31.1: CERTIFICATION
 
EX-31.2: CERTIFICATION
 
EX-32.1: CERTIFICATION
 
EX-32.2: CERTIFICATION
 
 
Amounts are presented in United States of America (“U.S.”) dollars and all amounts are in thousands, except for number of shares, per share amounts, registered holders, number of employees, beneficial owners, number of securities in an unrealized loss position and number of loans.










FORWARD-LOOKING STATEMENTS

 Some statements under “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report, particularly those anticipating future financial performance, business prospects, growth and operating strategies and similar matters, are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these statements by the use of words such as “will,” “may,” “anticipates,” “expects,” “estimates,” “projects,” “intends,” “plans,” “believes,” “targets,” “forecasts,” “potential,” “approximately,” or the negative version of those words and other words and terms with a similar meaning. Any forward-looking statements contained in this report are based upon our historical performance and on current plans, estimates and expectations. The inclusion of this forward looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Our actual results might differ materially from those projected in the forward-looking statements. Assurant, Inc. ("the Company") undertakes no obligation to update or review any forward-looking statement, whether as a result of new information, future events or other developments.

In addition to the factors described under “Critical Factors Affecting Results,” the following risk factors could cause our actual results to differ materially from those currently estimated by management:
i.
actions by governmental agencies or government sponsored entities or other circumstances, including pending regulatory matters affecting our lender-placed insurance business, that could result in reductions of premium rates or increases in expenses, including claims, fines, penalties or other expenses;
ii.
inability to implement, or delays in implementing, strategic plans for the Assurant Employee Benefits and Assurant Health segments;
iii.
loss of significant client relationships or business, distribution sources or contracts and reliance on a few clients;
iv.
the effects of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (the "Affordable Care Act"), and the rules and regulations thereunder, on our health and employee benefits businesses;
v.
potential variations between the final risk adjustment amount and reinsurance amounts, as determined by the U.S. Department of Health and Human Services under the Affordable Care Act, and the Company's estimate;
vi.
unfavorable outcomes in litigation and/or regulatory investigations that could negatively affect our results, business and reputation;
vii.
inability to execute strategic plans related to acquisitions, dispositions or new ventures;
viii.
failure to adequately predict or manage benefits, claims and other costs;
ix.
inadequacy of reserves established for future claims;
x.
current or new laws and regulations that could increase our costs and decrease our revenues;
xi.
significant competitive pressures in our businesses;
xii.
failure to attract and retain sales representatives, key managers, agents or brokers;
xiii.
losses due to natural or man-made catastrophes;
xiv.
a decline in our credit or financial strength ratings (including the risk of ratings downgrades in the insurance industry);
xv.
deterioration in the Company’s market capitalization compared to its book value that could result in an impairment of goodwill;
xvi.
risks related to our international operations, including fluctuations in exchange rates;
xvii.
data breaches compromising client information and privacy;
xviii.
general global economic, financial market and political conditions (including difficult conditions in financial, capital, credit and currency markets, the global economic slowdown, fluctuations in interest rates or a prolonged period of low interest rates, monetary policies, unemployment and inflationary pressure);
xix.
cyber security threats and cyber attacks;
xx.
failure to effectively maintain and modernize our information systems;
xxi.
uncertain tax positions and unexpected tax liabilities;



xxii.
risks related to outsourcing activities;
xxiii.
unavailability, inadequacy and unaffordable pricing of reinsurance coverage;
xxiv.
diminished value of invested assets in our investment portfolio (due to, among other things, volatility in financial markets; the global economic slowdown; credit, currency and liquidity risk; other than temporary impairments and increases in interest rates);
xxv.
insolvency of third parties to whom we have sold or may sell businesses through reinsurance or modified co-insurance;
xxvi.
inability of reinsurers to meet their obligations;
xxvii.
credit risk of some of our agents in Assurant Specialty Property and Assurant Solutions;
xxviii.
inability of our subsidiaries to pay sufficient dividends;
xxix.
failure to provide for succession of senior management and key executives; and
xxx.
cyclicality of the insurance industry.
For a more detailed discussion of the risk factors that could affect our actual results, please refer to “Critical Factors Affecting Results” in Item 7 and “Risk Factors” in Item 1A of this Form 10-K.




PART I

Unless the context otherwise requires, references to the terms “Assurant,” the “Company,” “we,” “us” and “our” refer to our consolidated operations.

Item 1. Business 
Assurant, Inc. was incorporated as a Delaware corporation in 2004.
Assurant safeguards clients and consumers when the unexpected occurs. A global provider of specialty protection products and related services, Assurant operates in North America, Latin America, Europe and other select worldwide markets through four operating segments. Assurant Solutions, Assurant Specialty Property, Assurant Health and Assurant Employee Benefits partner with clients who are leaders in their industries to provide consumers peace of mind and financial security. Our diverse range of products and services include mobile device protection products and services; extended service products and related services for consumer electronics, appliances and vehicles; pre-funded funeral insurance; lender-placed homeowners insurance; property preservation and valuation services; flood insurance; renters insurance and related products; debt protection administration; credit insurance; manufactured housing homeowners insurance; group dental insurance; group disability insurance; and group life insurance.
As previously announced, the Company will substantially exit the health insurance market in 2016 and has signed a definitive agreement to sell its Assurant Employee Benefits segment to Sun Life Assurance Company of Canada ("Sun Life"), a subsidiary of Sun Life Financial Inc. This transaction is expected to close by the end of the first quarter of 2016. See Note 3 and Note 4, respectively, contained elsewhere in the report for more information.
Assurant’s vision is to be the premier provider of specialty protection products and related services in North America, Latin America, Europe and other select worldwide markets. To achieve this vision, we focus on the following areas: 
Building and managing a portfolio of specialty insurance businesses and related services – Our operating segments are focused on serving specific sectors of the housing and lifestyle protection market. We continue to develop and add specialty market capabilities where we can meet unserved consumers’ needs, achieve superior returns, and leverage enterprise resources.  
Leveraging a set of core capabilities for competitive advantage – We apply our core capabilities to create competitive advantages – managing risk; managing relationships with large distribution partners; and integrating complex administrative systems. These core capabilities represent areas of expertise that are advantages within each of our businesses. We seek to generate attractive returns by building on specialized market knowledge, well-established distribution relationships and, in some businesses, economies of scale. 
Identifying and adapting to evolving market needs – Assurant’s businesses strive to adapt to changing market conditions by tailoring product and service offerings to specific client and customer needs. By understanding consumer dynamics in our core markets, we seek to design innovative products and services that will enable us to sustain long-term profitable growth and market leading positions. 
Strategic capital deployment – We deploy capital to invest in our businesses, repurchase shares and pay dividends. Our approach to mergers, acquisitions and other growth opportunities reflects our prudent and disciplined approach to managing our capital. Our mergers, acquisitions and business development process targets new business and capabilities that complements or supports our business model.
Competition 
Assurant’s businesses focus on niche products and related services within broader insurance markets. Although we face competition in each of our businesses, we believe that no single competitor competes against us in all of our business lines. The business lines in which we operate are generally characterized by a limited number of competitors. Competition in each business is based on a number of factors, including quality of service, product features, price, scope of distribution, financial strength ratings and name recognition. The relative importance of these factors varies by product and market. We compete for customers and distributors with insurance companies and other financial services companies in our businesses. 
Competitors of Assurant Solutions and Assurant Specialty Property include insurance companies, financial institutions and mobile device repair and logistics companies. Historically, Assurant Health’s main competitors were other health insurance companies, Health Maintenance Organizations (“HMOs”) and the Blue Cross/Blue Shield plans in states where we sold business. Assurant Employee Benefits’ competitors include other benefit and life insurance companies, dental managed care entities and not-for-profit dental plans. 

3


Segments 
For additional information on our segments, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations” and Note 22 to the Notes to the Consolidated Financial Statements included elsewhere in this report.
Assurant Solutions
 
For the Years Ended
 
December 31, 2015
 
December 31, 2014
Net earned premiums for selected product groupings:
 
 
 
Extended service contracts and warranties - domestic (1)
$
1,644,352

 
$
1,631,339

Extended service contracts and warranties - international (1)
802,477

 
850,454

Preneed life insurance
60,403

 
61,093

Credit insurance - domestic
132,130

 
160,794

Credit insurance - international
254,211

 
318,104

Other
122,273

 
107,084

Total
$
3,015,846

 
$
3,128,868

Fees and other income
$
785,611

 
$
667,852

Segment net income
$
197,183

 
$
218,948

Combined ratio (2):
 
 
 
Domestic
95.1
%
 
93.5
%
International
102.8
%
 
101.5
%
Equity (3)
$
2,035,772

 
$
1,605,669

 
(1)
Extended service contracts include warranty contracts for products such as mobile devices, personal computers, consumer electronics, appliances, automobiles and recreational vehicles.
(2)
The combined ratio is equal to total benefits, losses and expenses divided by net earned premiums and fees and other income excluding the preneed business.
(3)
Equity excludes accumulated other comprehensive income.

Products and Services
Assurant Solutions targets profitable growth in three key product areas: domestic and international extended service contracts (“ESCs”) and warranties, including mobile device protection; preneed life insurance; and international credit insurance.
ESC and Warranties: Through partnerships with leading retailers, mobile carriers and original equipment manufacturers (“OEMs”) and direct to consumer distribution, we underwrite and provide administrative services for ESCs and warranties. These contracts provide consumers with coverage on mobile devices, personal computers, consumer electronics, appliances, automobiles and recreational vehicles, protecting them from certain covered losses. We pay the cost of repairing or replacing customers’ property in the event of mechanical breakdown, accidental damage, and casualty losses such as theft, fire, and water damage. Our strategy is to provide service to our clients that addresses all aspects of the ESC or warranty, including program design and marketing strategy. We also provide administration, claims handling, logistics, and customer service. We believe that with both the required administrative infrastructure and insurance underwriting capabilities, we maintain a differentiated position in this marketplace.
Preneed Life Insurance: Preneed life insurance allows individuals to prepay for a funeral in a single payment or in multiple payments over a fixed number of years. The insurance policy proceeds are used to address funeral costs at death. These products are only sold in the U.S. and Canada and are generally structured as whole life insurance policies in the U.S. and annuity products in Canada.
Credit Insurance: Our credit insurance products offer protection from life events and uncertainties that arise in purchasing and borrowing transactions. Credit insurance programs generally offer consumers the option to protect a credit card or installment loan balance or payments in the event of death, involuntary unemployment or disability, and are generally available to all consumers without the underwriting restrictions that apply to term life insurance.
Regulatory changes have reduced the demand for credit insurance sold through banks in the U.S. Consequently, we continue to experience a reduction in credit insurance domestic gross written premiums, a trend we expect to continue.
Marketing and Distribution

4


Assurant Solutions focuses on establishing strong, long-term relationships with leading distributors of its products and services. We partner with some of the largest consumer electronics and appliance retailers and OEMs to market our ESC and warranty products. In our mobile business, we partner with leading mobile service providers, retailers and banks and market our mobile protection insurance and related services through them. In our preneed life insurance business, we have an exclusive relationship with Services Corporation International (“SCI”), the largest funeral provider in North America.
Several of our distribution agreements are exclusive. Typically these agreements have terms of one to 10 years and allow us to integrate our administrative systems with those of our clients.
In addition to the domestic market, we do business in Canada, the United Kingdom (“U.K.”), Ireland, Argentina, Brazil, Puerto Rico, Chile, Germany, Spain, Italy, France, Mexico, China, Colombia, Peru and South Korea. In these markets, we primarily sell consumer service contracts, including mobile device protection, and credit insurance products through agreements with financial institutions, retailers and mobile service providers. Systems, training, computer hardware and our overall market development approach are customized to fit the particular needs of each targeted international market.
In 2014, we acquired CWI Group (“CWI”), a market-leading mobile administrator in France. This acquisition has strengthened Assurant Solutions’ market-leading capabilities in mobile device protection and expanded its distribution into independent retailers and the financial services affinity market in Europe.
In 2013, we acquired Lifestyle Services Group (“LSG”), a mobile phone insurance provider based in the U.K. This acquisition has allowed us to develop and expand our European mobile business platform. In addition, we made an investment in Ike Asistencia (“Iké”), a services assistance business with significant business in Mexico and other countries in Latin America. Iké primarily provides roadside assistance, home assistance, travel, mobile and other protection products. This investment has allowed us to expand our customer base and strengthen our presence in Latin America.
As of December 31, 2015 no single Assurant Solutions client accounted for 10% or more of our consolidated revenue. However, Assurant Solutions is dependent on a few clients, the loss of any one or more such clients could have a material adverse effect on the Company's results of operations and cash flows.
Underwriting and Risk Management
We write a significant portion of our contracts on a retrospective commission basis. This allows us to adjust commissions on the basis of claims experience. Under these commission arrangements, the compensation of our clients is based upon the actual losses incurred compared to premiums earned after a specified net allowance to us. We believe that these arrangements better align our clients’ interests with ours and help us to better manage risk exposure.
Profits from our preneed life insurance programs are generally earned from interest rate spreads - the difference between the death benefit growth rates on underlying policies and the investment returns generated on the assets we hold related to those policies. To manage these spreads, we regularly adjust pricing to reflect changes in new money yields. 
Assurant Specialty Property
 
For the Years Ended
 
December 31, 2015
 
December 31, 2014
Net earned premiums by major product grouping:
 
 
 
Homeowners (lender-placed and voluntary)
$
1,425,799

 
$
1,743,965

Manufactured housing (lender-placed and voluntary)
165,657

 
237,576

Other (1)
453,245

 
524,556

Total
$
2,044,701

 
$
2,506,097

Fees and other income
$
405,545

 
$
301,048

Segment net income
$
307,705

 
$
341,757

Loss ratio (2)
38.6
%
 
43.3
%
Expense ratio (3)
52.7
%
 
46.5
%
Combined ratio (4)
84.9
%
 
85.2
%
Equity (5)
$
1,351,122

 
$
1,264,216

 
(1)
Other primarily includes multi-family housing, lender-placed flood, and miscellaneous insurance products.
(2)
The loss ratio is equal to policyholder benefits divided by net earned premiums.
(3)
The expense ratio is equal to selling, underwriting and general expenses divided by net earned premiums and fees and other income.
(4)
The combined ratio is equal to total benefits, losses and expenses divided by net earned premiums and fees and other income.
(5)
Equity excludes accumulated other comprehensive income.


5


Products and Services
Assurant Specialty Property targets profitable growth in lender-placed homeowners insurance, and adjacent niches such as multi-family housing insurance; lender-placed and voluntary flood insurance; home appraisal, inspection and preservation; receivables management for property management companies; and other property risk management services.
Lender-placed and voluntary homeowners insurance: The largest product line within Assurant Specialty Property is homeowners insurance, consisting principally of fire and dwelling hazard insurance offered through our lender-placed program. The lender-placed program provides collateral protection to lenders, mortgage servicers and investors in mortgaged properties in the event that a homeowner does not maintain insurance on a mortgaged dwelling. Lender-placed insurance coverage is not limited to the outstanding loan balance; it provides structural coverage, similar to that of a standard homeowners policy. The amount of coverage is often based on the last known insurance coverage under the prior policy for the property and provides replacement cost coverage on the property and thus ensures that a home can be repaired or rebuilt in the event of damage. It protects both the lender’s interest and the borrower’s interest and equity. We also provide insurance on foreclosed properties managed by our clients. This type of insurance is Real Estate Owned (“REO”) insurance. The lender-placed homeowners and REO markets experienced significant growth in prior years as a result of the housing crisis, but they are now declining.
In the majority of cases, we use a proprietary insurance-tracking administration system linked with the administrative systems of our clients to monitor clients’ mortgage portfolios to verify the existence of insurance on each mortgaged property and identify those that are uninsured. If there is a potential lapse in insurance coverage, we begin a process of notification and outreach to both the homeowner and the last-known insurance carrier or agent through phone calls and written correspondence. This process takes up to 90 days to complete. If coverage cannot be verified at the end of this process, the mortgage servicer procures a lender-placed policy for which the homeowner is responsible for paying the related premiums. The percentage of insurance policies placed to loans tracked represents our placement rates. The homeowner is still encouraged, and always maintains the option, to obtain or renew the insurance of his or her choice.
To meet the changing needs of the lending and housing industries, Assurant Specialty Property has worked with regulators to introduce a next generation lender-placed homeowners product to address some of the unanticipated issues that developed during the housing crisis. This product combines flexibility and best practices to address the concerns of various parties. The product contains expanded geographic ratings within each state to further differentiate rates for properties more exposed to catastrophes from those where the risk is lower, added premium rating flexibility from deductible options that can be modified based on factors such as coverage amount and delinquency status, and continued enhancements to our already extensive customer notification process to make it more clear to borrowers when they have lender-placed insurance.
Lender-placed and voluntary manufactured housing insurance: Manufactured housing insurance is offered on a lender-placed and voluntary basis. Lender-placed insurance is issued after an insurance tracking process similar to that described above. The tracking is performed by Assurant Specialty Property using a proprietary insurance tracking administration system, or by the lenders themselves. A number of manufactured housing retailers in the U.S. use our proprietary premium rating technology to assist them in selling property coverage at the point of sale.
Other insurance and mortgage services: We have developed products and services in adjacent and emerging markets, such as lender-placed and voluntary flood insurance, multi-family housing insurance and mortgage property risk management services. In 2013, we acquired Field Asset Services (“FAS”), a company that leverages its nationwide network of independent contractors to perform property preservation, restoration and inspection services for mortgage servicing clients and investors. In 2014, we acquired StreetLinks, a leader in valuation solutions and technologies, which is among the largest independent appraisal management companies in the United States. Also, in 2014, we acquired eMortgage Logic, a leading provider of property broker price opinions assisting mortgage servicing clients with determining property values. The acquisitions of FAS, Streetlinks and eMortgage Logic comprise our Mortgage Solutions business. We are also one of the largest administrators for the U.S. Government under the voluntary National Flood Insurance Program, for which we earn a fee for collecting premiums and processing claims. This business is 100% reinsured to the U.S. Government.
Marketing and Distribution
Assurant Specialty Property establishes long-term relationships with leading mortgage lenders and servicers. The majority of our lender-placed agreements are exclusive. Typically, these agreements have terms of three to five years and allow us to integrate our systems with those of our clients.
We offer our manufactured housing insurance programs primarily through manufactured housing lenders and retailers, along with independent specialty agents. The independent specialty agents distribute flood products and miscellaneous specialty property products. Multi-family housing products are distributed primarily through property management companies and affinity marketing partners.
Our property risk management services are provided directly to mortgage lenders and servicers, typically under non-exclusive arrangements.

6


On January 1, 2015, we sold our general agency business and primary associated insurance carrier, American Reliable Insurance Company (“ARIC”) to Global Indemnity Group, Inc., a subsidiary of Global Indemnity plc. The business offers specialty personal lines and agricultural insurance through general and independent agents.
As of December 31, 2015 no single Assurant Specialty Property client accounted for 10% or more of our consolidated revenue. However, Assurant Specialty Property is dependent on a few clients, the loss of any one or more such clients could have a material adverse effect on the Company's results of operations and cash flows.
Underwriting and Risk Management
Our lender-placed homeowners insurance program and certain of our manufactured housing products are not underwritten on an individual policy basis. Contracts with our clients require us to issue these policies automatically when a borrower’s insurance coverage is not maintained. These products are priced to factor in the additional underwriting risk from ensuring all client properties are provided continuous insurance coverage. We monitor pricing adequacy based on a variety of factors and adjust pricing as required, subject to regulatory constraints.
Because several of our product lines (such as homeowners, manufactured housing, and other property policies) are exposed to catastrophe risks, we purchase reinsurance coverage to protect the capital of Assurant Specialty Property and to mitigate earnings volatility. Our reinsurance program generally incorporates a provision to allow the reinstatement of coverage, which provides protection against the risk of multiple catastrophes in a single year. 
Assurant Health
 
For the Years Ended
 
December 31, 2015
 
December 31, 2014
Net earned premiums:
 
 
 
Individual
$
1,895,970

 
$
1,544,968

Small employer group
327,726

 
400,484

Total
$
2,223,696

 
$
1,945,452

Fees and other income
$
54,622

 
$
40,016

Segment net loss
$
(367,907
)
 
$
(63,748
)
Loss ratio (1)
103.5
%
 
81.0
%
Expense ratio (2)
23.2
%
 
25.0
%
Combined ratio (3)
124.2
%
 
104.3
%
Equity (4)
$
574,230

 
$
443,385

(1)
The loss ratio is equal to policyholder benefits divided by net earned premiums.
(2)
The expense ratio is equal to selling, underwriting and general expenses divided by net earned premiums and fees and other income.
(3)
The combined ratio is equal to total benefits, losses and expenses divided by net earned premiums and fees and other income.
(4)
Equity excludes accumulated other comprehensive income.

Products and Services
After a comprehensive review of strategic alternatives, the Company decided to exit the health insurance market as it focuses on its housing and lifestyle protection offerings. Assurant began to wind down its major medical operations in June 2015, and the Company expects to substantially complete its exit of the health insurance market by the end of 2016.
Until we put Assurant Health in run-off in 2015, it competed in the individual and small-group medical insurance markets by offering major medical insurance, short-term medical insurance, and supplemental coverage options to individuals and families. Our products were offered with different plan options to meet a broad range of customer needs, levels of affordability and to meet the requirements of 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”). Assurant Health also offered medical insurance to small employer groups.
Individual Medical: Assurant Health provided medical insurance products to individuals, primarily between the ages of 18 and 64, and their families, who did not have employer-sponsored coverage. We offered a wide variety of benefit plans at different price points, which allow customers to tailor their coverage to fit their unique needs. These plans include those with the essential health benefits required under the Affordable Care Act, as well as supplemental products.
Small Employer Group Medical: Assurant Health provided group medical insurance to small companies with two to fifty employees, although larger employer coverage is available. We offered fully insured products with the essential health benefits

7


required by the Affordable Care Act, as well as self-funded employer options and individual products sold through the workplace.
On October 1, 2015, we sold our supplemental and small-group self funded lines of business and certain assets to National General Holdings Corp. ("National General") for cash consideration of $14,000.
In March 2012, we entered into a new provider network arrangement with Aetna Signature Administrators ® (“Aetna”). This multi-year agreement provides our major medical customers with access to more than one million health care providers and 7,500 hospitals nationwide.
Marketing and Distribution
Until we put Assurant Health in run-off in 2015, our health insurance products were principally marketed through a network of independent agents. We also marketed through a variety of exclusive and non-exclusive national account relationships and direct distribution channels.
Underwriting and Risk Management
Following the passage of the Affordable Care Act, many of the traditional risk management techniques used to manage the risks of providing health insurance have become less relevant. Assurant Health took steps to adjust its products, pricing and business practices to comply with the new requirements. Following the announcement of the Company's decision to exit the health insurance market, sales of new health insurance policies have ended.
Please see “Management’s Discussion and Analysis - Assurant Health” and “Risk Factors - Risks Related to our Industry - Reform of the health insurance industry could materially reduce the profitability of certain of our businesses or render them unprofitable” for further details.
Assurant Employee Benefits
 
For the Years Ended
 
December 31, 2015
 
December 31, 2014
Net Earned Premiums:
 
 
 
Group disability
$
398,172

 
$
409,028

Group dental
396,925

 
392,502

Group life
204,526

 
200,285

Group supplemental and vision products
67,131

 
49,910

Total
$
1,066,754

 
$
1,051,725

Voluntary
$
478,588

 
$
441,479

Employer-paid and other
588,166

 
610,246

Total
$
1,066,754

 
$
1,051,725

Fees and other income
$
25,006

 
$
24,204

Segment net income
$
47,322

 
$
48,681

Loss ratio (1)
68.4
%
 
68.2
%
Expense ratio (2)
36.5
%
 
37.1
%
Equity (3)
$
532,332

 
$
540,964

(1)
The loss ratio is equal to policyholder benefits divided by net earned premiums.
(2)
The expense ratio is equal to selling, underwriting and general expenses divided by net earned premiums and fees and other income.
(3)
Equity excludes accumulated other comprehensive income.

On September 9, 2015, the Company agreed to sell its Assurant Employee Benefits Segment business to Sun Life. The transaction is expected to close by the end of the first quarter of 2016.
Products and Services
Assurant Employee Benefits offers group disability, dental, life, vision and supplemental products as well as individual dental products. The group products are offered with funding options ranging from fully employer-paid to fully employee-paid (voluntary). In addition, we reinsure disability and life products through our wholly owned subsidiary, Disability Reinsurance Management Services, Inc. (“DRMS”).

8


We focus on the needs of the small to mid-size employer. We believe that our group risk selection expertise, ease of enrollment and administration, our broad product suite, expansive dental network and strong relationships with brokers who work primarily with small to mid-size businesses give us a competitive advantage versus other carriers in this market.
Group Disability: Group disability insurance provides partial replacement of lost earnings for insured employees who become disabled, as defined by their plan provisions. Our products include both short- and long-term disability coverage options. We also reinsure disability policies written by other carriers through our DRMS subsidiary.
Group Dental: Dental benefit plans provide funding for necessary or elective dental care. Customers may select a traditional indemnity arrangement, a Preferred Provider Organization (“PPO”) arrangement, or a prepaid or managed care arrangement. Coverage is subject to deductibles, coinsurance and annual or lifetime maximums. In a prepaid plan, members must use participating dentists in order to receive benefits.
Success in the group dental business is heavily dependent on a strong provider network. Assurant Employee Benefits owns and operates Dental Health Alliance, L.L.C. (“DHA”), a leading dental PPO network. The Company has a larger network with DHA, marketed as Assurant Dental Network, which combines network agreements with partners such as Aetna and United Concordia Dental. We believe that our large combined network, Assurant Dental Network, increases the attractiveness of our products in the marketplace and the strength of the Assurant Employee Benefits dental offering.
Group Life: Group term life insurance provided through the workplace provides benefits in the event of death. We also provide accidental death and dismemberment insurance. Insurance consists primarily of renewable term life insurance with the amount of coverage provided being either a flat amount, a multiple of the employee’s earnings, or a combination of the two. We also reinsure life policies written by other carriers through DRMS.
Group Supplemental and Vision Products: Fully-insured vision coverage is offered through our agreement with Vision Service Plan, Inc., a leading national supplier of vision insurance. Our plans cover eye exams, glasses, and contact lenses and are usually sold in combination with one or more of our other products. In addition to the traditional voluntary products, we provide group critical illness, cancer, accident, and gap insurance. These products are generally paid for by the employee through payroll deductions, and the employee is enrolled in the coverage(s) at the worksite.
Marketing and Distribution
Our products and services are distributed through a group sales force located in 32 offices near major metropolitan areas. Our sales representatives distribute our products and services through independent brokers and employee-benefits advisors. Daily account management is provided through local sales offices, further supported by a centralized home office customer service department. Broker compensation in some cases includes an annual performance incentive, based on volume and retention of business.
DRMS provides turnkey group disability and life insurance solutions to insurance carriers that want to supplement their core product offerings. Our services include product development, state insurance regulatory filings, underwriting, claims management, and other functions typically performed by an insurer’s back office. Assurant Employee Benefits reinsures the risks written by DRMS’ clients, with the clients generally retaining shares that vary by contract.
Underwriting and Risk Management
The pricing of our products is based on the expected cost of benefits, calculated using assumptions for mortality, morbidity, interest, expenses and persistency, and other underwriting factors. Our block of business is diversified by industry and geographic location, which serves to limit some of the risks associated with changing economic conditions.
Disability claims management focuses on helping claimants return to work through a supportive network of services that may include physical therapy, vocational rehabilitation, and workplace accommodation. We employ or contract with a staff of doctors, nurses and vocational rehabilitation specialists, and use a broad range of additional outside medical and vocational experts to assist our claim specialists.
Ratings 
Independent rating organizations periodically review the financial strength of insurers, including our insurance subsidiaries. Financial strength ratings represent the opinions of rating agencies regarding the ability of an insurance company to meet its financial obligations to policyholders and contract holders. These ratings are not applicable to our common stock or debt securities. Ratings are an important factor in establishing the competitive position of insurance companies.
Rating agencies also use an “outlook statement” of “positive,” “stable,” “negative” or “developing” to indicate a medium- or long-term trend in credit fundamentals which, if continued, may lead to a rating change. A rating may have a stable outlook to indicate that the rating is not expected to change; however, a stable rating does not preclude a rating agency from changing a rating at any time, without notice.

9


Most of our active domestic operating insurance subsidiaries are rated by the A.M. Best Company (“A.M. Best”). In addition, six of our domestic operating insurance subsidiaries are also rated by Moody’s Investor Services (“Moody’s”) and seven are rated by Standard & Poor’s Inc., a division of McGraw Hill Companies, Inc. (“S&P”).
For further information on the risks of ratings downgrades, see “Item 1A - Risk Factors - Risks Related to our Company - A.M. Best, Moody’s and S&P rate the financial strength of our insurance company subsidiaries, and a decline in these ratings could affect our standing in the insurance industry and cause our sales and earnings to decrease.”
The following table summarizes our financial strength ratings and outlook of our domestic operating insurance subsidiaries as of December 31, 2015:
 
A.M. Best (1)
 
Moody’s (2)
 
Standard &
Poor’s (3)
Outlook
(4)
(5)
 
(6)
Company
 
 
 
 
American Bankers Insurance Company
A2
 
American Bankers Life Assurance Company
A-
A3
 
American Memorial Life Insurance Company
A-
N/A
 
American Security Insurance Company
A2
 
Assurant Life of Canada
A-
N/A
 
N/A
Caribbean American Life Assurance Company
A-
N/A
 
N/A
Caribbean American Property Insurance Company
N/A
 
N/A
John Alden Life Insurance Company
B+
Ba1
 
BB+
Reliable Lloyds
N/A
 
N/A
Standard Guaranty Insurance Company
N/A
 
N/A
Time Insurance Company
B+
Ba1
 
BB+
UDC Dental California
A-
N/A
 
N/A
Union Security Dental Care New Jersey
A-
N/A
 
N/A
Union Security Insurance Company
A-
A3
 
A-
Union Security Life Insurance Company of New York
A-
N/A
 
N/A
United Dental Care of Arizona
A-
N/A
 
N/A
United Dental Care of Colorado
A-
N/A
 
N/A
United Dental Care of Michigan
NR
N/A
 
N/A
United Dental Care of Missouri
A-
N/A
 
N/A
United Dental Care of New Mexico
A-
N/A
 
N/A
United Dental Care of Ohio
NR
N/A
 
N/A
United Dental Care of Texas
A-
N/A
 
N/A
United Dental Care of Utah
NR
N/A
 
N/A
Voyager Indemnity Insurance Company
N/A
 
N/A
(1)
A.M. Best financial strength ratings range from “A++” (superior) to “S” (suspended). Ratings of A and A- fall under the “excellent” category, which is the second highest of ten ratings categories. Ratings of B+ fall under the "good" category, which is the third highest of ten ratings categories.
(2)
Moody’s insurance financial strength ratings range from “Aaa” (exceptional) to “C” (extremely poor). A numeric modifier may be appended to ratings from “Aa” to “Caa” to indicate relative position within a category, with 1 being the highest and 3 being the lowest. Ratings of A2 and A3 are considered “good” and fall within the third highest of the nine ratings categories. Ratings of Ba1 are subject to substantial credit risk and fall within the fifth highest of the nine ratings categories.
(3)
S&P’s insurer financial strength ratings range from “AAA” (extremely strong) to “R” (under regulatory supervision). A “+” or “-” may be appended to ratings from categories AA to CCC to indicate relative position within a category. Ratings of A and A- (strong) and BB+ (vulnerable) are within the third and fifth highest of the nine ratings categories, respectively.
(4)
A.M. Best has a stable outlook on all of the ratings of the above entities, except for Union Security Insurance Company and Union Security Life Insurance Company of New York, which are under review with negative implications, and the dental HMO entities, which are under review with positive implications.
(5)
Moody's has a stable outlook on all of the ratings of the above entities, except for John Alden Life Insurance Company and Time Insurance Company, which have a negative outlook.
(6)
S&P has a stable outlook on all of the ratings of the above entities, except for Union Security Insurance Company, which is on Creditwatch Positive.


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Enterprise Risk Management
As an insurer, we are exposed to a wide variety of financial, operational and other risks, as described in Item 1A, “Risk Factors.” Enterprise risk management (“ERM”) is, therefore, a key component of our business strategies, policies, and procedures. Our ERM process is an iterative approach with the following key phases:
1.
Risk identification;
2.
High-level estimation of risk likelihood and severity;
3.
Risk prioritization at the business and enterprise levels;
4.
Scenario analysis and detailed modeling of likelihood and severity of key enterprise risks;
5.
Use of quantitative results and subject matter expert opinion to help guide business strategy and decision making.
Through our ERM process and our enterprise risk quantification model, we monitor a variety of risk metrics on an ongoing basis, with a particular focus on impact to net income (both GAAP and Statutory), company value and the potential need for capital infusions to subsidiaries under severe stress scenarios. The analysis of capital under stress scenarios informs our capital management actions and helps ensure our continued ability to pay policyholder benefits.
The Company’s ERM activities are coordinated by an Enterprise Risk Management Committee (“ERMC”), which includes managers from across the Company with knowledge of the Company’s business activities, including representation from the Compliance, Actuarial, Information Technology, Finance, Internal Audit and Asset Management departments. The ERMC develops risk assessment and risk management policies and procedures. It facilitates the identification, reporting and prioritizing of risks faced by the Company, and is responsible for promoting a risk-aware culture throughout the organization. The ERMC also coordinates with each of the Company’s Business Unit Risk Committees (“BURCs”), which meet regularly and are responsible for the identification of significant risks affecting their respective business units.
Our Board of Directors and senior management are responsible for overseeing significant enterprise risks. The ERMC presents its work periodically to the Board of Directors and its Finance and Investment Committee.
Through the use of regular committee meetings, business unit and enterprise risk inventory templates and dashboards, hypothetical scenario analysis, and quantitative modeling, the Company strives to identify, track, quantify, communicate and manage our key risks in a manner consistent with our risk appetite and high level strategy.
Our ERM process continues to evolve, and, when appropriate, we incorporate methodology changes, policy modifications and emerging best practices on an ongoing basis.    
Regulation 
The Company is subject to extensive federal, state and international regulation and supervision in the jurisdictions where it does business. Regulations vary from jurisdiction to jurisdiction. In 2015, the Company announced a strategic realignment of its portfolio to focus on specialty housing and lifestyle protection products and services. As a result of the partial sale of Assurant Health and the runoff of the remaining business and the impending sale of Assurant Employee Benefits, a number of regulations are or will soon be no longer relevant for Assurant. The following is a summary of significant regulations that apply to our businesses, and where applicable, our health business wind-down operations, but is not intended to be a comprehensive review of every regulation to which the Company is subject. For information on the risks associated with regulations applicable to the Company, please see Item 1A, “Risk Factors.”  
U.S. Insurance Regulation
We are subject to the insurance holding company laws in the states where our insurance companies are domiciled. These laws generally require insurance companies within the insurance holding company system to register with the insurance departments of their respective states of domicile and to furnish reports to such insurance departments regarding capital structure, ownership, financial condition, general business operations and intercompany transactions. These laws also require that transactions between affiliated companies be fair and equitable. In addition, certain intercompany transactions, changes of control, certain dividend payments and transfers of assets between the companies within the holding company system are subject to prior notice to, or approval by, state regulatory authorities.
Like all U.S. insurance companies, our insurance subsidiaries are subject to regulation and supervision in the jurisdictions where they do business. In general, these regulations are designed to protect the interests of policyholders, and not necessarily the interests of shareholders and other investors. To that end, the laws of the various states and other jurisdictions establish insurance departments with broad powers with respect to such things as:
licensing;
capital, surplus and dividends;

11


underwriting requirements and limitations (including, in some cases, minimum or target loss ratios);
entrance into and exit from states;
introduction, cancellation and termination of certain coverages;
statutory accounting and annual statement disclosure requirements;
product types, policy forms and mandated insurance benefits;
premium rates;
fines, penalties and assessments;
claims practices, including occasional regulatory requirements to pay claims on terms other than those mandated by underlying policy contracts;
transactions between affiliates;
the form and content of disclosures to consumers;
the type, amounts and valuation of investments;
annual tests of solvency and reserve adequacy;
assessments or other surcharges for guaranty funds and the recovery of assessments through premium increases; and  
market conduct and sales practices of insurers and agents.
     Dividend Payment Limitations. Our holding company’s assets consist primarily of the capital stock of our subsidiaries. Accordingly, our holding company’s future cash flows depend upon the availability of dividends and other statutorily permissible payments from our subsidiaries. The ability to pay such dividends and to make such other payments is regulated by the states in which our subsidiaries are domiciled. These dividend regulations vary from state to state and by type of insurance provided by the applicable subsidiary, but generally require our insurance subsidiaries to maintain minimum solvency requirements and limit the amount of dividends these subsidiaries can pay to the holding company. For more information, please see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Regulatory Requirements.”
 Risk-Based Capital Requirements. In order to enhance the regulation of insurer solvency, the National Association of Insurance Commissioners (“NAIC”) has established certain risk-based capital standards applicable to life, health and property and casualty insurers. Risk-based capital, which regulators use to assess the sufficiency of an insurer’s statutory capital, is calculated by applying factors to various asset, premium, expense, liability and reserve items. Factors are higher for items which in the NAIC’s view have greater underlying risk. The NAIC periodically reviews the risk-based capital formula and changes to the formula could occur in the future.  
Investment Regulation. Insurance company investments must comply with applicable laws and regulations that prescribe the kind, quality and concentration of investments. These regulations require diversification of insurance company investment portfolios and limit the amount of investments in certain asset categories.  
Financial Reporting. Regulators closely monitor the financial condition of licensed insurance companies. Our insurance subsidiaries are required to file periodic financial reports with insurance regulators. Moreover, states regulate the form and content of these statutory financial statements.  
Products and Coverage. Insurance regulators have broad authority to regulate many aspects of our products and services. For example, some jurisdictions require insurers to provide coverage to persons who would not be considered eligible insurance risks under standard underwriting criteria, dictating the types of insurance and the level of coverage that must be provided to such applicants. Additionally, certain non-insurance products and services, such as service contracts, may be regulated by regulatory bodies other than departments of insurance.  
Pricing and Premium Rates. Nearly all states have insurance laws requiring insurers to file price schedules and policy forms with the state’s regulatory authority. In many cases, these price schedules and/or policy forms must be approved prior to use, and state insurance departments have the power to disapprove increases or require decreases in the premium rates we charge.  
Market Conduct Regulation. Activities of insurers are highly regulated by state insurance laws and regulations, which govern the form and content of disclosure to consumers, advertising, sales practices and complaint handling. State regulatory authorities enforce compliance through periodic market conduct examinations.  
Guaranty Associations and Indemnity Funds. Most states require insurance companies to support guaranty associations or indemnity funds, which are established to pay claims on behalf of insolvent insurance companies. These associations may levy assessments on member insurers. In some states member insurers can recover a portion of these assessments through premium tax offsets and/or policyholder surcharges.  

12


Insurance Regulatory Initiatives. The NAIC, state regulators and professional organizations have considered and are considering various proposals that may alter or increase state authority to regulate insurance companies and insurance holding companies. Please see Item 1A, “Risk Factors - Risks Related to Our Industry - Changes in regulation may reduce our profitability and limit our growth” for a discussion of the risks related to such initiatives.  
Federal Regulation
Patient Protection and Affordable Care Act. Although health insurance is generally regulated at the state level, the Affordable Care Act introduced a significant component of federal regulation for health insurers. Although the Assurant Health business is in run-off, some provisions of the Affordable Care Act continue to apply to us. In particular, provisions of the Affordable Care Act and related reforms include a requirement that we pay premium rebates to customers if the loss ratios for some of our product lines are less than specified percentages; changes in the benefits provided under some of our products; elimination of limits on lifetime and annual benefit maximums; a prohibition from imposing any pre-existing condition exclusion; limits on our ability to rescind coverage for persons who have misrepresented or omitted material information when they applied for coverage and, elimination of our ability to underwrite health insurance products with certain narrow exceptions; mandated essential health benefits; new and higher taxes and fees and limitations on the deductibility of compensation and certain other payments; and the need to operate with a lower expense structure at both the business segment and enterprise level. Additionally, under the Affordable Care Act, significant premium stabilization programs became effective in 2014. These reinsurance, risk adjustment, and risk corridor programs impose certain requirements on us, including, among other things, that we make contributions to fund the reinsurance program and, under some circumstances, risk transfer payments related to the risk adjustment program and payments to the Department of Health and Human Services related to the risk corridor program.  
Employee Retirement Income Security Act. Because we provide products and services for certain U.S. employee benefit plans, we are subject to regulation under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). ERISA places certain requirements on how the Company may do business with employers that maintain employee benefit plans covered by ERISA. Among other things, regulations under ERISA set standards for certain notice and disclosure requirements and for claim processing and appeals. In addition, some of our administrative services and other activities may also be subject to regulation under ERISA.  
HIPAA, HITECH Act and Gramm-Leach-Bliley Act. The Health Insurance Portability and Accountability Act of 1996, along with its implementing regulations (“HIPAA”), impose various requirements on health insurers, HMOs, health plans and health care providers. Among other things, Assurant Health and Assurant Employee Benefits are subject to HIPAA regulations requiring certain guaranteed issuance and renewability of health insurance coverage for individuals and small groups (generally groups with 50 or fewer employees) and limitations on exclusions based on pre-existing conditions. HIPAA also imposes administrative simplification requirements for electronic transactions.  
HIPAA also imposes requirements on health insurers, health plans and health care providers to ensure the privacy and security of protected health information. These privacy and security provisions were further expanded by the privacy provisions contained in the Health Information Technology for Economic and Clinical Health Act (the “HITECH Act”) and its accompanying Omnibus Rule enacted in January 2013, which enhances penalties for violations of HIPAA and requires regulated entities to provide notice of security breaches of protected health information to individuals and HHS. In addition, certain of our activities are subject to the privacy regulations of the Gramm-Leach-Bliley Act, which, along with regulations adopted thereunder, generally requires insurers to provide customers with notice regarding how their non-public personal health and financial information is used, and to provide them with the opportunity to “opt out” of certain disclosures, if applicable.  
Dodd-Frank Wall Street Reform and Consumer Protection Act. Regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) address mortgage servicers’ obligations to correct errors asserted by mortgage loan borrowers; to provide certain information requested by such borrowers; and to provide protections to such borrowers; in connection with lender-placed insurance; and these requirements affect our operations because, in many instances, we administer such operations on behalf of our mortgage servicer clients. While the CFPB does not have direct jurisdiction over insurance products, it is possible that additional regulations promulgated by the CFPB, such as those mentioned, may extend its authority more broadly to cover these products and thereby affect the Company or our clients.
 International Regulation
We are subject to regulation and supervision of our international operations in various jurisdictions. These regulations, which vary depending on the jurisdiction, include anti-corruption laws; solvency and market conduct regulations; various privacy, insurance, tax, tariff and trade laws and regulations; and corporate, employment, intellectual property and investment laws and regulations.
Outside the U.S., the Company operates in Canada, the U.K., Ireland, France, Argentina, Brazil, Puerto Rico, Chile, Germany, Spain, Italy, Mexico and China and our businesses are supervised by local regulatory authorities of these

13


jurisdictions. We also have business activities in Peru, Colombia and South Korea where we have gained access to these markets by registering certain entities, where required, to act as reinsurers.  
Our operations in the U.K., for example, are subject to regulation by the Financial Conduct Authority and Prudential Regulation Authority. Authorized insurers are generally permitted to operate throughout the rest of the European Union, subject to satisfying certain requirements of these regulatory bodies and meeting additional local regulatory requirements.  
We are also subject to certain U.S. and foreign laws applicable to businesses generally, including anti-corruption laws. The Foreign Corrupt Practices Act of 1977 (the “FCPA”) regulates U.S. companies in their dealings with foreign officials, prohibiting bribes and similar practices. In addition, the U.K. Anti-Bribery Act has wide applicability to certain activities that affect U.K. companies, their commercial activities in the U.K., and potentially that of their affiliates located outside of the U.K.  
Additionally, the International Association of Insurance Supervisors (the “IAIS”) is developing a model common framework (“ComFrame”) for the supervision of Internationally Active Insurance Groups (“IAIGs”), which includes additional group-wide supervisory oversight across national boundaries and the establishment of ongoing supervisory colleges. The IAIS has announced that it expects by 2016 to develop a risk-based global insurance capital standard applicable to IAIGs, with full implementation beginning in 2019. As of December 31, 2015, Assurant meets the numerical criteria to qualify as an IAIG, but the decision whether to treat Assurant as an IAIG is left to the discretion of its domestic and foreign insurance regulators. Should such regulators decide to treat Assurant as an IAIG, Assurant will be subject to the additional requirements of ComFrame. At this time, we cannot predict whether our insurance regulators will treat us as an IAIG, and what additional capital requirements, compliance costs or other burdens these requirements would impose on us, if we were subject to them.  
Securities and Corporate Governance Regulation  
As a company with publicly-traded securities, Assurant is subject to certain legal and regulatory requirements applicable generally to public companies, including the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and the New York Stock Exchange (the “NYSE”) relating to public reporting and disclosure, accounting and financial reporting, and corporate governance matters. Additionally, Assurant, Inc. is subject to the corporate governance laws of Delaware, its state of incorporation.  
Environmental Regulation  
Because we own and operate real property, we are subject to federal, state and local environmental laws. Potential environmental liabilities and costs in connection with any required remediation of such properties is an inherent risk in property ownership and operation. Under the laws of several states, contamination of a property may give rise to a lien on the property to secure recovery of the costs of the cleanup, which could have priority over the lien of an existing mortgage against the property and thereby impair our ability to foreclose on that property should the related loan be in default. In addition, under certain circumstances, we may be liable for the costs of addressing releases or threatened releases of hazardous substances at properties securing mortgage loans held by us.
Other Non-Insurance Regulation
As the Company continues to evolve its business mix to cover other non-insurance based products and services, it becomes subject to other legal and regulatory requirements, including regulations of the Consumer Financial Protection Bureau and other federal, state and municipal regulatory bodies, as well as additional regulatory bodies in non-U.S. jurisdictions.
Other Information 
Customer Concentration 
No one customer or group of affiliated customers accounts for 10% or more of the Company’s consolidated revenues. 
Employees 
We had approximately 16,700 employees as of January 31, 2016. Assurant Solutions has employees in Argentina, Brazil, Italy, Spain and Mexico that are represented by labor unions and trade organizations. We believe that employee relations are satisfactory. 
Sources of Liquidity 
For a discussion of the Company’s sources and uses of funds, see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources,” and Note 15 to the Consolidated Financial Statements contained elsewhere in this report. 
Taxation 

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For a discussion of tax matters affecting the Company and its operations, see Note 8 to the Consolidated Financial Statements contained elsewhere in this report. 
Financial Information about Reportable Business Segments 
For financial information regarding reportable business segments of the Company, see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note 22 to the Consolidated Financial Statements contained elsewhere in this report. 
Available Information 
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, the Statements of Beneficial Ownership of Securities on Forms 3, 4 and 5 for our Directors and Officers and all amendments to such reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge through the SEC website at www.sec.gov . These documents are also available at the SEC's Public Reference Room at 100F Street, NE, Washington, DC 20549. Further information on the operation of the Public Reference room can be found by calling the SEC at 1-800-SEC-0330. These documents are also available free of charge through the Investor Relations page of our website ( www.assurant.com ) as soon as reasonably practicable after filing. Other information found on our website is not part of this or any other report filed with or furnished to the SEC.
Item 1A. Risk Factors 
Certain factors may have a material adverse effect on our business, financial condition and results of operations and you should carefully consider them. It is not possible to predict or identify all such factors.
Risks Related to Our Company 
Our revenues and profits may decline if we are unable to maintain relationships with significant clients, distributors and other parties important to the success of our business. 
The success of our business depends largely on our relationships and contractual arrangements with significant clients-including mortgage servicers, lenders, mobile device carriers, retailers, OEMs and others-and with brokers, agents and other parties. Many of these arrangements are exclusive and some rely on preferred provider or similar relationships. If our key clients, intermediaries or other parties terminate important business arrangements with us, or renew contracts on terms less favorable to us, our cash flows, results of operations and financial condition could be materially adversely affected. In addition, each of our Assurant Solutions and Assurant Specialty Property segments receives a substantial portion of its revenue from a few clients. As of December 31, 2015 no single client accounted for 10% or more of our consolidated revenue. However, a reduction in business with or the loss of one or more of our significant clients could have a material adverse effect on the results of operations and cash flows of individual segments or of the Company. Examples of important business arrangement include, at Assurant Solutions, relationships with mobile device carriers, retailers and financial and other institutions through which we distribute our products, including an exclusive distribution relationship with SCI relating to the distribution of our preneed insurance policies. In Assurant Specialty Property, we have exclusive and non-exclusive relationships with certain mortgage lenders and manufactured housing lenders and property managers, and in turn we are eligible to insure properties securing loans guaranteed by or sold to government-sponsored entities (“GSEs”) and serviced by the mortgage loan servicers with whom we do business. In our lender-placed insurance business, the change in requirements for eligibility to insure properties securing loans of GSEs-and restrictions imposed by state regulators-could affect our ability to do business with certain mortgage loan servicers or the volume or profitability of such business. In addition, the transfer by mortgage servicer clients of loan portfolios to other carriers or the participation by other carriers in insuring or reinsuring lender-placed insurance risks that we have historically insured could materially reduce our revenues and profits from this business.
We are also subject to the risk that clients, distributors and other parties may face financial difficulties, reputational issues or problems with respect to their own products and services or regulatory restrictions that may lead to decreased sales of our products and services. Moreover, if one or more of our clients or distributors consolidate or align themselves with other companies, we may lose significant business, resulting in material decreases in revenues and profits.
Significant competitive pressures could affect our results of operations. 
We compete for customers and distributors with many insurance companies and other financial services companies for business and individual customers, employer and other group customers, agents, brokers and other distribution relationships, and with logistics and mobile device repair companies for the business of cell phone carriers and original equipment manufacturers. Some of our competitors may offer a broader array of products than our subsidiaries or have a greater diversity of distribution resources, better brand recognition, more competitive pricing, lower costs, greater financial strength, more resources, or higher ratings. 

15


Many of our insurance products, particularly our group benefits policies, are underwritten annually. There is a risk that group purchasers may be able to obtain more favorable terms from competitors, rather than renewing coverage with us. As a result, competition may adversely affect the persistency of our policies, as well as our ability to sell products. In addition, some of our competitors may price their products below ours, putting us at a competitive disadvantage and potentially adversely affecting our revenues and results of operations. 
Additionally, for Assurant Solutions, our ability to adequately and effectively price our products is affected by, among other things, the evolving nature of consumer needs and preferences and improvements in technology, which could cause us to reduce the price of products and services we offer. For Assurant Specialty Property, our lender-placed homeowners insurance program and certain of our manufactured housing products are not underwritten on an individual policy basis and our contracts with clients require us to issue these policies automatically when a borrower’s insurance coverage is not maintained. Consequently, our inability to adequately monitor and provide for pricing adequacy for these products, subject to regulatory constraints, could potentially adversely affect our results of operations.
New competition and technological advancements could also cause the supply of insurance to change, which could affect our ability to price our products at attractive rates and thereby adversely affect our underwriting results. Although there are some impediments facing potential competitors who wish to enter the markets we serve, the entry of new competitors into our markets can occur, affording our customers significant flexibility in moving to other insurance providers. 
In our lender-placed insurance business, we use a proprietary insurance-tracking administration system linked with the administrative systems of our clients to monitor the clients’ mortgage portfolios to verify the existence of insurance on each mortgaged property and identify those that are uninsured. If, in addition to our current competitors, others in this industry develop a competing system or equivalent administering capabilities, this could reduce the revenues and results of operations in this business.
A number of factors outside the Company's control could impair the Company's ability to close the sale of the Assurant Employee Benefits segment and complete the wind-down of the Assurant Health segment.
The sale of Assurant Employee Benefits and wind-down of Assurant Health involve a number of challenges, uncertainties and risks, including the risk related to the closing of the Assurant Employee Benefits transaction and regulatory risk related to the wind-down of Assurant Health.
Sales of our products and services may decline if we are unable to attract and retain sales representatives or to develop and maintain distribution sources. 
We distribute many of our insurance products and services through a variety of distribution channels, including independent employee benefits specialists, brokers, managing general agents, life agents, financial institutions, mortgage lenders and servicers, retailers, funeral homes, association groups and other third-party marketing organizations. 
Our relationships with these distributors are significant both for our revenues and profits. We do not distribute our insurance products and services through captive or affiliated agents. In Assurant Employee Benefits, independent agents and brokers who act as advisors to our customers market and distribute our products. There is intense competition between insurers to form relationships with agents and brokers of demonstrated ability. We compete with other insurers for relationships with agents, brokers, and other intermediaries primarily on the basis of our financial position, support services, product features and, more generally, through our ability to meet the needs of their clients, our customers. Independent agents and brokers are typically not exclusively dedicated to us, but instead usually also market the products of our competitors and therefore we face continued competition from our competitors’ products. Moreover, our ability to market our products and services depends on our ability to tailor our channels of distribution to comply with changes in the regulatory environment in which we and such agents and brokers operate. 
We have our own sales representatives whose distribution process varies by segment. We depend in large part on our sales representatives to develop and maintain client relationships. Our inability to attract and retain effective sales representatives could materially adversely affect our results of operations and financial condition.
General economic, financial market and political conditions may materially adversely affect our results of operations and financial condition. Particularly, difficult conditions in financial markets and the global economy may negatively affect the results of all of our business segments. 
General economic, financial market and political disruptions could have a material adverse effect on our results of operations and financial condition. Limited availability of credit, deteriorations of the global mortgage and real estate markets, declines in consumer confidence and consumer spending, increases in prices or in the rate of inflation, continuing periods of high unemployment, or disruptive geopolitical events could contribute to increased volatility and diminished expectations for the economy and the financial markets, including the market for our stock. These conditions could also affect all of our business segments. Specifically, during periods of economic downturn:

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individuals and businesses may (i) choose not to purchase our insurance products, warranties and other related products and services, (ii) terminate existing policies or contracts or permit them to lapse, and (iii) choose to reduce the amount of coverage they purchase;
clients are more likely to experience financial distress or declare bankruptcy or liquidation which could have an adverse impact on the remittance of premiums from such clients as well as the collection of receivables from such clients for items such as unearned premiums;
disability insurance claims and claims on other specialized insurance products tend to rise;
there is a higher loss ratio on credit card and installment loan insurance due to rising unemployment and disability levels;
there is an increased risk of fraudulent insurance claims;
insureds tend to increase their utilization of health and dental benefits if they anticipate becoming unemployed or losing benefits; and
substantial decreases in loan availability and origination could reduce the demand for credit insurance that we write or debt cancellation or debt deferment products that we administer, and on the placement of hazard insurance under our lender-placed insurance programs.
General inflationary pressures may affect the costs of medical and dental care, as well as repair and replacement costs on our real and personal property lines, increasing the costs of paying claims. Inflationary pressures may also affect the costs associated with our preneed insurance policies, particularly those that are guaranteed to grow with the Consumer Price Index (or “CPI”). Conversely, deflationary pressures may affect the pricing of our products. 
Additionally, continued uncertainty surrounding the U.S. Federal Reserve’s monetary policy could adversely affect the U.S. and global economy.
Our actual claims losses may exceed our reserves for claims, and this may require us to establish additional reserves that may materially affect our results of operations, profitability and capital. 
We maintain reserves to cover our estimated ultimate exposure for claims and claim adjustment expenses with respect to reported claims and incurred but not reported claims (“IBNR”) as of the end of each accounting period. Whether calculated under GAAP, Statutory Accounting Principles (“SAP”) or accounting principles applicable in foreign jurisdictions, reserves are estimates. Reserving is inherently a matter of judgment; our ultimate liabilities could exceed reserves for a variety of reasons, including changes in macroeconomic factors (such as unemployment and interest rates), case development and other factors. From time to time, we also adjust our reserves, and may adjust our reserving methodology, as these factors and our claims experience changes. Reserve development, changes in our reserving methodology and paid losses exceeding corresponding reserves could have a material adverse effect on our results of operations. Please see “Item 7 - Management’s Discussion & Analysis - Critical Accounting Policies & Estimates - Reserves” for additional detail on our reserves. 
We may be unable to accurately predict and price for benefits, claims and other costs, which could reduce our profitability. 
Our profitability could vary depending on our ability to predict and price for benefits, claims and other costs including, but not limited to, medical and dental costs, disability claims and the frequency and severity of property claims. This ability could be affected by factors such as inflation, changes in the regulatory environment, changes in industry practices, changes in legal, social or environmental conditions, new treatments or technologies. Political or economic conditions can also affect the availability of programs (for example, the Social Security disability program) on which our business may rely to accurately predict benefits and claims. The inability to accurately predict and price for benefits, claims and other costs could materially adversely affect our results of operations and financial condition.
Catastrophe losses, including man-made catastrophe losses, could materially reduce our profitability and have a material adverse effect on our results of operations and financial condition. 
Our insurance operations expose us to claims arising out of catastrophes, particularly in our homeowners, life and other health insurance businesses. We have experienced, and expect to experience, catastrophe losses that materially reduce our profitability or have a material adverse effect on our results of operations and financial condition. Catastrophes can be caused by various natural events, including, but not limited to, hurricanes, windstorms, earthquakes, hailstorms, floods, severe winter weather, fires, epidemics and the long-term effects of climate change, or can be man-made catastrophes, including terrorist attacks or accidents such as airplane crashes. While the frequency and severity of catastrophes are inherently unpredictable, increases in the value and geographic concentration of insured property, the geographic concentration of insured lives, and the effects of inflation could increase the severity of claims from future catastrophes. 
Catastrophe losses can vary widely and could significantly exceed our expectations. They may cause substantial volatility in our financial results for any fiscal quarter or year and could materially reduce our profitability or materially adversely affect our financial condition. Our ability to write new business also could be affected.

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Accounting rules do not permit insurers to reserve for such catastrophic events before they occur. In addition, the establishment of appropriate reserves, including reserves for catastrophes, is an inherently uncertain and complex process. The ultimate cost of losses may vary materially from recorded reserves and such variance may have a material adverse effect on our results of operations and financial condition. 
If the severity of an event were sufficiently high (for example, in the event of an extremely large catastrophe), it could exceed our reinsurance coverage limits and could have a material adverse effect on our results of operations and financial condition. We may also lose premium income due to a large-scale business interruption caused by a catastrophe combined with legislative or regulatory reactions to the event. 
We use catastrophe modeling tools that help estimate our exposure to such events, but these tools are based on historical data and other assumptions that may provide projections that are materially different from the actual events. 
Because Assurant Specialty Property’s lender-placed homeowners and lender-placed manufactured housing insurance products are designed to automatically provide property coverage for client portfolios, our concentration in certain catastrophe-prone states like Florida, California, Texas and New York may increase. Furthermore, the withdrawal of other insurers from these or other states may lead to adverse selection and increased use of our products in these areas and may negatively affect our loss experience. 
The exact impact of the physical effects of climate change is uncertain. It is possible that changes in the global climate may cause long-term increases in the frequency and severity of storms, resulting in higher catastrophe losses, which could materially affect our results of operations and financial condition. 
Our group life and health insurance operations could be materially impacted by catastrophes such as a terrorist attack, a natural disaster, a pandemic or an epidemic that causes a widespread increase in mortality or disability rates or that causes an increase in the need for medical care. In addition, with respect to our preneed insurance policies, the average age of policyholders is approximately 73 years. This group is more susceptible to certain epidemics than the overall population, and an epidemic resulting in a higher incidence of mortality could have a material adverse effect on our results of operations and financial condition. 
A.M. Best, Moody’s, and S&P rate the financial strength of our insurance company subsidiaries, and a decline in these ratings could affect our standing in the insurance industry and cause our sales and earnings to decrease. 
Ratings are important considerations in establishing the competitive position of insurance companies. A.M. Best rates most of our domestic operating insurance subsidiaries. Moody’s rates six of our domestic operating insurance subsidiaries and S&P rates seven of our domestic operating insurance subsidiaries. These ratings are subject to periodic review by A.M. Best, Moody’s, and S&P, and we cannot assure that we will be able to retain them. In 2015, Time Insurance Company and John Alden Life Insurance Company experienced multiple rating actions as a result of Assurant’s decision to exit the health insurance market in 2016 and higher than anticipated losses in 2015. The following actions took place: A.M. Best downgraded the companies from A- to B+, Moody’s downgraded the companies from Baa2 to Ba1 and revised the outlook to negative, and S&P downgraded the companies from BBB to BB+. A.M. Best also placed the ratings of Union Security Insurance Company and Union Security Life Insurance Company of New York under review with negative implications due to the possible diminished business profile of the entities after the close of the Assurant Employee Benefits sale. 
Rating agencies may change their methodology or requirements for determining ratings, or they may become more conservative in assigning ratings. Rating agencies or regulators could also increase capital requirements for the Company or its subsidiaries. Any reduction in our ratings could materially adversely affect the demand for our products from intermediaries and consumers and materially adversely affect our results. In addition, any reduction in our financial strength ratings could materially adversely affect our cost of borrowing. 
As of December 31, 2015, contracts representing approximately 33% of Assurant Solutions’ and 27% of Assurant Specialty Property’s net earned premiums and fee income contain provisions requiring the applicable subsidiaries to maintain minimum A.M. Best financial strength ratings ranging from “A” or better to “B” or better, depending on the contract. Our clients may terminate these contracts or fail to renew them if the subsidiaries’ ratings fall below these minimums. Termination or failure to renew these agreements could materially and adversely affect our results of operations and financial condition. 
Additionally, certain contracts in the DRMS business, representing approximately 5% of Assurant Employee Benefits’ net earned premiums for the year ended December 31, 2015 contain provisions requiring the applicable subsidiaries to maintain minimum A.M. Best financial strength ratings of “A-” or better. DRMS clients may terminate the agreements and, in some instances, recapture in-force business if the ratings of applicable subsidiaries fall below “A-”.
We face risks associated with our international operations. 
Our international operations face political, legal, operational and other risks that we may not face in our domestic operations. For example, we may face the risk of restrictions on currency conversion or the transfer of funds; burdens and costs

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of compliance with a variety of foreign laws; political or economic instability in countries in which we conduct business, including possible terrorist acts; inflation and foreign exchange rate fluctuations; diminished ability to enforce our contractual rights; differences in cultural environments and unexpected changes in regulatory requirements, including changes in regulatory treatment of certain products; exposure to local economic conditions and restrictions on the repatriation of non-U.S. investment and earnings; and potentially substantial tax liabilities if we repatriate the cash generated by our international operations back to the U.S. 
If our business model is not successful in a particular country, we may lose all or most of our investment in that country. As we continue to expand in select worldwide markets, our business becomes increasingly exposed to these risks identified above where certain countries have recently experienced economic instability. 
In addition, as we engage with international clients, we have made certain up-front commission payments and similar cash outlays, which we may not recover if the business does not materialize as we expect. These up-front payments are typically supported by various protections, such as letters of guarantee, but we may not recover our initial outlays and other amounts owed to us fully or timely. As our international business grows, we rely increasingly on fronting carriers or intermediaries in certain other countries to maintain their licenses and product approvals, satisfy local regulatory requirements and continue in business. 
For information on the significant international regulations that apply to our Company, please see Item 1, “Business - Regulation - International Regulation.” 
Fluctuations in the exchange rate of the U.S. dollar and other foreign currencies may materially and adversely affect our results of operations. 
While most of our costs and revenues are in U.S. dollars, some are in other currencies. Because our financial results in certain countries are translated from local currency into U.S. dollars upon consolidation, the results of our operations may be affected by foreign exchange rate fluctuations. To a large extent, we do not currently hedge foreign currency risk. If the U.S. dollar weakens against the local currency, the translation of these foreign-currency-denominated balances will result in increased net assets, net revenue, operating expenses, and net income or loss. Similarly, our net assets, net revenue, operating expenses, and net income or loss will decrease if the U.S. dollar strengthens against local currency. For example, Argentina, a country in which Assurant Solutions operates, is currently undergoing a currency crisis. These fluctuations in currency exchange rates may result in gains or losses that materially and adversely affect our results of operations.
An impairment of goodwill or other intangible assets could materially affect our results of operations and book value. 
Goodwill represented $833,512 of our $30,043,128 in total assets as of December 31, 2015. We review our goodwill annually in the fourth quarter for impairment or more frequently if circumstances indicating that the asset may be impaired exist. Such circumstances could include a sustained significant decline in our share price, a decline in our actual or expected future cash flows or income, a significant adverse change in the business climate, or slower growth rates, among others. Circumstances such as those mentioned above could trigger an impairment of some or all of the remaining goodwill on our balance sheet, which could have a material adverse effect on our profitability and book value per share. For more information on our annual goodwill impairment testing and the goodwill of our segments, please see “Item 7 - Management's Discussion and Analysis - Critical Factors Affecting Results - Value and Recoverability of Goodwill.” In addition, other intangible assets collectively represented $277,163 of our total assets as of December 31, 2015, and an impairment of these other intangible assets could have a material adverse effect on our profitability and book value per share. 
 Unfavorable conditions in the capital and credit markets may significantly and adversely affect our access to capital and our ability to pay our debts or expenses. 
In previous years, the global capital and credit markets experienced extreme volatility and disruption. In many cases, companies’ ability to raise money was severely restricted. Although conditions in the capital and credit markets have improved significantly, they could again deteriorate. Our ability to borrow or raise money is important if our operating cash flow is insufficient to pay our expenses, meet capital requirements, repay debt, pay dividends on our common stock or make investments. The principal sources of our liquidity are insurance premiums, fee income, cash flow from our investment portfolio and liquid assets, consisting mainly of cash or assets that are readily convertible into cash. Sources of liquidity in normal markets also include a variety of short-and long-term instruments. 
If our access to capital markets is restricted, our cost of capital could increase, thus decreasing our profitability and reducing our financial flexibility. Our results of operations, financial condition, cash flows and statutory capital position could be materially and adversely affected by disruptions in the capital markets. 
The value of our investments could decline, affecting our profitability and financial strength. 
Investment returns are an important part of our profitability. Significant fluctuations in the fixed maturity market could impair our profitability, financial condition and cash flows. Our investments are subject to market-wide risks and fluctuations,

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as well as to risks inherent in particular securities. In addition, certain factors affecting our business, such as volatility of claims experience, could force us to liquidate securities prior to maturity, causing us to incur capital losses. See “Item 7A - Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk.” 
Market conditions, changes in interest rates, and prolonged periods of low interest rates may materially affect our results. 
Recent periods have been characterized by low interest rates. A prolonged period during which interest rates remain at historically low levels may result in lower-than-expected net investment income and larger required reserves. In addition, certain statutory capital requirements are based on formulas or models that consider interest rates and a prolonged period of low interest rates may increase the statutory capital we are required to hold. 
Changes in interest rates may materially adversely affect the performance of some of our investments. Interest rate volatility may increase or reduce unrealized gains or unrealized losses in our portfolios. Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. Fixed maturity and short-term investments represented 82% of the fair value of our total investments as of December 31, 2015. 
The fair market value of the fixed maturity securities in our portfolio and the investment income from these securities fluctuate depending on general economic and market conditions. Because all of our fixed maturity securities are classified as available for sale, changes in the market value of these securities are reflected in our consolidated balance sheets. Their fair market value generally increases or decreases in an inverse relationship with fluctuations in interest rates, while net investment income from fixed maturity investments increases or decreases directly with interest rates. In addition, actual net investment income and cash flows from investments that carry prepayment risk, such as mortgage-backed and other asset-backed securities may differ from those anticipated at the time of investment as a result of interest rate fluctuations. An increase in interest rates will also decrease the net unrealized gains in our current investment portfolio. 
We employ asset/liability management strategies to manage the adverse effects of interest rate volatility and the likelihood that cash flows are unavailable to pay claims as they become due. Our asset/liability management strategies do not completely eliminate the adverse effects of interest rate volatility, and significant fluctuations in the level of interest rates may require us to liquidate investments prior to maturity at a significant loss to pay claims and policyholder benefits. This could have a material adverse effect on our results of operations and financial condition. 
Our preneed insurance policies are generally whole life insurance policies with increasing death benefits. In extended periods of declining interest rates or rising inflation, there may be compression in the spread between the death benefit growth rates on these policies and the investment income that we can earn, resulting in a negative spread. As a result, declining interest rates or high inflation rates may have a material adverse effect on our results of operations and our overall financial condition. See “Item 7A - Quantitative and Qualitative Disclosures About Market Risk - Inflation Risk” for additional information. 
Assurant Employee Benefits calculates reserves for long-term disability and life waiver of premium claims using net present value calculations based on interest rates at the time reserves are established and expectations regarding future interest rates. Waiver of premium refers to a provision in a life insurance policy pursuant to which an insured with a disability that lasts for a specified period no longer has to pay premiums for the duration of the disability or for a stated period, during which time the life insurance coverage continues. If interest rates decline, reserves for open and new claims in Assurant Employee Benefits may need to be calculated using lower discount rates, thereby increasing the net present value of those claims and the required reserves. Depending on the magnitude of the decline, such changes could have a material adverse effect on our results of operations and financial condition. In addition, investment income may be lower than that assumed in setting premium rates. 
We may be unable to grow our business as we would like if we cannot find suitable acquisition candidates at attractive prices or integrate them effectively. 
We expect acquisitions and new ventures to play a significant role in the growth of some of our businesses. We may not, however, be able to identify suitable acquisition candidates or new venture opportunities or to finance or complete such transactions on acceptable terms. Additionally, the integration of acquired businesses may result in significant challenges, and we may be unable to accomplish such integration smoothly or successfully. 
Acquired businesses and new ventures may not provide us with the benefits that we anticipate. Acquisitions entail a number of risks including, among other things, inaccurate assessment of liabilities; difficulties in realizing projected efficiencies; synergies and cost savings; difficulties in integrating systems and personnel; failure to achieve anticipated revenues, earnings or cash flow; an increase in our indebtedness; and a limitation in our ability to access additional capital when needed. Our failure to adequately address these acquisition risks could materially adversely affect our results of operations and financial condition. 
Our investment portfolio is subject to various risks that may result in realized investment losses. 

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We are subject to credit risk in our investment portfolio, primarily from our investments in corporate bonds, preferred stocks, leveraged loans, municipal bonds, and commercial mortgages. Defaults by third parties in the payment or performance of their obligations could reduce our investment income and realized investment gains or result in the continued recognition of investment losses. The value of our investments may be materially adversely affected by increases in interest rates, downgrades in the corporate bonds included in the portfolio and by other factors that may result in the continued recognition of other-than-temporary impairments. Each of these events may cause us to reduce the carrying value of our investment portfolio. 
Further, the value of any particular fixed maturity security is subject to impairment based on the creditworthiness of a given issuer. As of December 31, 2015, fixed maturity securities represented 78% of the fair value of our total invested assets. Our fixed maturity portfolio also includes below investment grade securities (rated “BB” or lower by nationally recognized statistical rating organizations). These investments comprise approximately 5% of the fair value of our total investments as of December 31, 2015 and generally provide higher expected returns but present greater risk and can be less liquid than investment grade securities. A significant increase in defaults and impairments on our fixed maturity investment portfolio could materially adversely affect our results of operations and financial condition. See “Item 7A - Quantitative and Qualitative Disclosures About Market Risk - Credit Risk” for additional information on the composition of our fixed maturity investment portfolio. 
We currently invest in a small amount of equity securities (approximately 4% of the fair value of our total investments as of December 31, 2015). However, we have had higher percentages in the past and may make more such investments in the future. Investments in equity securities generally provide higher expected total returns but present greater risk to preservation of capital than our fixed maturity investments. 
If treasury rates or credit spreads were to increase, the Company may have additional realized and unrealized investment losses and increases in other-than-temporary impairments. The determination that a security has incurred an other-than-temporary decline in value requires the judgment of management. Inherently, there are risks and uncertainties involved in making these judgments. Changes in facts, circumstances, or critical assumptions could cause management to conclude that further impairments have occurred. This could lead to additional losses on investments. For further details on net investment losses and other-than-temporary-impairments, please see Note 5 to the Consolidated Financial Statements included elsewhere in this report. 
Derivative instruments generally present greater risk than fixed maturity investments or equity investments because of their greater sensitivity to market fluctuations. Since August 1, 2003, we have been using derivative instruments to manage the exposure to inflation risk created by our preneed insurance policies that are tied to the CPI. The protection provided by these derivative instruments begins at higher levels of inflation. However, exposure can still exist due to potential differences in the amount of business and the notional amount of the protection. This could have a material adverse effect on our results of operations and financial condition. 
Our commercial mortgage loans and real estate investments subject us to liquidity risk. 
Our commercial mortgage loans on real estate investments (which represented approximately 9% of the fair value of our total investments as of December 31, 2015) are relatively illiquid. If we require extremely large amounts of cash on short notice, we may have difficulty selling these investments at attractive prices and in a timely manner.
The risk parameters of our investment portfolio may not assume an appropriate level of risk, thereby reducing our profitability and diminishing our ability to compete and grow. 
In pricing our products and services, we incorporate assumptions regarding returns on our investments. Accordingly, our investment decisions and objectives are a function of the underlying risks and product profiles of each of our operating segments. Market conditions may not allow us to invest in assets with sufficiently high returns to meet our pricing assumptions and profit targets over the long term. If, in response, we choose to increase our product prices, our ability to compete and grow may be diminished.
Environmental liability exposure may result from our commercial mortgage loan portfolio and real estate investments. 
Liability under environmental protection laws resulting from our commercial mortgage loan portfolio and real estate investments may weaken our financial strength and reduce our profitability. For more information, please see Item 1, “Business - Regulation - Environmental Regulation.” 
Unanticipated changes in tax provisions, changes in tax laws or exposure to additional income tax liabilities could materially and adversely affect our results. 
In accordance with applicable income tax guidance, the Company must determine whether its ability to realize the value of its deferred tax asset is “more likely than not.” Under the income tax guidance, a deferred tax asset should be reduced by a valuation allowance if, based on the weight of all available evidence, it is more likely than not that some portion of the deferred

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tax asset will not be realized. The realization of deferred tax assets depends upon the existence of sufficient taxable income of the same character during the carryback or carryforward periods. 
In determining the appropriate valuation allowance, management made certain judgments relating to recoverability of deferred tax assets, use of tax loss and tax credit carryforwards, levels of expected future taxable income and available tax planning strategies. The assumptions in making these judgments are updated periodically on the basis of current business conditions affecting the Company and overall economic conditions. These management judgments are therefore subject to change due to factors that include, but are not limited to, changes in our ability to realize sufficient taxable income of the same character in the same jurisdiction or in our ability to execute other tax planning strategies. Management will continue to assess and determine the need for, and the amount of, the valuation allowance in subsequent periods. Any change in the valuation allowance could have a material impact on our results of operations and financial condition. 
Changes in tax laws could increase our corporate taxes or reduce our deferred tax assets. Certain proposed changes could have the effect of increasing our effective tax rate by reducing deductions or increasing income inclusions. Conversely, other changes, such as lowering the corporate tax rate, could reduce the value of our deferred tax assets. 
Failure to protect our clients’ confidential information and privacy could harm our reputation, cause us to lose customers, reduce our profitability and subject us to fines, litigation and penalties, and the costs of compliance with privacy and security laws could adversely affect our business. 
Our businesses are subject to a variety of privacy regulations and confidentiality obligations. If we do not comply with state and federal privacy and security laws and regulations, or contractual provisions, requiring us to protect confidential information and provide notice to individuals whose information is improperly disclosed, we could experience adverse consequences, including loss of customers and related revenue, regulatory problems (including fines and penalties), harm to our reputation and civil litigation, which could adversely affect our business and results of operations. As have other entities in the insurance industry, we have incurred and will continue to incur substantial costs in complying with the requirements of applicable privacy and security laws. For more information on the privacy and security laws that apply to us, please see Item 1, “Business - Regulation.”
The failure to effectively maintain and modernize our information systems could adversely affect our business. 
Our business is dependent upon our ability to maintain the effectiveness of existing technology systems, enhance technology to support the Company’s business in an efficient and cost-effective manner, and keep current with technological advances, evolving industry and regulatory standards and customer needs. In addition, our ability to keep our systems integrated with those of our clients is critical to the success of our business. If we do not effectively maintain our systems and update them to address technological advancements, our relationships and ability to do business with our clients may be adversely affected. We could also experience other adverse consequences, including unfavorable underwriting and reserving decisions, internal control deficiencies and security breaches resulting in loss of data. System development projects may be more costly or time-consuming than anticipated and may not deliver the expected benefits upon completion. 
Failure to successfully manage outsourcing activities could adversely affect our business. 
As we continue to improve operating efficiencies across the business, we have outsourced and may outsource selected functions to third parties, including independent contractors. For example, we outsource certain key functions in our Mortgage Solutions businesses to certain independent contractors who we believe offer us expertise in this area, as well as scalability and cost effective services. We take steps to monitor and regulate the performance of these independent third parties to whom the Company has outsourced these functions. If these third parties fail to satisfy their obligations to the Company as a result of their performance, changes in their operations, financial condition or other matters beyond our control, the Company’s operations, information, service standards, reputation and data could be compromised. In particular, if we are unable to attract and retain the necessary quality and number of contracts with enough independent contractors, or if changes in law or judicial decisions require such independent contractors to be classified as employees, our Mortgage Solutions businesses could be significantly adversely affected.
In addition, to the extent the Company outsources selected services or functions to third parties outside the U.S., the Company is exposed to the risks that accompany operations in a foreign jurisdiction, including international economic and political conditions, foreign laws and fluctuations in currency values and, potentially, increased risk of data breaches. For more information on the risks associated with outsourcing to international third parties, please see Item 1A, “Risk Factors - Risks Related to Our Company - We face risks associated with our international operations.” If third party providers do not perform as anticipated, we may not fully realize the anticipated economic and other benefits of this outsourcing, which could adversely affect our results of operations and financial condition.
System security risks, data protection breaches and cyber-attacks could adversely affect our business and results of operations. 

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Our information technology systems are vulnerable to threats from computer viruses, natural disasters, unauthorized access, cyber-attack and other similar disruptions. Although we have network security measures in place, experienced computer programmers and hackers may be able to penetrate our network and misappropriate or compromise confidential information, create system disruptions or cause shutdowns. 
As an insurer, we receive and are required to protect confidential information from customers, vendors and other third parties that may include personal health or financial information. If any disruption or security breach results in a loss or damage to our data, or inappropriate disclosure of our confidential information or that of others, it could damage to our reputation, affect our relationships with our customers and clients, lead to claims against the Company, result in regulatory action and harm our business. In addition, we may be required to incur significant costs to mitigate the damage caused by any security breach or to protect against future damage.
Reinsurance may not be available or adequate to protect us against losses, and we are subject to the credit risk of reinsurers. 
As part of our overall risk and capacity management strategy, we purchase reinsurance for certain risks underwritten by our various operating segments. Although the reinsurer is liable to us for claims properly ceded under the reinsurance arrangements, we remain liable to the insured as the direct insurer on all risks reinsured. Ceded reinsurance arrangements therefore do not eliminate our obligation to pay claims. We are subject to credit risk with respect to our ability to recover amounts due from reinsurers. The inability to collect amounts due from reinsurers could materially adversely affect our results of operations and our financial condition.
Reinsurance for certain types of catastrophes could become unavailable or prohibitively expensive for some of our businesses. In such a situation, we might also be adversely affected by state regulations that prohibit us from excluding catastrophe exposures or from withdrawing from or increasing premium rates in catastrophe-prone areas. 
Our reinsurance facilities are generally subject to annual renewal. We may not be able to maintain our current reinsurance facilities and, even where highly desirable or necessary, we may not be able to obtain other reinsurance facilities in adequate amounts and at favorable rates. Inability to obtain reinsurance at favorable rates or at all could cause us to reduce the level of our underwriting commitments, to take more risk, or to incur higher costs. These developments could materially adversely affect our results of operations and financial condition.
Through reinsurance, we have sold businesses that could again become our direct financial and administrative responsibility if the reinsurers become insolvent. 
In the past, we have sold, and in the future we may sell, businesses through reinsurance ceded to third parties. For example, in 2001 we sold the insurance operations of our Fortis Financial Group (“FFG”) division to The Hartford Financial Services Group, Inc. (“The Hartford”) and in 2000 we sold our Long Term Care (“LTC”) division to John Hancock Life Insurance Company (“John Hancock”), now a subsidiary of Manulife Financial Corporation. Most of the assets backing reserves coinsured under these sales are held in trusts or separate accounts. However, if the reinsurers became insolvent, we would be exposed to the risk that the assets in the trusts and/or the separate accounts would be insufficient to support the liabilities that would revert to us. 
In January 2013, The Hartford sold its Individual Life Operations to Prudential Financial, Inc. (“Prudential”). Included in this transaction are the individual life policies remaining in force that were originally transferred to The Hartford as part of the sale of FFG. The assets backing the reserves coinsured from The Hartford to Prudential continue to be held in trusts or separate accounts, and we are subject to the risk that the trust and/or separate account assets are insufficient to support the liabilities that would revert to us. Although The Hartford remains responsible for the sufficiency of the assets backing the reserves, we face risks related to any administrative system changes Prudential implements in administering the business. 
The A.M. Best ratings of The Hartford and John Hancock are currently A- and A+, respectively. A.M. Best currently maintains a stable outlook on both The Hartford’s and John Hancock’s financial strength ratings.
We also face the risk of again becoming responsible for administering these businesses in the event of reinsurer insolvency. We do not currently have the administrative systems and capabilities to process these businesses. Accordingly, we would need to obtain those capabilities in the event of an insolvency of one or more of the reinsurers. We might be forced to obtain such capabilities on unfavorable terms with a resulting material adverse effect on our results of operations and financial condition. In addition, third parties to whom we have sold businesses in the past may in turn sell these businesses to other third parties, and we could face risks related to the new administrative systems and capabilities of these third parties in administering these businesses.
For more information on these arrangements, including the reinsurance recoverables and risk mitigation mechanisms used, please see “Item 7A - Quantitative and Qualitative Disclosures About Market Risks - Credit Risk.”

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Due to the structure of our commission program, we are exposed to risks related to the creditworthiness and reporting systems of some of our agents, third party administrations and clients in Assurant Solutions and Assurant Specialty Property.
We are subject to the credit risk of some of the clients and agents with which we contract in Assurant Solutions and Assurant Specialty Property. For example, we advance agents' commissions as part of our preneed insurance product offerings. These advances are a percentage of the total face amount of coverage. There is a one-year payback provision against the agency if death or lapse occurs within the first policy year. If SCI, which receives the largest shares of such agent commissions, were unable to fulfill its payback obligations, this could have an adverse effect on our operations and financial condition.
In addition, some of our clients, third party administrators and agents collect and report premiums or pay claims on our behalf. These parties' failure to remit all premiums collected or to pay claims on our behalf on a timely and accurate basis could have an adverse effect on our results of operations.
The inability of our subsidiaries to pay sufficient dividends to the holding company could prevent us from meeting our obligations and paying future stockholder dividends. 
As a holding company whose principal assets are the capital stock of our subsidiaries, Assurant, Inc. relies primarily on dividends and other statutorily permissible payments from our subsidiaries to meet our obligations for payment of interest and principal on outstanding debt obligations, to repurchase shares, to acquire new businesses and to pay dividends to stockholders and corporate expenses. The ability of our subsidiaries to pay dividends and to make such other payments depends on their statutory surplus, future statutory earnings, rating agency requirements and regulatory restrictions. Except to the extent that Assurant, Inc. is a creditor with recognized claims against our subsidiaries, claims of the subsidiaries’ creditors, including policyholders, have priority over creditors’ claims with respect to the assets and earnings of the subsidiaries. If any of our subsidiaries should become insolvent, liquidate or otherwise reorganize, our creditors and stockholders will have no right to proceed against their assets or to cause the liquidation, bankruptcy or winding-up of the subsidiary under applicable liquidation, bankruptcy or winding-up laws. The applicable insurance laws of the jurisdiction where each of our insurance subsidiaries is domiciled would govern any proceedings relating to that subsidiary, and the insurance authority of that jurisdiction would act as a liquidator or rehabilitator for the subsidiary. Both creditors and policyholders of the subsidiary would be entitled to payment in full from the subsidiary’s assets before Assurant, Inc., as a stockholder, would be entitled to receive any distribution from the subsidiary. 
The payment of dividends by any of our regulated domestic insurance company subsidiaries in excess of specified amounts (i.e., extraordinary dividends) must be approved by the subsidiary’s domiciliary state department of insurance. Ordinary dividends, for which no regulatory approval is generally required, are limited to amounts determined by a formula, which varies by state. The formula for the majority of the states in which our subsidiaries are domiciled is based on the prior year’s statutory net income or 10% of the statutory surplus as of the end of the prior year. Some states limit ordinary dividends to the greater of these two amounts, others limit them to the lesser of these two amounts and some states exclude prior year realized capital gains from prior year net income in determining ordinary dividend capacity. Some states have an additional stipulation that dividends may only be paid out of earned surplus. If insurance regulators determine that payment of an ordinary dividend or any other payments by our insurance subsidiaries to us (such as payments under a tax sharing agreement or payments for employee or other services) would be adverse to policyholders or creditors, they may block such payments that would otherwise be permitted without prior approval. Future regulatory actions could further restrict the ability of our insurance subsidiaries to pay dividends. For more information on the maximum amount our subsidiaries could pay us in 2016 without regulatory approval, see “Item 5 - Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Dividend Policy.” 
Assurant, Inc.’s credit facilities also contain limitations on our ability to pay dividends to our stockholders if we are in default or such dividend payments would cause us to be in default of our obligations under the credit facilities. 
Any additional material restrictions on the ability of insurance subsidiaries to pay dividends could adversely affect Assurant, Inc.’s ability to pay any dividends on our common stock and/or service our debt and pay our other corporate expenses.
The success of our business strategy depends on the continuing service of key executives and the members of our senior management team, and any failure to adequately provide for the succession of senior management and other key executives could have an adverse effect on our results of operations. 
Our business and results of operations could be adversely affected if we fail to adequately plan for and successfully carry out the succession of our senior management and other key executives.
Risks Related to Our Industry 
We are subject to extensive laws and regulations, which increase our costs and could restrict the conduct of our business. 

24


Our insurance and other subsidiaries are subject to extensive regulation and supervision in the jurisdictions in which they do business. Such regulation is generally designed to protect the interests of policyholders or other customers. To that end, the laws of the various states and other jurisdictions establish insurance departments and other regulatory bodies with broad powers over, among other things: licensing and authorizing the transaction of business; capital, surplus and dividends; underwriting limitations; companies’ ability to enter and exit markets; statutory accounting and other disclosure requirements; policy forms; coverage; companies’ ability to provide, terminate or cancel certain coverages; premium rates, including regulatory ability to disapprove or reduce the premium rates companies may charge; trade and claims practices; certain transactions between affiliates; content of disclosures to consumers; type, amount and valuation of investments; assessments or other surcharges for guaranty funds and companies’ ability to recover assessments through premium increases; and market conduct and sales practices. 
For a discussion of various laws and regulations affecting our business, please see Item 1, “Business - Regulation.” 
If regulatory requirements impede our ability to conduct certain operations, our results of operations and financial condition could be materially adversely affected. In addition, we may be unable to maintain all required licenses and approvals and our business may not fully comply with the wide variety of applicable laws and regulations or the relevant regulators’ interpretation of these laws and regulations. In such events, the insurance regulatory authorities could preclude us from operating, limit some or all of our activities, or fine us. Such actions could materially adversely affect our results of operations and financial condition. 
Our business is subject to risks related to litigation and regulatory actions.
From time to time, we may be subject to a variety of legal and regulatory actions relating to our current and past business operations, including, but not limited to:
industry-wide investigations regarding business practices including, but not limited to, the use of the marketing of certain types of insurance policies or certificates of insurance;
actions by regulatory authorities that may restrict our ability to increase or maintain our premium rates, require us to reduce premium rates, imposes fines or penalties and result in other expenses;
market conduct examinations, for which we are required to pay the expenses of the regulator as well as our own expenses, and which may result in fines, penalties, or other adverse consequences;
disputes regarding our lender-placed insurance products including those relating to rates, agent compensation, consumer disclosure, continuous coverage requirements, loan tracking services and other services that we provide to mortgage servicers;
disputes over coverage or claims adjudication;
disputes over our treatment of claims, in which states or insureds may allege that we failed to make required payments or to meet prescribed deadlines for adjudicating claims;
disputes regarding sales practices, disclosures, premium refunds, licensing, regulatory compliance, underwriting and compensation arrangements;
disputes with agents, brokers or network providers over compensation and termination of contracts and related claims;
disputes alleging bundling of credit insurance and warranty products with other products provided by financial institutions;
disputes with tax and insurance authorities regarding our tax liabilities;
disputes relating to customers’ claims that the customer was not aware of the full cost or existence of the insurance or limitations on insurance coverage.
Further, actions by certain regulators may cause changes to the structure of the lender-placed insurance industry, including the arrangements under which we issue insurance and track coverage on mortgaged properties. These changes could materially adversely affect the results of operations of Assurant Specialty Property and the results of operations and financial condition of the Company. See Item 1, “Business - Regulation” and Item 7, “Management's Discussion and Analysis - Results of Operations - Assurant Specialty Property - Regulatory Matters.”  
In addition, the Company is involved in a variety of litigation relating to its current and past business operations and may from time to time become involved in other such actions. In particular, the Company is a defendant in class actions in a number of jurisdictions regarding its lender-placed insurance programs. These cases allege a variety of claims under a number of legal theories. The plaintiffs seek premium refunds and other relief. The Company continues to defend itself vigorously in these class actions and, as appropriate, to enter into settlements. 

25


We participate in settlements on terms that we consider reasonable in light of the strength of our defenses; however, the results of any pending or future litigation and regulatory proceedings are inherently unpredictable and involve significant uncertainty. Unfavorable outcomes in litigation or regulatory proceedings, or significant problems in our relationships with regulators, could materially adversely affect our results of operations and financial condition, our reputation, our ratings, and our ability to continue to do business. They could also expose us to further investigations or litigation. In addition, certain of our clients in the mortgage and credit card and banking industries are the subject of various regulatory investigations and litigation regarding mortgage lending practices, credit insurance, debt-deferment and debt cancellation products, and the sale of ancillary products, which could indirectly affect our businesses.
Our business is subject to risks related to reductions in the insurance premium rates we charge.
The premiums we charge are subject to review by regulators. If they consider our loss ratios to be too low, they could require us to reduce our rates. Significant rate reductions could materially reduce our profitability. 
Lender-placed insurance products accounted for approximately 73% and 71% of Assurant Specialty Property’s net earned premiums for the twelve months ended December 2015 and 2014, respectively. The approximate corresponding contributions to segment net income in these periods were 78% and 73%. The portion of total segment net income attributable to lender-placed products may vary substantially over time depending on the frequency, severity and location of catastrophic losses, the cost of catastrophe reinsurance and reinstatement coverage, the variability of claim processing costs and client acquisition costs, and other factors. In addition, we expect placement rates for these products to decline.
The Company files rates with the state departments of insurance in the ordinary course of business. In addition to this routine correspondence, from time to time the Company engages in discussions and proceedings with certain state regulators regarding our lender-placed insurance business. The results of such reviews may vary. As previously disclosed, the Company has reached agreements with the New York Department of Financial Services (the “NYDFS”), the Florida Office of Insurance Regulation (the “FOIR”) and the California Department of Insurance regarding the Company’s lender-placed insurance business in those states. It is possible that other state departments of insurance and regulatory authorities may choose to initiate or continue to review the appropriateness of the Company’s premium rates for its lender-placed insurance products. If, in the aggregate, further reviews by state departments of insurance lead to significant decreases in premium rates for the Company’s lender-placed insurance products, our results of operations could be materially adversely affected. 
 Changes in regulation may reduce our profitability and limit our growth.
Legislation or other regulatory reform that increases the regulatory requirements imposed on us or that changes the way we are able to do business may significantly harm our business or results of operations in the future. If we were unable for any reason to comply with these requirements, it could result in substantial costs to us and may materially adversely affect our results of operations and financial condition.
In addition, new interpretations of existing laws, or new judicial decisions affecting the insurance industry, could adversely affect our business.
Legislative or regulatory changes that could significantly harm our subsidiaries and us include, but are not limited to:
imposed reductions on premium levels, limitations on the ability to raise premiums on existing policies, or new minimum loss ratios;
increases in minimum capital, reserves and other financial viability requirements;
enhanced or new regulatory requirements intended to prevent future financial crises or to otherwise ensure the stability of institutions;
new licensing requirements;
restrictions on the ability to offer certain types of insurance products or service contracts;
prohibitions or limitations on provider financial incentives and provider risk-sharing arrangements;
more stringent standards of review for claims denials or coverage determinations;
new benefit mandates;
increased regulation relating to lender-placed insurance;
limitations on the ability to manage health care and utilization due to direct access laws that allow insureds to seek services directly from specialty medical providers without referral by a primary care provider;
new or enhanced regulatory requirements that require insurers to pay claims on terms other than those mandated by underlying policy contracts; and
restriction of solicitation of insurance consumers by funeral board laws for prefunded funeral insurance coverage.

26


In recent years, significant attention has been focused on the procedures that life insurers follow to identify unreported death claims. In November 2011, the National Conference of Insurance Legislators (“NCOIL”) proposed a model rule that would govern unclaimed property policies for insurers and mandate the use of the U.S. Social Security Administration’s Death Master File (the “Death Master File”) to identify deceased policyholders and beneficiaries. Certain state insurance regulators have also focused on this issue. For example, the NYDFS issued a letter requiring life insurers doing business in New York to use data from the Death Master File to search proactively for deceased policyholders and to pay claims without the receipt of a valid claim by or on behalf of a beneficiary. The Company evaluated the impact of the NCOIL model rule and established reserves for additional claim liabilities in certain of its businesses. It is possible that existing reserves may be inadequate and need to be increased and/or that the Company may be required to establish reserves for businesses the Company does not currently believe are subject to the NCOIL model rule or any similar regulatory requirement. In addition, it is possible that these regulators or regulators in other states may adopt regulations similar to the NCOIL model rule or to the requirements imposed by the NYDFS.
In addition, regulators in certain states have hired third party auditors to audit the unclaimed property records of insurance companies operating in those states. Among other companies, the Company is currently subject to these audits in a number of states and has been responding to information requests from these auditors.
Proposals are currently pending to amend state insurance holding company laws to increase the scope of insurance holding company regulation. These include the NAIC “Solvency Modernization Initiative,” which focuses on capital requirements, and the Solvency II Directive, which became effective in January 2016. The Solvency II Directive reforms the insurance industry’s solvency framework, including, among other items, minimum capital and solvency requirements.
Various state and federal regulatory authorities have taken actions with respect to our lender-placed insurance business. On January 16, 2015, at the request of the Indiana Department of Insurance, the National Association of Insurance Commissioners (the “NAIC”) authorized an industry-wide multistate targeted market conduct examination focusing on lender placed insurance. Several insurance companies, including American Security Insurance Company, are subject to the examination. At present, 43 jurisdictions are participating. During the course of 2015, the Company has cooperated in responding to requests for information and documents and has engaged in various communications with the examiners. The examination continues and no final report has been issued.
We cannot predict the full effect of these or any other regulatory initiatives on the Company at this time, but they could have a material adverse effect on the Company’s results of operations, cash flows and financial condition.
Reform of the health insurance industry could materially reduce the profitability of certain of our businesses or render them unprofitable.
Although the Assurant Health business is in run-off, some provisions of the Affordable Care Act continue to apply to us. As a result, although Assurant Health has made, and continues to make, significant changes to its operations and products to adapt to the new environment consistent with the wind-down, this business continues to experience losses, which we have been and may continue to be unable to limit to the extent we would like through the completion of the wind-down.  In addition, the results of our health insurance operations are heavily dependent on the ongoing implementation of the reinsurance, risk adjustment and risk corridors programs under the Affordable Care Act. These programs may not be effective in appropriately mitigating any adverse effects of the Affordable Care Act on the Company. Furthermore, the reinsurance and risk corridor programs may not be adequately funded by the United States Congress from time to time. Consequently, it may be difficult, in some circumstances, to capture, determine and deliver amounts payable to or receivable by us under these programs, which could have a material adverse effect on our results of operations.
The Affordable Care Act and related reforms have made and will continue to make sweeping and fundamental changes to the U.S. health care system. For more information on the Affordable Care Act and its impact on our Assurant Health and Assurant Employee Benefits segments, please see Item 1, “Business - Regulation - Federal Regulation - Patient Protection and Affordable Care Act.”
Among other requirements, the Affordable Care Act requires that Assurant Health rebate to consumers the difference between its actual loss ratios and required minimum medical loss ratios (by state and legal entity) for certain products. Please see “Item 7 - Management’s Discussion & Analysis - Critical Accounting Estimates - Health Insurance Premium Rebate Liability” for more information about the minimum medical loss ratio and the Company’s rebate estimate calculations. In addition, the Affordable Care Act imposes limitations on the deductibility of compensation and certain other payments.
In addition, some uncertainty remains surrounding the mechanics of inclusion of pediatric dental coverage in the package of essential health benefits; unfavorable resolution of this uncertainty could decrease revenues in our Assurant Employee Benefits business.
The insurance and related businesses in which we operate may be subject to periodic negative publicity, which may negatively affect our financial results. 

27


We communicate with and distribute our products and services ultimately to individual consumers. There may be a perception that some of these purchasers may be unsophisticated and in need of consumer protection. Accordingly, from time to time, consumer advocacy groups or the media may focus attention on our products and services, thereby subjecting us to negative publicity. 
We may also be negatively affected if another company in one of our industries or in a related industry engages in practices resulting in increased public attention to our businesses. Negative publicity may also result from judicial inquiries, unfavorable outcomes in lawsuits, or regulatory or governmental action with respect to our products, services and industry commercial practices. Negative publicity may cause increased regulation and legislative scrutiny of industry practices as well as increased litigation or enforcement action by civil and criminal authorities. Additionally, negative publicity may increase our costs of doing business and adversely affect our profitability by impeding our ability to market our products and services, constraining our ability to price our products appropriately for the risks we are assuming, requiring us to change the products and services we offer, or increasing the regulatory burdens under which we operate. 
The insurance industry can be cyclical, which may affect our results. 
Certain lines of insurance that we write can be cyclical. Although no two cycles are the same, insurance industry cycles have typically lasted for periods ranging from two to ten years. In addition, the upheaval in the global economy in recent years has been much more widespread and has affected all the businesses in which we operate. We expect to see continued cyclicality in some or all of our businesses in the future, which may have a material adverse effect on our results of operations and financial condition. 
Risks Related to Our Common Stock
 
Given the recent economic climate, our stock may be subject to stock price and trading volume volatility. The price of our common stock could fluctuate or decline significantly and you could lose all or part of your investment. 
In recent years, the stock markets have experienced significant price and trading volume volatility. Company-specific issues and market developments generally in the insurance industry and in the regulatory environment may have caused this volatility. Our stock price could materially fluctuate or decrease in response to a number of events and factors, including but not limited to: quarterly variations in operating results; operating and stock price performance of comparable companies; changes in our financial strength ratings; limitations on premium levels or the ability to maintain or raise premiums on existing policies; regulatory developments and negative publicity relating to us or our competitors. In addition, broad market and industry fluctuations may materially and adversely affect the trading price of our common stock, regardless of our actual operating performance. 
 Applicable laws, our certificate of incorporation and by-laws, and contract provisions may discourage takeovers and business combinations that some stockholders might consider to be in their best interests. 
State laws and our certificate of incorporation and by-laws may delay, defer, prevent or render more difficult a takeover attempt that our stockholders might consider in their best interests. For example, Section 203 of the General Corporation Law of the State of Delaware may limit the ability of an “interested stockholder” to engage in business combinations with us. An interested stockholder is defined to include persons owning 15% or more of our outstanding voting stock. These provisions may also make it difficult for stockholders to replace or remove our directors, facilitating director enhancement that may delay, defer or prevent a change in control. Such provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging future takeover attempts. 
Our certificate of incorporation or by-laws also contain provisions that permit our Board of Directors to issue one or more series of preferred stock, prohibit stockholders from filling vacancies on our Board of Directors, prohibit stockholders from calling special meetings of stockholders and from taking action by written consent, and impose advance notice requirements for stockholder proposals and nominations of directors to be considered at stockholder meetings. 
Additionally, applicable state insurance laws may require prior approval of an application to acquire control of a domestic insurer. State statutes generally provide that control over a domestic insurer is presumed to exist when any person directly or indirectly owns, controls, has voting power over, or holds proxies representing, 10% or more of the domestic insurer’s voting securities. However, the State of Florida, in which some of our insurance subsidiaries are domiciled, sets this threshold at 5%. Because a person acquiring 5% or more of our common stock would indirectly control the same percentage of the stock of our Florida subsidiaries, the insurance change of control laws of Florida would apply to such transaction and at 10% the laws of many other states would likely apply to such a transaction. Prior to granting such approval, a state insurance commissioner will typically consider such factors as the financial strength of the applicant, the integrity of the applicant’s board of directors and

28


executive officers, the applicant’s plans for the future operations of the domestic insurer and any anti-competitive results that may arise from the consummation of the acquisition of control. 
We may also, under some circumstances involving a change of control, be obligated to repay our outstanding indebtedness under our revolving credit facility and other agreements. We or any possible acquirer may not have available financial resources necessary to repay such indebtedness in those circumstances, which may constitute an event of default resulting in acceleration of indebtedness and potential cross-default under other agreements. The threat of this could have the effect of delaying or preventing transactions involving a change of control, including transactions in which our stockholders would receive a substantial premium for their shares over then-current market prices, or which they otherwise may deem to be in their best interests. 
 

29


Item 1B. Unresolved Staff Comments 
None.
 
Item 2. Properties
 We own eight properties, including five buildings whose locations serve as headquarters for our operating segments, two buildings that serve as operation centers for Assurant Specialty Property and one building that serves as a claims training center for Assurant Specialty Property. Assurant Solutions and Assurant Specialty Property share headquarters buildings located in Miami, Florida and Atlanta, Georgia. Assurant Specialty Property has operations centers located in Florence, South Carolina and Springfield, Ohio. Assurant Solutions’ preneed business also has a headquarters building in Rapid City, South Dakota. Assurant Employee Benefits has a headquarters building in Kansas City, Missouri. Assurant Health has a headquarters building in Milwaukee, Wisconsin. We lease office space for various offices and service centers located throughout the U.S. and internationally, including our New York, New York corporate office and our data center in Woodbury, Minnesota. Our leases have terms ranging from month-to-month to fifteen years. We believe that our owned and leased properties are adequate for our current business operations.
 
Item  3. Legal Proceedings 
The Company is involved in litigation in the ordinary course of business, both as a defendant and as a plaintiff and may from time to time be subject to a variety of legal and regulatory actions relating to our current and past business operations. See Note 25 to the Notes to Consolidated Financial Statements for a description of certain matters, which description is incorporated herein by reference. Although the Company cannot predict the outcome of any litigation, regulatory examinations or investigations, it is possible that the outcome of such matters could have a material adverse effect on the Company’s consolidated results of operations or cash flows for an individual reporting period. However, based on currently available information, management does not believe that any pending matter is likely to have a material adverse effect, individually or in the aggregate, on the Company’s financial condition.

 
Item 4. Mine Safety Disclosures 
Not applicable.
 

30


PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Stock Performance Graph
The following chart compares the total stockholder returns (stock price increase plus dividends paid) on our common stock from December 31, 2010 through December 31, 2015 with the total stockholder returns for the S&P 400 MidCap Index and the S&P 500 Index, as the broad equity market indexes, and the S&P 400 Multi-line Insurance Index and the S&P 500 Multi-line Insurance Index, as the published industry indexes. The graph assumes that the value of the investment in the common stock and each index was $100 on December 31, 2010 and that all dividends were reinvested.




31



Total Values/Return to Stockholders
(Includes reinvestment of dividends)
 
Base
Period
12/31/10
 
INDEXED VALUES
Years Ending
Company / Index
12/31/11
 
12/31/12
 
12/31/13
 
12/31/14
 
12/31/15
Assurant, Inc.
100
 
108.58

 
93.86

 
182.88

 
191.56

 
229.73

S&P 500 Index
100
 
102.11

 
118.45

 
156.82

 
178.29

 
180.75

S&P 400 MidCap Index
100
 
98.27

 
115.83

 
154.64

 
169.74

 
166.05

S&P 500 Multi-line Insurance Index*
100
 
72.91

 
92.38

 
136.63

 
143.14

 
153.51

S&P 400 Multi-line Insurance Index*
100
 
108.58

 
130.19

 
179.93

 
196.79

 
244.95

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNUAL RETURN PERCENTAGE
Years Ending
Company / Index
 
 
12/31/11
 
12/31/12
 
12/31/13
 
12/31/14
 
12/31/15
Assurant, Inc.
 
 
8.58

 
-13.56

 
94.85

 
4.75

 
19.93

S&P 500 Index
 
 
2.11

 
16.00

 
32.39

 
13.69

 
1.38

S&P 400 MidCap Index
 
 
-1.73

 
17.88

 
33.50

 
9.77

 
-2.18

S&P 500 Multi-line Insurance Index*
 
 
-27.09

 
26.70

 
47.90

 
4.77

 
7.24

S&P 400 Multi-line Insurance Index*
 
 
8.58

 
19.90

 
38.21

 
9.37

 
24.47

*
 S&P 400 Multi-line Insurance Index is comprised of mid-cap companies, while the S&P 500 Multi-line Insurance Index is comprised of large-cap companies.
 
Common Stock Price 
Our common stock is listed on the NYSE under the symbol “AIZ.” The following table sets forth the high and low intraday sales prices per share of our common stock as reported by the NYSE for the periods indicated.
Year Ended December 31, 2015
High
 
Low
 
Dividends
First Quarter
$
67.77

 
$
60.22

 
$
0.27

Second Quarter
$
68.87

 
$
59.86

 
$
0.30

Third Quarter
$
79.60

 
$
68.14

 
$
0.30

Fourth Quarter
$
86.81

 
$
78.25

 
$
0.50

 
 
 
 
 
 
Year Ended December 31, 2014
High
 
Low
 
Dividends
First Quarter
$
68.70

 
$
63.60

 
$
0.25

Second Quarter
$
69.39

 
$
44.98

 
$
0.27

Third Quarter
$
66.84

 
$
63.36

 
$
0.27

Fourth Quarter
$
69.52

 
$
60.81

 
$
0.27

 
Holders 
On February 10, 2016, there were approximately 204 registered holders of record of our common stock. The closing price of our common stock on the NYSE on February 10, 2016 was $66.23. 
Please see Item 12 of this report for information about securities authorized for issuance under our equity compensation plans.

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Shares Repurchased
Period in 2015
Total Number
of Shares
Purchased
 
Average Price
Paid Per  Share
 
Total Number of
Shares Purchased as
Part of  Publicly
Announced
Programs (1)
 
Approximate
Dollar Value of
Shares that May Yet
be Repurchased
Under the  Programs (1)
January 1 – January 31
529,100

 
$
65.51

 
529,100

 
$
452,018

February 1 – February 28
120,000

 
61.07

 
120,000

 
444,691

March 1 – March 31
645,000

 
61.50

 
645,000

 
405,035

Total first quarter
1,294,100

 
63.10

 
1,294,100

 
405,035

April 1 – April 30
640,000

 
61.20

 
640,000

 
365,878

May 1 – May 31
472,000

 
64.89

 
472,000

 
335,257

June 1 – June 30
482,586

 
67.19

 
482,586

 
302,841

Total second quarter
1,594,586

 
64.11

 
1,594,586

 
302,841

July 1 – July 31
303,807

 
70.98

 
303,807

 
281,284

August 1 – August 31
67,436

 
73.67

 
67,436

 
276,317

September 1 – September 30

 

 

 
1,026,317

Total third quarter
371,243

 
71.47

 
371,243

 
1,026,317

October 1 – October 31
924,960

 
80.26

 
924,960

 
952,103

November 1 – November 30

 

 

 
952,103

December 1 – December 31

 

 

 
952,103

Total fourth quarter
924,960

 
80.26

 
924,960

 
952,103

Total through December 31
4,184,889

 
$
68.02

 
4,184,889

 
$
952,103

 
(1)
Shares purchased pursuant to the November 15, 2013 publicly announced share repurchase authorization of up to $600,000 of outstanding common stock, which was increased by an authorization on September 9, 2015 for the repurchase of up to an additional $750,000 of outstanding common stock.

Dividend Policy 
On January 15, 2016, our Board of Directors declared a quarterly dividend of $0.50 per common share payable on March 14, 2016 to stockholders of record as of February 29, 2016. We paid dividends of $0.50 per common share on December 14, 2015, $0.30 on September 15, 2015 and June 9, 2015, and $0.27 on March 9, 2015. We paid dividends of $0.27 per common share on December 15, 2014, September 9, 2014 and June 10, 2014, and $0.25 per common share on March 10, 2014. Any determination to pay future dividends will be at the discretion of our Board of Directors and will be dependent upon: our subsidiaries’ payment of dividends and/or other statutorily permissible payments to us; our results of operations and cash flows; our financial position and capital requirements; general business conditions; any legal, tax, regulatory and contractual restrictions on the payment of dividends; and any other factors our Board of Directors deems relevant. 
Assurant, Inc. is a holding company and, therefore, its ability to pay dividends, service its debt and meet its other obligations depends primarily on the ability of its regulated U.S. domiciled insurance subsidiaries to pay dividends and make other statutorily permissible payments to the holding company. Our insurance subsidiaries are subject to significant regulatory and contractual restrictions limiting their ability to declare and pay dividends. See “Item 1A – Risk Factors – Risks Relating to Our Company – The inability of our subsidiaries to pay sufficient dividends to the holding company could prevent us from meeting our obligations and paying future stockholder dividends.” For the calendar year 2016, the maximum amount of dividends our regulated U.S. domiciled insurance subsidiaries could pay us, under applicable laws and regulations without prior regulatory approval, is approximately $564,000. Dividends or returns of capital paid by our subsidiaries, net of infusions and excluding amounts received from dispositions and amounts used for acquisitions, totaled $174,579 in 2015.
We may seek approval of regulators to pay dividends in excess of any amounts that would be permitted without such approval. However, there can be no assurance that we would obtain such approval if sought. 
Payments of dividends on shares of common stock are subject to the preferential rights of preferred stock that our Board of Directors may create from time to time. There is no preferred stock issued and outstanding as of December 31, 2015. For more information regarding restrictions on the payment of dividends by us and our insurance subsidiaries, including those pursuant to the terms of our revolving credit facilities, see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.” 

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In addition, our $400,000 revolving credit facility restricts payments of dividends if an event of default under the facility has occurred or if a proposed dividend payment would cause an event of default under the facility.

34


Item 6. Selected Financial Data
 
Assurant, Inc.
Five-Year Summary of Selected Financial Data
 
As of and for the years ended December 31,
 
2015
 
2014
 
2013
 
2012
 
2011
Consolidated Statement of Operations Data:
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
Net earned premiums
$
8,350,997

 
$
8,632,142

 
$
7,759,796

 
$
7,236,984

 
$
7,125,368

Net investment income
626,217

 
656,429

 
650,296

 
713,128

 
689,532

Net realized gains on investments (1)
31,826

 
60,783

 
34,525

 
64,353

 
32,580

Amortization of deferred gain on disposal of businesses
12,988

 
(1,506
)
 
16,310

 
18,413

 
20,461

Fees and other income
1,303,466

 
1,033,805

 
586,730

 
475,392

 
404,863

Total revenues
10,325,494

 
10,381,653

 
9,047,657

 
8,508,270

 
8,272,804

Benefits, losses and expenses
 
 
 
 
 
 
 
 
 
Policyholder benefits (2)
4,742,535

 
4,405,333

 
3,675,532

 
3,655,404

 
3,749,734

Amortization of deferred acquisition costs and value of businesses acquired
1,402,573

 
1,485,558

 
1,470,287

 
1,403,215

 
1,327,788

Underwriting, general and administrative expenses
3,924,089

 
3,688,230

 
3,034,404

 
2,631,594

 
2,428,795

Interest expense
55,116

 
58,395

 
77,735

 
60,306

 
60,360

Total benefits, losses and expenses
10,124,313

 
9,637,516

 
8,257,958

 
7,750,519

 
7,566,677

Income before provision for income taxes
201,181

 
744,137

 
789,699

 
757,751

 
706,127

Provision for income taxes (3)
59,626

 
273,230

 
300,792

 
274,046

 
167,171

Net income
$
141,555

 
$
470,907

 
$
488,907

 
$
483,705

 
$
538,956

Earnings per share:
 
 
 
 
 
 
 
 
 
Basic
$
2.08

 
$
6.52

 
$
6.38

 
$
5.74

 
$
5.58

Diluted
$
2.05

 
$
6.44

 
$
6.30

 
$
5.67

 
$
5.51

Dividends per share
$
1.37

 
$
1.06

 
$
0.96

 
$
0.81

 
$
0.70

Share data:
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding used in basic per share calculations
68,163,825

 
72,181,447

 
76,648,688

 
84,276,427

 
96,626,306

Plus: Dilutive securities
853,384

 
970,563

 
1,006,076

 
1,030,638

 
1,169,003

Weighted average shares used in diluted per share calculations
69,017,209

 
73,152,010

 
77,654,764

 
85,307,065

 
97,795,309

Selected Consolidated Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents and investments
$
14,283,077

 
$
15,450,108

 
$
15,961,199

 
$
15,885,722

 
$
15,192,878

Total assets
$
30,043,128

 
$
31,562,466

 
$
29,714,689

 
$
28,946,607

 
$
27,019,862

Policy liabilities (4)
$
19,787,133

 
$
19,711,953

 
$
18,698,615

 
$
18,666,355

 
$
17,278,342

Debt
$
1,171,382

 
$
1,171,079

 
$
1,638,118

 
$
972,399

 
$
972,278

Total stockholders’ equity
$
4,523,967

 
$
5,181,307

 
$
4,833,479

 
$
5,185,366

 
$
4,873,950

Per share data:
 
 
 
 
 
 
 
 
 
Total book value per basic share (5)
$
67.92

 
$
73.73

 
$
66.23

 
$
64.93

 
$
54.31

(1)
Included in net realized gains are other-than-temporary impairments of $5,024, $30, $4,387, $1,843 and $7,836 for 2015, 2014, 2013, 2012, and 2011, respectively.
(2)
2015 includes higher loss experience and adverse claim development on 2015 individual major medical policies. During 2012, we incurred losses of $250,206, net of reinsurance, mainly associated with Superstorm Sandy. During 2011, we incurred losses of $157,645 associated with Hurricane Irene, Tropical Storm Lee, wildfires in Texas and severe storms, including tornadoes in the southeast. Reportable catastrophe losses include only individual catastrophic events that generated losses to the Company in excess of $5,000, pre-tax and net of reinsurance.
(3)
During 2011, we had an $80,000 release of a capital loss valuation allowance related to deferred tax assets.
(4)
Policy liabilities include future policy benefits and expenses, unearned premiums and claims and benefits payable.
(5)
Total stockholders’ equity divided by the basic shares outstanding for book value per basic share calculation. At December 31, 2015, 2014, 2013, 2012, and 2011 there were 66,606,258, 70,276,896, 72,982,023, 79,866,858, and 89,743,761 shares, respectively, outstanding.
 

35


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and accompanying notes which appear elsewhere in this report. It contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report, particularly under the headings “Item 1A – Risk Factors” and “Forward-Looking Statements.” 
General 
We report our results through five segments: Assurant Solutions, Assurant Specialty Property, Assurant Health, Assurant Employee Benefits, and Corporate and Other. The Corporate and Other segment includes activities of the holding company, financing and interest expenses, net realized gains (losses) on investments and investment income earned from short-term investments held. The Corporate and Other segment also includes the amortization of deferred gains associated with the sales of FFG and LTC, through reinsurance agreements as described below. 
The following discussion covers the twelve months ended December 31, 2015 (“Twelve Months 2015”), twelve months ended December 31, 2014 (“Twelve Months 2014”) and twelve months ended December 31, 2013 (“Twelve Months 2013”). Please see the discussion that follows, for each of these segments, for a more detailed analysis of the fluctuations. 
Executive Summary 
Consolidated net income decreased $329,352, or 70%, to $141,555 for Twelve Months 2015 from $470,907 for Twelve Months 2014. The decrease was primarily related to higher loss experience and adverse claims development on 2015 individual major medical policies, a reduction in the 2014 estimated recoveries from the Affordable Care Act risk mitigation programs and $106,389 (after-tax) of exit and disposal costs, including premium deficiency reserve accruals, severance and retention costs, long-lived asset impairments and other costs associated with our exit from the health insurance market.  
Assurant Solutions net income decreased $21,765, or 10%, to $197,183 for Twelve Months 2015 from $218,948 for Twelve Months 2014. The decrease was primarily due to the previously disclosed loss of a domestic mobile tablet program and declining service contract volumes at certain North American retail clients.  
Total revenues were relatively flat at $4,178,140 for Twelve Months 2015 compared with $4,179,360 for Twelve Months 2014. Net earned premiums decreased $113,022 primarily due to foreign exchange volatility, the loss of a domestic mobile tablet program and the continued run-off of our credit insurance business. These items were partially offset by growth from our auto warranty business and from a large domestic service contract client.  
Overall, we expect Assurant Solutions 2016 net income and net earned premiums and fees to increase from Twelve Months 2015 amounts. Results are expected to improve in the second half of 2016 driven by new mobile programs, improved international profitability and additional expense initiatives. Foreign exchange volatility, lower service contract revenue from legacy North American retail clients and continued run-off in credit insurance will impact results.
Assurant Specialty Property net income decreased $34,052, or 10%, to $307,705 for Twelve Months 2015 from $341,757 for Twelve Months 2014. The decrease is primarily due to the previously disclosed loss of client business and ongoing normalization in our lender-placed homeowners insurance business, partially offset by more favorable non-catastrophe loss experience and lower catastrophe reinsurance costs. The divestiture of American Reliable Insurance Company ("ARIC") also contributed to the decrease in net income.
Total revenues decreased $365,948 to $2,543,105 for Twelve Months 2015 from $2,909,053 for Twelve Months 2014. The decrease was primarily due to the divestiture of ARIC, combined with lower lender-placed homeowners insurance net earned premiums. The decline in lender-placed homeowners insurance net earned premiums is primarily due to a decline in placement rates, lower premium rates and previously disclosed loss of client business. These items were partially offset by an increase in fees and other income reflecting contributions from mortgage solutions businesses.
The Twelve Months 2015 expense ratio increased 620 basis points compared with Twelve Months 2014. The increase was primarily due to lower net earned premiums and higher legal costs related to outstanding matters. In addition, growth in fee-based businesses, which have higher expense ratios than our insurance products, contributed to the increase.
For 2016, we expect Assurant Specialty Property net income and net earned premiums to decrease compared with Twelve Months 2015 reflecting the ongoing normalization of lender-placed insurance business partially offset by increased efficiencies, including the implementation of new technology, and other expense savings initiatives. Contributions from multi-family housing and mortgage solutions businesses are expected to partially offset the decline. In addition, catastrophe losses may affect overall results.  

36


As previously announced, the Company concluded a comprehensive review of strategic alternatives for its health business and expects to substantially complete the process to exit the health insurance market in 2016. During the remainder of the exit process, we expect to incur up to $50,000 of additional exit-related charges, as well as certain overhead expenses that are excluded from the premium deficiency reserve accrual.
In addition, the Company signed a definitive agreement to sell its Assurant Employee Benefits segment to Sun Life. The transaction is expected to close by the end of First Quarter 2016.
For more information, see Notes 3 and 4 of the Notes to the Consolidated Financial Statements included elsewhere in this report.  
Critical Factors Affecting Results 
Our results depend on the appropriateness of our product pricing, underwriting and the accuracy of our methodology for the establishment of reserves for future policyholder benefits and claims, returns on and values of invested assets and our ability to manage our expenses. Factors affecting these items, including unemployment, difficult conditions in financial markets and the global economy, may have a material adverse effect on our results of operations or financial condition. For more information on these factors, see “Item 1A – Risk Factors.” 
Management believes the Company will have sufficient liquidity to satisfy its needs over the next twelve months including the ability to pay interest on our senior notes and dividends on our common stock. 
For Twelve Months 2015, net cash provided by operating activities, including the effect of exchange rate changes and the reclassification of assets held for sale on cash and cash equivalents, totaled $192,483; net cash provided by investing activities totaled $264,293 and net cash used in financing activities totaled $487,127. We had $1,288,305 in cash and cash equivalents as of December 31, 2015. Please see “ – Liquidity and Capital Resources,” below for further details. 
Revenues 
We generate revenues primarily from the sale of our insurance policies and service contracts and from investment income earned on our investments. Sales of insurance policies are recognized in revenue as earned premiums while sales of administrative services are recognized as fee income. 
Under the universal life insurance guidance, income earned on preneed life insurance policies sold after January 1, 2009 are presented within policy fee income net of policyholder benefits. Under the limited pay insurance guidance, the consideration received on preneed policies sold prior to January 1, 2009 is presented separately as net earned premiums, with policyholder benefits expense being shown separately.
Our premium and fee income is supplemented by income earned from our investment portfolio. We recognize revenue from interest payments, dividends and sales of investments. Currently, our investment portfolio is primarily invested in fixed maturity securities. Both investment income and realized capital gains on these investments can be significantly affected by changes in interest rates. 
Interest rate volatility can increase or reduce unrealized gains or losses in our investment portfolios. Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. Fluctuations in interest rates affect our returns on, and the market value of, fixed maturity and short-term investments. 
The fair market value of the fixed maturity securities in our investment portfolio and the investment income from these securities fluctuate depending on general economic and market conditions. The fair market value generally increases or decreases in an inverse relationship with fluctuations in interest rates, while net investment income realized by us from future investments in fixed maturity securities will generally increase or decrease with interest rates. We also have investments that carry pre-payment risk, such as mortgage-backed and asset-backed securities. Interest rate fluctuations may cause actual net investment income and/or cash flows from such investments to differ from estimates made at the time of investment. In periods of declining interest rates, mortgage prepayments generally increase and mortgage-backed securities, commercial mortgage obligations and bonds are more likely to be prepaid or redeemed as borrowers seek to borrow at lower interest rates. Therefore, in these circumstances we may be required to reinvest those funds in lower-interest earning investments. 
Expenses 
Our expenses are primarily policyholder benefits, underwriting, general and administrative expenses and interest expense. 
Policyholder benefits are affected by our claims management programs, reinsurance coverage, contractual terms and conditions, regulatory requirements, economic conditions, and numerous other factors. Benefits paid or reserves required for

37


future benefits could substantially exceed our expectations, causing a material adverse effect on our business, results of operations and financial condition. 
Underwriting, general and administrative expenses consist primarily of commissions, premium taxes, licenses, fees, amortization of deferred costs, general operating expenses and income taxes. 
We incur interest expense related to our debt. 
Critical Accounting Estimates 
Certain items in our consolidated financial statements are based on estimates and judgment. Differences between actual results and these estimates could in some cases have material impacts on our consolidated financial statements. 
The following critical accounting policies require significant estimates. The actual amounts realized in these areas could ultimately be materially different from the amounts currently provided for in our consolidated financial statements.
Health Insurance Premium Rebate Liability
The Affordable Care Act was signed into law in March 2010. One provision of the Affordable Care Act, effective January 1, 2011, established a minimum medical loss ratio (“MLR”) designed to ensure that a minimum percentage of premiums is paid for clinical services or health care quality improvement activities. The Affordable Care Act established an MLR of 80% for individual and small group business and 85% for large group business. If the actual loss ratios, calculated in a manner prescribed by the Department of Health and Human Services (“HHS”), are less than the required MLR, premium rebates are payable to the policyholders by August 1 of the subsequent year. 
The Assurant Health loss ratio reported in "Results of Operations" below (the “GAAP loss ratio”) differs from the loss ratio calculated under the MLR rules. The most significant differences include: the fact that the MLR is calculated separately by state, legal entity and type of coverage (individual or group); the MLR calculation includes credibility adjustments for each state/entity/coverage cell, which are not applicable to the GAAP loss ratio; the MLR calculation applies only to some of our health insurance products, while the GAAP loss ratio applies to the entire portfolio, including products not governed by the Affordable Care Act; the MLR includes quality improvement expenses, taxes and fees; changes in reserves and Affordable Care Act risk mitigation program amounts are treated differently in the MLR calculation; the MLR premium rebate amounts are considered adjustments to premiums for GAAP reporting whereas they are reported as additions to incurred claims in the MLR rebate estimate calculations; and the MLR is calculated using a rolling three years of experience while the GAAP loss ratio represents the current year only.
Assurant Health has estimated the 2015 impact of this regulation based on definitions and calculation methodologies outlined in the HHS regulations and guidance. The estimate was based on separate projection models for individual medical and small group business using projections of expected premiums, claims, and enrollment by state, legal entity and market for medical businesses subject to MLR requirements for the MLR reporting year. In addition, the projection models include quality improvement expenses, state assessments, taxes, and estimated impacts of the Affordable Care Act risk mitigation programs (commonly referred to as the "3R's"). The premium rebate is presented as a reduction of net earned premiums in the consolidated statement of operations and included in unearned premiums in the consolidated balance sheet.
Affordable Care Act Risk Mitigation Programs
Beginning in 2014, the Affordable Care Act introduced new and significant premium stabilization programs. These programs, discussed in further detail below, are meant to mitigate the potential adverse impact to individual health insurers as a result of Affordable Care Act provisions that became effective January 1, 2014.A three-year (2014-2016) reinsurance program provides reimbursement to insurers for high cost individual business sold on or off the public marketplaces. The reinsurance entity established by HHS is funded by a per-member reinsurance fee assessed on all commercial medical plans, including self-insured group health plans. Only Affordable Care Act individual plans are eligible for recoveries if claims exceed a specified threshold, up to a reinsurance cap. Reinsurance contributions associated with Affordable Care Act individual plans are reported as a reduction in net earned premiums in the consolidated statements of operations, and estimated reinsurance recoveries are established as reinsurance recoverables in the consolidated balance sheets with an offsetting reduction in policyholder benefits in the consolidated statement of operations. Reinsurance fee contributions for non-Affordable Care Act business are reported in underwriting, general and administrative expenses in the consolidated statement of operations.

38


A permanent risk adjustment program transfers funds from insurers with lower risk populations to insurers with higher risk populations based on the relative risk scores of participants in Affordable Care Act plans in the individual and small group markets, both on and off the public marketplaces. Based on the risk of its members compared to the total risk of all members in the same state and market, considering data obtained from industry studies, the Company estimates its year-to-date risk adjustment transfer amount. The Company records a risk adjustment transfer receivable (payable) in premiums and accounts receivable (unearned premium) in the consolidated balance sheets, with an offsetting adjustment to net earned premiums in the consolidated statements of operations when the amounts are reasonably estimable and collection is reasonably assured.
A three-year (2014-2016) risk corridor program limits insurer gains and losses by comparing allowable medical costs to a target amount as defined by HHS. This program applies to a subset of Affordable Care Act eligible individual and small group products certified as Qualified Health Plans.     The public marketplace can only sell Qualified Health Plans. In addition, carriers who sell Qualified Health Plans on the public marketplace can also sell them off the public marketplace. Variances from the target amount exceeding certain thresholds may result in amounts due to or due from HHS. During 2015, the Company participated in the federal insurance public marketplaces so the risk corridor program is applicable. However, as the current full funding for this program is unclear at this time, no accruals were established for any receivable amounts from this program for 2015, so there was no impact on the Company's 2015 operations. The Company does not anticipate any payables into this program for 2015.
Reserves  
Reserves are established in accordance with GAAP using generally accepted actuarial methods and reflect judgments about expected future claim payments. Calculations incorporate assumptions about inflation rates, the incidence of incurred claims, the extent to which all claims have been reported, future claims processing, lags and expenses and future investment earnings, and numerous other factors. While the methods of making such estimates and establishing the related liabilities are periodically reviewed and updated, the calculation of reserves is not an exact process. 
Reserves do not represent precise calculations of expected future claims, but instead represent our best estimates at a point in time of the ultimate costs of settlement and administration of a claim or group of claims, based upon actuarial assumptions and projections using facts and circumstances known at the time of calculation. 
Many of the factors affecting reserve adequacy are not directly quantifiable and not all future events can be anticipated when reserves are established. Reserve estimates are refined as experience develops. Adjustments to reserves, both positive and negative, are reflected in the consolidated statement of operations in the period in which such estimates are updated. 
Because establishment of reserves is an inherently complex process involving significant judgment and estimates, there can be no certainty that ultimate losses will not exceed existing claim reserves. Future loss development could require reserves to be increased, which could have a material adverse effect on our earnings in the periods in which such increases are made. See "Item 1A - Risk Factors - Risks related to our Company - Our actual claims losses may exceed our reserves for claims, and this may require us to establish additional reserves that may materially affect our results of operations, profitability and capital" for more detail on this risk.

39


The following table provides reserve information for our major product lines for the years ended December 31, 2015 and 2014:
 
December 31, 2015
 
December 31, 2014
 
 
 
 
 
Claims and Benefits
Payable
 
 
 
 
 
Claims and Benefits
Payable
 
Future
Policy
Benefits and
Expenses
 
Unearned
Premiums
 
Case
Reserves
 
Incurred
But Not
Reported
Reserves
 
Future
Policy
Benefits and
Expenses
 
Unearned
Premiums
 
Case
Reserves
 
Incurred
But Not
Reported
Reserves
Long Duration Contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preneed funeral life insurance policies and investment-type annuity contracts
$
4,670,977

 
$
134,534

 
$
13,644

 
$
6,324

 
$
4,618,505

 
$
4,872

 
$
14,696

 
$
6,456

Life insurance no longer offered
407,360

 
427

 
2,360

 
1,070

 
418,672

 
570

 
2,272

 
1,301

Universal life and other products no longer offered
153,801

 
118

 
773

 
1,674

 
168,808

 
136

 
704

 
1,959

FFG, LTC and other disposed businesses
4,129,233

 
47,132

 
973,614

 
103,652

 
4,153,741

 
46,585

 
881,514

 
97,524

Medical
68,353

 
742

 
1,465

 
2,321

 
87,563

 
7,254

 
1,959

 
7,886

All other
36,970

 
404

 
12,855

 
10,836

 
36,383

 
382

 
13,863

 
9,803

Short Duration Contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Group term life

 
2,431

 
166,920

 
30,857

 

 
2,905

 
169,006

 
28,786

Group disability

 
1,984

 
1,092,841

 
100,155

 

 
1,564

 
1,127,068

 
107,961

Medical

 
25,401

 
235,516

 
253,295

 

 
130,185

 
137,370

 
240,830

Dental

 
4,244

 
1,587

 
16,454

 

 
4,013

 
2,251

 
17,037

Property and warranty

 
2,223,589

 
182,095

 
507,310

 

 
2,386,719

 
130,517

 
546,979

Credit life and disability

 
181,466

 
25,966

 
35,718

 

 
241,092

 
34,581

 
43,298

Extended service contracts

 
3,669,859

 
7,258

 
33,928

 

 
3,568,352

 
6,780

 
42,054

All other

 
131,389

 
18,961

 
57,270

 

 
135,046

 
5,375

 
18,776

Total
$
9,466,694

 
$
6,423,720

 
$
2,735,855

 
$
1,160,864

 
$
9,483,672

 
$
6,529,675

 
$
2,527,956

 
$
1,170,650


For a description of our reserving methodology, see Note 13 to the Notes to the Consolidated Financial Statements included elsewhere in this report. 
Long Duration Contracts 
Reserves for future policy benefits represent the present value of future benefits to policyholders and related expenses less the present value of future net premiums. Reserve assumptions reflect best estimates for expected investment yield, inflation, mortality, morbidity, expenses and withdrawal rates. These assumptions are based on our experience to the extent it is credible, modified where appropriate to reflect current trends, industry experience and provisions for possible unfavorable deviation. We also record an unearned revenue reserve which represents premiums received which have not yet been recognized in our consolidated statements of operations. 
Historically, premium deficiency testing on continuing lines of business has not resulted in material adjustments to deferred acquisition costs or reserves. Such adjustments could occur, however, if economic or mortality conditions significantly deteriorated. 
Risks related to the reserves recorded for certain discontinued individual life, annuity, and long-term care insurance policies have been 100% ceded via reinsurance. While the Company has not been released from the contractual obligation to the policyholders, changes in and deviations from economic, mortality, morbidity, and withdrawal assumptions used in the calculation of these reserves will not directly affect our results of operations unless there is a default by the assuming reinsurer. 
Short Duration Contracts 
Claims and benefits payable reserves for short duration contracts include (1) case reserves for known claims which are unpaid as of the balance sheet date; (2) IBNR reserves for claims where the insured event has occurred but has not been reported to us as of the balance sheet date; and (3) loss adjustment expense reserves for the expected handling costs of settling the claims. Periodically, we review emerging experience and make adjustments to our reserves and assumptions where necessary. Below are further discussions on the reserving process for our major short duration products. 
Group Disability and Group Term Life 

40


Case or claim reserves are set for active individual claims on group long term disability policies and for waiver of premium benefits on group term life policies. Reserve factors used to calculate these reserves reflect assumptions regarding disabled life mortality and claim recovery rates, claim management practices, awards for social security and other benefit offsets and yield rates earned on assets supporting the reserves. Group long term disability and group term life waiver of premium reserves are discounted because the payment pattern and ultimate cost are fixed and determinable on an individual claim basis. 
Factors considered when setting IBNR reserves include patterns in elapsed time from claim incidence to claim reporting, and elapsed time from claim reporting to claim payment. 
Key sensitivities at December 31, 2015 for group long term disability claim reserves include the discount rate and claim termination rates:
 
Claims and
Benefits Payable
 
 
Claims and
Benefits Payable
Group disability, discount rate decreased by 100 basis points
$
1,251,532

 
Group disability, claim termination rate 10% lower
$
1,224,925

Group disability, as reported
$
1,192,996

 
Group disability, as reported
$
1,192,996

Group disability, discount rate increased by 100 basis points
$
1,139,604

 
Group disability, claim termination rate 10% higher
$
1,165,045

 
The discount rate is also a key sensitivity for group term life waiver of premium reserves (included within group term life reserves).
 
Claims and Benefits Payable
Group term life, discount rate decreased by 100 basis points
$
206,000

Group term life, as reported
$
197,777

Group term life, discount rate increased by 100 basis points
$
190,392

 
Medical 
IBNR reserves calculated using generally accepted actuarial methods represent the largest component of reserves for short duration medical claims and benefits payable. The primary methods we use in their estimation are the loss development method and the projected claim method. Under the loss development method, we estimate ultimate losses for each incident period by multiplying the current cumulative losses by the appropriate loss development factor. When there is not sufficient data to reliably estimate reserves under the loss development method, such as for recent claim periods, the projected claim method is used. This method utilizes expected ultimate loss ratios to estimate the required reserve. Where appropriate, we also use variations on each method or a blend of the two. 
Reserves for our various product lines are calculated using experience data where credible. If sufficient experience data is not available, data from other similar blocks may be used. Industry data provides additional benchmarks when historical experience is too limited. Reserve factors may also be adjusted to reflect considerations not reflected in historical experience, such as changes in claims inventory levels, changes in provider negotiated rates or cost savings initiatives, increasing or decreasing medical cost trends, product changes and demographic changes in the underlying insured population. 
Key sensitivities as of December 31, 2015 for short duration medical reserves include claims processing levels, claims under case management, medical inflation, seasonal effects, medical provider discounts and product mix. The effects of these sensitivities can be summarized by adjusting loss development factors, as follows:
 
Claims and Benefits Payable
Short duration medical, loss development factors 1% lower*
$
508,811

Short duration medical, as reported
$
488,811

Short duration medical, loss development factors 1% higher*
$
470,811

*
This refers to loss development factors for the most recent four months. Our historical claims experience indicates that approximately 87.5% of medical claims are paid within four months of the incurred date.

Changes in medical loss development may increase or decrease the MLR rebate liability.


41


 Property and Warranty 
Our Property and Warranty lines of business include lender-placed homeowners, manufactured housing homeowners, multi-family housing, credit property, credit unemployment and warranty insurance and some longer-tail coverages (e.g. asbestos, environmental, other general liability and personal accident). Claim reserves for these lines are calculated on a product line basis using generally accepted actuarial principles and methods. They consist of case and IBNR reserves. The method we most often use in setting our Property and Warranty reserves is the loss development method. Under this method, we estimate ultimate losses for each accident period by multiplying the current cumulative losses by the appropriate loss development factor. We then calculate the reserve as the difference between the estimate of ultimate losses and the current case-incurred losses (paid losses plus case reserves). We select loss development factors based on a review of historical averages, adjusted to reflect recent trends and business-specific matters such as current claims payment practices. 
The loss development method involves aggregating loss data (paid losses and case-incurred losses) by accident quarter (or accident year) and accident age for each product or product grouping. As the data ages, we compile loss development factors that measure emerging claim development patterns between reporting periods. By selecting the most appropriate loss development factors, we project the known losses to an ultimate incurred basis for each accident period. 
The data is typically analyzed using quarterly paid losses and/or quarterly case-incurred losses. Some product groupings may also use annual paid loss and/or annual case-incurred losses, as well as other actuarially accepted methods. 
Each of these data groupings produces an indication of the loss reserves for the product or product grouping. The process to select the best estimate differs by line of business. The single best estimate is determined based on many factors, including but not limited to:  
the nature and extent of the underlying assumptions;
the quality and applicability of historical data - whether internal or industry data;
current and future market conditions - the economic environment will often impact the development of loss triangles;
the extent of data segmentation - data should be homogeneous yet credible enough for loss development methods to apply; and
the past variability of loss estimates - the loss estimates on some product lines will vary from actual loss experience more than others.
Most of our credit property and credit unemployment insurance business is either reinsured or written on a retrospective commission basis. Business written on a retrospective commission basis permits management to adjust commissions based on claims experience. Thus, any adjustment to prior years’ incurred claims is partially offset by a change in commission expense, which is included in the underwriting, general and administrative expenses line in our consolidated statements of operations.
While management has used its best judgment in establishing its estimate of required reserves, different assumptions and variables could lead to significantly different reserve estimates. Two key measures of loss activity are loss frequency, which is a measure of the number of claims per unit of insured exposure, and loss severity, which is a measure of the average size of claims. Factors affecting loss frequency include the effectiveness of loss controls and safety programs and changes in economic activity or weather patterns. Factors affecting loss severity include changes in policy limits, retentions, rate of inflation and judicial interpretations. 
If the actual level of loss frequency and severity are higher or lower than expected, the ultimate reserves required will be different than management’s estimate. The effect of higher and lower levels of loss frequency and severity levels on our ultimate costs for claims occurring in 2015 would be as follows:
Change in both loss frequency and
severity for all Property and Warranty
Ultimate cost of claims
occurring in 2015
 
Change in cost of claims
occurring in 2015
3% higher
$
731,390

 
$
41,985

2% higher
$
717,257

 
$
27,852

1% higher
$
703,262

 
$
13,857

Base scenario
$
689,405

 
$

1% lower
$
675,548

 
$
(13,857
)
2% lower
$
661,553

 
$
(27,852
)
3% lower
$
647,420

 
$
(41,985
)
 
Reserving for Asbestos and Other Claims 

42


Our property and warranty line of business includes exposure to asbestos, environmental and other general liability claims arising from our participation in various reinsurance pools from 1971 through 1985. This exposure arose from a contract that we discontinued writing many years ago. We carry case reserves, as recommended by the various pool managers, and IBNR reserves totaling $30,519 (before reinsurance) and $27,721 (net of reinsurance) at December 31, 2015. We believe the balance of case and IBNR reserves for these liabilities are adequate. However, any estimation of these liabilities is subject to greater than normal variation and uncertainty due to the general lack of sufficiently detailed data, reporting delays and absence of a generally accepted actuarial methodology for those exposures. There are significant unresolved industry legal issues, including such items as whether coverage exists and what constitutes a claim. In addition, the determination of ultimate damages and the final allocation of losses to financially responsible parties are highly uncertain. However, based on information currently available, and after consideration of the reserves reflected in the consolidated financial statements, we do not believe that changes in reserve estimates for these claims are likely to be material.
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 future premiums or gross profits. Acquisition costs primarily consist of commissions and premium taxes. Certain direct response advertising expenses are deferred when the primary purpose of the advertising is to elicit sales to customers who can be shown to have specifically responded to the advertising and the direct response advertising results in probable future benefits. 
The deferred acquisition costs (“DAC”) asset is tested annually to ensure that future premiums or gross profits are sufficient to support the amortization of the asset. Such testing involves the use of best estimate assumptions to determine if anticipated future policy premiums and investment income are adequate to cover all DAC and related claims, benefits and expenses. To the extent a deficiency exists, it is recognized immediately by a charge to the consolidated statements of operations and a corresponding reduction in the DAC asset. If the deficiency is greater than unamortized DAC, a liability will be accrued for the excess deficiency. 
Long Duration Contracts 
Acquisition costs for preneed life insurance policies issued prior to January 1, 2009 and certain discontinued life insurance policies have been deferred and amortized in proportion to anticipated premiums over the premium-paying period. These acquisition costs consist primarily of first year commissions paid to agents. 
For preneed investment-type annuities, preneed life insurance policies with discretionary death benefit growth issued after January 1, 2009, universal life insurance policies and investment-type annuity contracts that are no longer offered, DAC is amortized in proportion to the present value of estimated gross profits from investment, mortality, expense margins and surrender charges over the estimated life of the policy or contract. Estimated gross profits include the impact of unrealized gains or losses on investments as if these gains or losses had been realized, with corresponding credits or charges included in AOCI. The assumptions used for the estimates are consistent with those used in computing the policy or contract liabilities.
Acquisition costs relating to group worksite products, which typically have high front-end costs and are expected to remain in force for an extended period of time, consist primarily of first year commissions to brokers, costs of issuing new certificates and compensation to sales representatives. These acquisition costs are front-end loaded, thus they are deferred and amortized over the estimated terms of the underlying contracts.
Short Duration Contracts
Acquisition costs relating to property contracts, warranty and extended service contracts and single premium credit insurance contracts are amortized over the term of the contracts in relation to premiums earned.
Acquisition costs relating to monthly pay credit insurance business consist mainly of direct response advertising costs and are deferred and amortized over the estimated average terms and balances of the underlying contracts. 
Acquisition costs relating to group term life, group disability, group dental and group vision consist primarily of compensation to sales representatives. These acquisition costs are front-end loaded; thus, they are deferred and amortized over the estimated terms of the underlying contracts. 
Investments 
We regularly monitor our investment portfolio to ensure investments that may be other-than-temporarily impaired are identified in a timely fashion, 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

43


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. 
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 analyzes 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 its amortized cost and its net present value. 
Inherently, there are risks and uncertainties involved in making these judgments. Changes in circumstances and critical assumptions such as a continued weak economy, 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. See also Note 5 to the Consolidated Financial Statements included elsewhere in this report and “Item 1A – Risk Factors – Risks Related to our Company – The value of our investments could decline, affecting our profitability and financial strength” and “Investments” contained later in this item. 
Reinsurance 
Reinsurance recoverables include amounts we are owed by reinsurers. Reinsurance costs are expensed 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 benefits reserves and are reported in our consolidated balance sheets. An estimated 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. The ceding of insurance does not discharge our primary liability to our insureds. 
The following table sets forth our reinsurance recoverables as of the dates indicated:
 
December 31, 2015
 
December 31, 2014
Reinsurance recoverables
$
7,470,403

 
$
7,254,585

 
We have used reinsurance to exit certain businesses, including blocks of individual life, annuity, and long-term care business. The reinsurance recoverables relating to these dispositions amounted to $4,607,056 and $4,549,699 at December 31, 2015 and 2014, respectively. 
In the ordinary course of business, we are involved in both the assumption and cession of reinsurance with non-affiliated companies. The following table provides details of the reinsurance recoverables balance for the years ended December 31:
 
2015
 
2014
Ceded future policyholder benefits and expense
$
4,037,682

 
$
4,052,976

Ceded unearned premium
1,667,228

 
1,587,583

Ceded claims and benefits payable
1,429,128

 
1,283,510

Ceded paid losses
336,365

 
330,516

Total
$
7,470,403

 
$
7,254,585


We utilize reinsurance for loss protection and capital management, business dispositions and, in Assurant Solutions and Assurant Specialty Property, client risk and profit sharing. See also “Item 1A – Risk Factors – Reinsurance may not be available or adequate to protect us against losses and we are subject to the credit risk of reinsurers,” and “Item 7A – Quantitative and Qualitative Disclosures About Market Risk – Credit Risk.” 
Retirement and Other Employee Benefits 
We sponsor a qualified pension plan, (the “Assurant Pension Plan”) and various non-qualified pension plans (including an Executive Pension Plan), along with a retirement health benefits plan covering our employees who meet specified eligibility requirements. Effective March 1, 2016, benefit accruals for the Assurant Pension Plan, the various non-qualified pension plans and the retirement health benefits plan were frozen. The reported expense and liability associated with these plans requires an extensive use of assumptions which include, but are not limited to, the discount rate, expected return on plan assets and rate of future compensation increases. We determine these assumptions based upon currently available market and industry data, and

44


historical performance of the plan and its assets. The actuarial assumptions used in the calculation of our aggregate projected benefit obligation vary and include an expectation of long-term appreciation in equity markets which is not changed by minor short-term market fluctuations, but does change when large interim deviations occur. The assumptions we use may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of the participants.
Contingencies 
We account for contingencies by evaluating each contingent matter separately. A loss is accrued if reasonably estimable and probable. We establish reserves for these contingencies at the best estimate, or, if no one estimated amount within the range of possible losses is more probable than any other, we report an estimated reserve at the low end of the estimated range. Contingencies affecting the Company include litigation matters which are inherently difficult to evaluate and are subject to significant changes. 
Deferred Taxes 
Deferred income taxes are recorded for temporary differences between the financial reporting and income tax bases 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 if, based on the weight of all available evidence, it is more likely than not that some portion of the asset will not be realized. The valuation allowance is sufficient to reduce the asset to the amount that is more likely than not to be realized. The Company has deferred tax assets resulting from temporary differences that may reduce taxable income in future periods. The detailed components of our deferred tax assets, liabilities and valuation allowance are included in Note 8 to the Notes to the Consolidated Financial Statements included elsewhere in this report.
As of December 31, 2014, the Company had a cumulative valuation allowance of $18,164 against deferred tax assets of international subsidiaries. During Twelve Months 2015, the Company recognized a cumulative income tax benefit of $4,946 primarily related to the release of a valuation allowance of certain international subsidiaries. As of December 31, 2015, the Company has a cumulative valuation allowance of $13,218 against deferred tax assets, as it is management’s assessment that it is more likely than not that this amount of deferred tax assets will not be realized. The realization of deferred tax assets related to net operating loss carryforwards of international subsidiaries depends upon the existence of sufficient taxable income of the same character in the same jurisdiction.
In determining whether the deferred tax asset is realizable, the Company weighed all available evidence, both positive and negative. We considered all sources of taxable income available to realize the asset, including the future reversal of existing temporary differences, future taxable income exclusive of reversing temporary differences, carry forwards and tax-planning strategies. 
 The Company believes it is more likely than not that the remainder of its deferred tax assets will be realized in the foreseeable future. Accordingly, other than noted herein for certain international subsidiaries, a valuation allowance has not been established. 
Future reversal of the valuation allowance will be recognized either when the benefit is realized or when we determine that it is more likely than not that the benefit will be realized. Depending on the nature of the taxable income that results in a reversal of the valuation allowance, and on management’s judgment, the reversal will be recognized either through other comprehensive income (loss) or through continuing operations in the consolidated statements of operations. Likewise, if the Company determines that it is not more likely than not that it would be able to realize all or part of the deferred tax asset in the future, an adjustment to the deferred tax asset valuation allowance would be recorded through a charge to continuing operations in the consolidated statements of operations in the period such determination is made. 
In determining the appropriate valuation allowance, management makes judgments about recoverability of deferred tax assets, use of tax loss and tax credit carryforwards, levels of expected future taxable income and available tax planning strategies. The assumptions used in making these judgments are updated periodically by management based on current business conditions that affect the Company and overall economic conditions. These management judgments are therefore subject to change based on factors that include, but are not limited to, changes in expected capital gain income in the foreseeable future and the ability of the Company to successfully execute its tax planning strategies. Please see “Item 1A-Risk Factors-Risks Related to Our Company-Unanticipated changes in tax provisions, changes in tax laws or exposure to additional income tax liabilities could materially and adversely affect our results for more information.
 Valuation and Recoverability of Goodwill 
Goodwill represented $833,512 and $841,239 of our $30,043,128 and $31,562,466 of total assets as of December 31, 2015 and 2014, respectively. We review our goodwill annually in the fourth quarter for impairment, or more frequently if indicators of impairment exist. Such indicators include, but are not limited to, significant adverse change in legal factors,

45


adverse action or assessment by a regulator, unanticipated competition, loss of key personnel or a significant decline in our expected future cash flows due to changes in company-specific factors or the broader business climate. The evaluation of such factors requires considerable judgment. Any adverse change in these factors could have a significant impact on the recoverability of goodwill and could have a material impact on our consolidated financial statements. 
We have concluded that our reporting units for goodwill testing are equivalent to our operating segments. Therefore, we test goodwill for impairment at the reporting unit level. 
The following table illustrates the amount of goodwill carried at each reporting unit:
 
December 31,
 
2015
 
2014
Assurant Solutions
$
529,093

 
$
539,653

Assurant Specialty Property
304,419

 
301,586

Assurant Health

 

Assurant Employee Benefits

 

Total
$
833,512

 
$
841,239

 
In 2015, the Company chose the option to perform qualitative assessments for our Assurant Solutions and Assurant Specialty Property reporting units. This option allows us to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test. 
We initially considered the 2014 quantitative analysis performed by the Company whereby it compared the estimated fair value of the Assurant Solutions and Assurant Specialty Property reporting units with their respective net book values (“Step 1”). Based on the 2014 Step 1 tests, Assurant Solutions had an estimated fair value that exceeded its net book value by 25.4%, and Assurant Specialty Property had an estimated fair value that exceeded its net book value by 33.3%.
Based on our qualitative assessments, having considered the factors in totality we determined that it was not necessary to perform a Step 1 quantitative goodwill impairment test for the Assurant Solutions and Assurant Specialty Property reporting units and that it is more-likely-than-not that the fair value of each reporting unit continues to exceed its net book value in 2015. Significant changes in the external environment or substantial declines in the operating performance of Assurant Solutions and Assurant Specialty Property could cause us to reevaluate this conclusion in the future.
In undertaking our qualitative assessments for the Assurant Solutions and Assurant Specialty Property reporting units, we considered macro-economic, industry and reporting unit-specific factors. These included (i.) the effect of the current interest rate environment on our cost of capital; (ii.) each reporting unit’s ability to sustain market share over the year; (iii.) lack of turnover in key management; (iv.) 2015 actual performance as compared to expected 2015 performance from our 2014 Step 1 assessment; and, (v.) the overall market position and share price of Assurant, Inc.
Recent Accounting Pronouncements
Please see Note 2 of the Notes to the Consolidated Financial Statements.
Results of Operations
 
Assurant Consolidated
 
Overview
 
The table below presents information regarding our consolidated results of operations:

46


 
For the Years Ended December 31,
 
2015
 
2014
 
2013
Revenues:
 
 
 
 
 
Net earned premiums
$
8,350,997

 
$
8,632,142

 
$
7,759,796

Net investment income
626,217

 
656,429

 
650,296

Net realized gains on investments
31,826

 
60,783

 
34,525

Amortization of deferred gains on disposal of businesses
12,988

 
(1,506
)
 
16,310

Fees and other income
1,303,466

 
1,033,805

 
586,730

Total revenues
10,325,494

 
10,381,653

 
9,047,657

Benefits, losses and expenses:
 
 
 
 
 
Policyholder benefits
4,742,535

 
4,405,333

 
3,675,532

Selling, underwriting and general expenses (1)
5,326,662

 
5,173,788

 
4,504,691

Interest expense
55,116

 
58,395

 
77,735

Total benefits, losses and expenses
10,124,313

 
9,637,516

 
8,257,958

Income before provision for income taxes
201,181

 
744,137

 
789,699

Provision for income taxes
59,626

 
273,230

 
300,792

Net income
$
141,555

 
$
470,907

 
$
488,907

(1)
Includes amortization of DAC and VOBA and underwriting, general and administrative expenses.

Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014
 
Net income decreased $329,352, or 70%, to $141,555 for Twelve Months 2015 from $470,907 for Twelve Months 2014. The decrease was primarily related to higher loss experience and adverse claims development on 2015 individual major medical policies, a reduction in the 2014 estimated recoveries from the Affordable Care Act risk mitigation program and $106,389 (after-tax) of exit and disposal costs, including premium deficiency reserves, severance and retention costs, long-lived asset impairments and other costs associated with our exit from the health insurance market. For more information see Note 3 of the Notes to the Consolidated Financial Statements included elsewhere in this report.

 
Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013
 
Net income decreased $18,000, or 4%, to $470,907 for Twelve Months 2014 from $488,907 for Twelve Months 2013. The decrease was primarily related to lower net income at Assurant Specialty Property, a net loss at Assurant Health and a $19,400 (after-tax) loss associated with a divested business. Please see Note 4 to the Consolidated Financial Statements for further information. These items were partially offset by improved results in our Assurant Solutions and Assurant Employee Benefits segments, lower expenses in the Corporate and Other segment, an increase in net realized gains on investments and a favorable change in tax liabilities, including a $20,753 one-time tax benefit related to the conversion of the Canadian branch operations of certain U.S. subsidiaries to foreign corporate entities. Please see Note 8 to the Consolidated Financial Statements for further information.



47


Assurant Solutions
 
Overview
 
The table below presents information regarding Assurant Solutions’ segment results of operations:
 
For the Years Ended 
 December 31,
 
2015
 
2014
 
2013
Revenues:
 
 
 
 
 
Net earned premiums
$
3,015,846

 
$
3,128,868

 
$
2,783,758

Net investment income
376,683

 
382,640

 
376,245

Fees and other income
785,611

 
667,852

 
400,370

Total revenues
4,178,140

 
4,179,360

 
3,560,373

Benefits, losses and expenses:
 
 
 
 
 
Policyholder benefits
919,403

 
1,027,469

 
895,504

Selling, underwriting and general expenses
2,982,263

 
2,830,058

 
2,474,259

Total benefits, losses and expenses
3,901,666

 
3,857,527

 
3,369,763

Segment income before provision for income taxes
276,474

 
321,833

 
190,610

Provision for income taxes
79,291

 
102,885

 
65,458

Segment net income
$
197,183

 
$
218,948

 
$
125,152

Net earned premiums:
 
 
 
 
 
Domestic:
 
 
 
 
 
Credit
$
132,130

 
$
160,794

 
$
166,417

Service contracts
1,644,352

 
1,631,339

 
1,372,314

Other (1)
88,228

 
73,254

 
82,864

Total Domestic
1,864,710

 
1,865,387

 
1,621,595

International:
 
 
 
 
 
Credit
254,211

 
318,104

 
380,683

Service contracts
802,477

 
850,454

 
685,039

Other (1)
34,045

 
33,830

 
29,918

Total International
1,090,733

 
1,202,388

 
1,095,640

Preneed
60,403

 
61,093

 
66,523

Total
$
3,015,846

 
$
3,128,868

 
$
2,783,758

Fees and other income:
 
 
 
 
 
Domestic:
 
 
 
 
 
Debt protection
$
15,239

 
$
30,938

 
$
29,100

Service contracts
519,142

 
424,259

 
206,130

Other (1)
10,212

 
8,344

 
6,920

Total Domestic
544,593

 
463,541

 
242,150

International
133,980

 
97,265

 
51,873

Preneed
107,038

 
107,046