Investments

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



	June 30, 2016
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		OTTI in AOCI (a)
Fixed maturity securities:
U.S. government and government agencies and authorities	$	165,841	$	7,158	$	(1	)	$	172,998	$	—
States, municipalities and political subdivisions	526,189		48,884		—			575,073		—
Foreign governments	504,131		92,848		(297		)	596,682		—
Asset-backed	2,877		1,245		(221		)	3,901		1,197
Commercial mortgage-backed	43,858		780		—			44,638		—
Residential mortgage-backed	878,548		69,198		(67		)	947,679		14,585
U.S. corporate	4,982,779		630,941		(13,220		)	5,600,500		15,060
Foreign corporate	1,605,221		202,343		(4,836		)	1,802,728		2,041
Total fixed maturity securities	$	8,709,444	$	1,053,397	$	(18,642	)	$	9,744,199	$	32,883
Equity securities:
Common stocks	$	12,329	$	7,794	$	(1	)	$	20,122	$	—
Non-redeemable preferred stocks	369,839		45,611		(1,066		)	414,384		—
Total equity securities	$	382,168	$	53,405	$	(1,067	)	$	434,506	$	—

	December 31, 2015
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		OTTI in AOCI (a)
Fixed maturity securities:
U.S. government and government agencies and authorities	$	150,681	$	3,891	$	(537	)	$	154,035	$	—
States, municipalities and political subdivisions	647,335		48,389		(94		)	695,630		—
Foreign governments	497,785		65,188		(723		)	562,250		—
Asset-backed	3,499		1,367		(204		)	4,662		1,285
Commercial mortgage-backed	22,169		352		—			22,521		—
Residential mortgage-backed	953,247		48,676		(3,409		)	998,514		15,343
U.S. corporate	5,429,783		513,254		(73,344		)	5,869,693		15,705
Foreign corporate	1,766,296		164,295		(22,568		)	1,908,023		2,180
Total fixed maturity securities	$	9,470,795	$	845,412	$	(100,879	)	$	10,215,328	$	34,513
Equity securities:
Common stocks	$	13,048	$	6,623	$	(7	)	$	19,664	$	—
Non-redeemable preferred stocks	437,515		45,495		(2,617		)	480,393		—
Total equity securities	$	450,563	$	52,118	$	(2,624	)	$	500,057	$	—


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

The Company's states, municipalities and political subdivisions holdings are highly diversified across the U.S. and Puerto Rico, with no individual state’s exposure (including both general obligation and revenue securities) exceeding 0.5% of the overall investment portfolio as of June 30, 2016 and December 31, 2015. At June 30, 2016 and December 31, 2015, the securities include general obligation and revenue bonds issued by states, cities, counties, school districts and similar issuers, including $265,348 and $319,654, respectively, of advance refunded or escrowed-to-maturity bonds (collectively referred to as “pre-refunded bonds”), which are bonds for which an irrevocable trust has been established to fund the remaining payments of principal and interest. As of June 30, 2016 and December 31, 2015, revenue bonds account for 51% and 50% of the holdings, respectively. Excluding pre-refunded revenue bonds, the activities supporting the income streams of the Company’s revenue bonds are across a broad range of sectors, primarily highway, water, airport and marina, higher education, specifically pledged tax revenues, and other miscellaneous sources such as bond banks, finance authorities and appropriations.

The Company’s investments in foreign government fixed maturity securities are held mainly in countries and currencies where the Company has policyholder liabilities, which allow the assets and liabilities to be more appropriately matched. At June 30, 2016, approximately 82%, 7% and 4% of the foreign government securities were held in the Canadian government/provincials and the governments of Brazil and Germany, respectively. At December 31, 2015, approximately 79%, 8% and 5% of the foreign government securities were held in the Canadian government/provincials and the governments of Brazil and Germany, respectively. No other country represented more than 3% of the Company's foreign government securities as of June 30, 2016 and December 31, 2015.

The Company has European investment exposure in its corporate fixed maturity and equity securities of $732,886 with a net unrealized gain of $75,160 at June 30, 2016 and $888,923 with a net unrealized gain of $67,957 at December 31, 2015. Approximately 23% and 25% of the corporate European exposure is held in the financial industry at June 30, 2016 and December 31, 2015, respectively. The Company's largest European country exposure (the United Kingdom) represented approximately 4% and 5% of the fair value of the Company's corporate securities as of June 30, 2016 and December 31, 2015, respectively. Approximately 7% of the fair value of the corporate European securities are pound and euro-denominated and are not hedged to U.S. dollars, but held to support those foreign-denominated liabilities. The Company's international investments are managed as part of the overall portfolio with the same approach to risk management and focus on diversification.

The Company has exposure to the energy sector in its corporate fixed maturity securities of $638,143 with a net unrealized gain of $47,797 at June 30, 2016 and $779,720 with a net unrealized loss of $6,985 at December 31, 2015. Approximately 85% and 89% of the energy exposure is rated as investment grade as of June 30, 2016 and December 31, 2015, respectively.

The cost or amortized cost and fair value of fixed maturity securities at June 30, 2016 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.



	Cost or Amortized Cost		Fair Value
Due in one year or less	$	424,041	$	429,125
Due after one year through five years	1,671,193		1,757,547
Due after five years through ten years	2,118,236		2,241,236
Due after ten years	3,570,691		4,320,073
Total	7,784,161		8,747,981
Asset-backed	2,877		3,901
Commercial mortgage-backed	43,858		44,638
Residential mortgage-backed	878,548		947,679
Total	$	8,709,444	$	9,744,199

The following table summarizes the proceeds from sales of available-for-sale securities and the gross realized gains and gross realized losses that have been recognized in the statement of operations as a result of those sales:



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Proceeds from sales	$	606,531	$	804,476	$	2,874,248	$	1,356,989
Gross realized gains (a)	14,667		13,912		190,984		26,255
Gross realized losses (b)	5,110		5,844		31,571		11,443


(a)	Six months ended June 30, 2016 gross realized gains includes $150,701 related to the sale of Assurant Employee Benefits as described in Note 5.


(b)	Six months ended June 30, 2016 gross realized losses includes $16,427 related to the sale of Assurant Employee Benefits as described in Note 5.

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



	Three Months Ended June 30,					Six Months Ended June 30,
	2016			2015		2016			2015
Net realized gains related to sales and other:
Fixed maturity securities	$	6,625		$	6,746	$	145,774		$	12,259
Equity securities	3,337			1,080		13,143			1,954
Commercial mortgage loans on real estate	9,092			—		21,545			—
Other investments	2,625			4,173		3,583			4,311
Total net realized gains related to sales and other (a)	21,679			11,999		184,045			18,524
Net realized losses related to other-than-temporary impairments:
Fixed maturity securities	(53		)	—		(701		)	(2,570		)
Total net realized losses related to other-than-temporary impairments	(53		)	—		(701		)	(2,570		)
Total net realized gains	$	21,626		$	11,999	$	183,344		$	15,954


(a)	Six months ended June 30, 2016 net gains includes $146,727 related to the sale of Assurant Employee Benefits as described in Note 5.

Other-Than-Temporary Impairments

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

For the three and six months ended June 30, 2016, the Company recorded $53 and $364, respectively, of OTTI, of which $53 and $701, respectively, was related to both credit losses and securities the Company intends to sell and recorded as net OTTI losses recognized in earnings, with the remaining $337 related to all other factors and was recorded as an unrealized gain component of AOCI. There was no OTTI recorded for the three months ended June 30, 2015. For the six months ended June 30, 2015, the Company recorded $3,208 of OTTI, of which $2,570 was related to credit losses and recorded as net OTTI losses recognized in earnings, with the remaining $638 related to all other factors and recorded as an unrealized loss component of AOCI.

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



	Three Months Ended June 30,
	2016			2015
Balance, March 31,	$	30,981		$	36,057
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security	(709		)	(603		)
Reductions for credit loss impairments previously recognized on securities which matured, paid down, prepaid or were sold during the period	(1,168		)	(1,146		)
Balance, June 30,	$	29,104		$	34,308

	Six Months Ended June 30,
	2016			2015
Balance, January 1,	$	32,377		$	35,424
Additions for credit loss impairments recognized in the current period on securities previously impaired	554			—
Additions for credit loss impairments recognized in the current period on securities not previously impaired	—			2,570
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security	(1,318		)	(1,075		)
Reductions for credit loss impairments previously recognized on securities which matured, paid down, prepaid or were sold during the period	(2,509		)	(2,611		)
Balance, June 30,	$	29,104		$	34,308

The Company regularly monitors its investment portfolio to ensure investments that may be other-than-temporarily impaired are timely identified, properly valued, and charged against earnings in the proper period. The determination that a security has incurred an other-than-temporary decline in value requires the judgment of management. Assessment factors include, but are not limited to, the length of time and the extent to which the market value has been less than cost, the financial condition and rating of the issuer, whether any collateral is held, the intent and ability of the Company to retain the investment for a period of time sufficient to allow for recovery for equity securities and the intent to sell or whether it is more likely than not that the Company will be required to sell for fixed maturity securities. Inherently, there are risks and uncertainties involved in making these judgments. Changes in circumstances and critical assumptions such as a continued weak economy, a more pronounced economic downturn or unforeseen events which affect one or more companies, industry sectors, or countries could result in additional impairments in future periods for other-than-temporary declines in value. Any equity security whose price decline is deemed other-than-temporary is written down to its then current market value with the amount of the impairment reported as a realized loss in that period. The impairment of a fixed maturity security that the Company has the intent to sell or that it is more likely than not that the Company will be required to sell is deemed other-than-temporary and is written down to its market value at the balance sheet date with the amount of the impairment reported as a realized loss in that period. For all other-than-temporarily impaired fixed maturity securities that do not meet either of these two criteria, the Company is required to analyze its ability to recover the amortized cost of the security by calculating the net present value of projected future cash flows. For these other-than-temporarily impaired fixed maturity securities, the net amount recognized in earnings is equal to the difference between the amortized cost of the fixed maturity security and its net present value.

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

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

The investment category and duration of the Company’s gross unrealized losses on fixed maturity securities and equity securities at June 30, 2016 and December 31, 2015 were as follows:



	June 30, 2016
	Less than 12 months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Fixed maturity securities:
U.S. government and government agencies and authorities	$	2,176	$	(1	)	$	—	$	—		$	2,176	$	(1	)
Foreign governments	—		—			27,644		(297		)	27,644		(297		)
Asset-backed	—		—			991		(221		)	991		(221		)
Residential mortgage-backed	19,861		(58		)	812		(9		)	20,673		(67		)
U.S. corporate	235,238		(3,543		)	139,876		(9,677		)	375,114		(13,220		)
Foreign corporate	55,075		(1,479		)	39,037		(3,357		)	94,112		(4,836		)
Total fixed maturity securities	$	312,350	$	(5,081	)	$	208,360	$	(13,561	)	$	520,710	$	(18,642	)
Equity securities:
Common stock	$	339	$	(1	)	$	—	$	—		$	339	$	(1	)
Non-redeemable preferred stocks	13,531		(337		)	13,139		(729		)	26,670		(1,066		)
Total equity securities	$	13,870	$	(338	)	$	13,139	$	(729	)	$	27,009	$	(1,067	)



	December 31, 2015
	Less than 12 months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Fixed maturity securities:
U.S. government and government agencies and authorities	$	90,008	$	(465	)	$	5,564	$	(72	)	$	95,572	$	(537	)
States, municipalities and political subdivisions	6,881		(94		)	—		—			6,881		(94		)
Foreign governments	24,071		(347		)	22,239		(376		)	46,310		(723		)
Asset-backed	—		—			1,136		(204		)	1,136		(204		)
Residential mortgage-backed	260,620		(3,179		)	11,147		(230		)	271,767		(3,409		)
U.S. corporate	1,287,545		(65,631		)	38,224		(7,713		)	1,325,769		(73,344		)
Foreign corporate	348,912		(19,616		)	15,805		(2,952		)	364,717		(22,568		)
Total fixed maturity securities	$	2,018,037	$	(89,332	)	$	94,115	$	(11,547	)	$	2,112,152	$	(100,879	)
Equity securities:
Common stock	$	623	$	(7	)	$	—	$	—		$	623	$	(7	)
Non-redeemable preferred stocks	63,665		(1,632		)	13,806		(985		)	77,471		(2,617		)
Total equity securities	$	64,288	$	(1,639	)	$	13,806	$	(985	)	$	78,094	$	(2,624	)

Total gross unrealized losses represent approximately 4% and 5% of the aggregate fair value of the related securities at June 30, 2016 and December 31, 2015, respectively. Approximately 27% and 88% of these gross unrealized losses have been in a continuous loss position for less than twelve months at June 30, 2016 and December 31, 2015, respectively. The total gross unrealized losses are comprised of 232 and 884 individual securities at June 30, 2016 and December 31, 2015, respectively. In accordance with its policy described above, the Company concluded that for these securities an adjustment to its results of operations for other-than-temporary impairments of the gross unrealized losses was not warranted at June 30, 2016 and December 31, 2015. These conclusions were based on a detailed analysis of the underlying credit and expected cash flows of each security. As of June 30, 2016, the gross unrealized losses that have been in a continuous loss position for twelve months or more were concentrated in the Company’s corporate fixed maturity securities and in non-redeemable preferred stocks. The non-redeemable preferred stocks are perpetual preferred securities that have characteristics of both debt and equity securities. To evaluate these securities, the Company applies an impairment model similar to that used for the Company's fixed maturity securities. As of June 30, 2016, the Company did not intend to sell these securities and it was not more likely than not that the Company would be required to sell them and no underlying cash flow issues were noted. Therefore, the Company did not recognize an OTTI on those perpetual preferred securities that had been in a continuous unrealized loss position for twelve months or more. As of June 30, 2016, the Company did not intend to sell the fixed maturity securities and it was not more likely than not that the Company would be required to sell the securities before the anticipated recovery of their amortized cost basis. The gross unrealized losses are primarily attributable to widening credit spreads associated with an underlying shift in overall credit risk premium.

The Company has entered into commercial mortgage loans, collateralized by the underlying real estate, on properties located throughout the U.S. and Canada. At June 30, 2016, approximately 35% of the outstanding principal balance of commercial mortgage loans was concentrated in the states of California, New York, and Texas. Although the Company has a diversified loan portfolio, an economic downturn could have an adverse impact on the ability of its debtors to repay their loans. The outstanding balance of commercial mortgage loans range in size from $18 to $14,404 at June 30, 2016 and from $17 to $14,625 at December 31, 2015.

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

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



	June 30, 2016
Loan-to-Value	Carrying Value			% of Gross Mortgage Loans		Debt-Service Coverage Ratio
70% and less	$	592,516		95.1	%	1.88
71 – 80%	16,585			2.7	%	1.13
81 – 95%	8,850			1.4	%	1.26
Greater than 95%	4,816			0.8	%	3.52
Gross commercial mortgage loans	622,767			100	%	1.87
Less valuation allowance	(2,582		)
Net commercial mortgage loans	$	620,185

	December 31, 2015
Loan-to-Value	Carrying Value			% of Gross Mortgage Loans		Debt-Service Coverage Ratio
70% and less	$	1,101,572		95.5	%	2.01
71 – 80%	39,080			3.4	%	1.19
81 – 95%	8,370			0.7	%	1.05
Greater than 95%	4,816			0.4	%	3.52
Gross commercial mortgage loans	1,153,838			100	%	1.98
Less valuation allowance	(2,582		)
Net commercial mortgage loans	$	1,151,256

All commercial mortgage loans that are individually impaired have an established mortgage loan valuation allowance for losses. An additional valuation allowance is established for incurred, but not specifically identified impairments. Changing economic conditions affect the Company's valuation of commercial mortgage loans. Changing vacancies and rents are incorporated into the discounted cash flow analysis that the Company performs for monitored loans and may contribute to the establishment of (or an increase or decrease in) a commercial mortgage loan valuation allowance for losses. In addition, the Company continues to monitor the entire commercial mortgage loan portfolio to identify risk. Areas of emphasis are properties that have exposure to specific geographic events, have deteriorating credits or have experienced a reduction in debt-service coverage ratio. During the six months ended June 30 2016, the Company did not establish or increase the valuation allowance based upon this analysis.

Commercial Mortgage Loan Securitization

On May 31, 2016, the Company transferred $259,741 of certain commercial mortgage loans on real estate into a trust. Upon transfer, the loans were securitized as a source of funding for the Company and as a means of transferring the economic risk of the loans to third parties. The securitized assets are legally isolated from the creditors of the Company and are not available to satisfy its obligations and were accounted for as a sale. The securitized assets can only be used to settle obligations of the trust. The Company does not have the power to direct the activities of the trust, nor does it provide guarantees or recourse to the trust other than standard representations and warranties. The Company retained interest in the trust in the form of subordinate securities issued by the trust. The trust is a variable interest entity ("VIE") that the Company does not consolidate.

The cash proceeds, including accrued investment income, from the securitization were $269,828, with a corresponding realized gain of $9,092. At closing, the Company purchased $30,822 of securities at fair value from the trust. As of June 30, 2016, the maximum loss exposure the Company has to the trust is $30,906. The Company calculates its maximum loss exposure based on the unlikely event that all the assets in the trust become worthless and the effect it would have on the Company’s consolidated balance sheets based upon its retained interest in the trust. The securities purchased from the trust are included within fixed maturity securities available for sale at fair value on the consolidated balance sheet and are part of the Company’s ongoing other-than-temporary impairment review. See Note 8, Fair Values, Inputs, and Valuation Techniques for Financial Assets and Liabilities Disclosures for further description of the Company’s fair value inputs and valuation techniques.

Variable Interest Entities

A VIE is a legal entity which does not have sufficient equity at risk to allow the entity to finance its activities without additional financial support or in which the equity investors, as a group, do not have the characteristic of a controlling financial interest. The Company's investments in VIEs include private equity limited partnerships and real estate joint ventures. These investments are generally accounted for under the equity method and included in the consolidated balance sheets in other investments. The Company's maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported in the Company's consolidated balance sheet in addition to any required unfunded commitments. As of June 30, 2016, the Company's maximum exposure to loss is $231,364 in recorded carrying value and $64,928 in unfunded commitments. See Commercial Mortgage Loan Securitization section above for the disclosures relating to the commercial mortgage loan securitization trust.