RESERVES

Short Duration Contracts

The Company's short duration contracts are mainly comprised of disposed and runoff business. The principal products and services included in these categories are described in the summary of significant accounting policies. See Note 2 for further information.

Disposed and Runoff Short Duration Insurance Lines

Disposed business includes certain medical policies no longer offered and AEB policies disposed of via reinsurance. Reserves for previously disposed business are included in the Company’s reserves in accordance with the insurance guidelines. The Company maintains an offsetting reinsurance recoverable related to the AEB reserves. See Note 9 for further information.

Long Duration Contracts

The Company's long duration contracts are primarily comprised of preneed life insurance and annuity policies, life insurance policies (no longer offered), and Sun Life, FFG and LTC disposed businesses. The principal products and services included in these categories are described in the summary of significant accounting policies. See Note 2 for further information.

Disposed and Runoff Long Duration Insurance Lines

The Company’s universal life and annuity products are no longer offered and are in runoff. Reserves have been established based on the following assumptions. Interest rates credited on annuities were at guaranteed rates, ranging from 3.5% to 4.0%, except for a limited number of policies with guaranteed crediting rates of 4.5%. All annuity policies are past the surrender charge period. Crediting interest rates on universal life fund are at guaranteed rates of 4.0% to 4.1%. Universal life funds are subject to surrender charges that vary by product, age, sex, year of issue, risk class, face amount and grade to zero over a period not longer than 20 years.

Reserves for previously disposed Sun Life, FFG and LTC businesses are included in the Company’s reserves in accordance with the insurance guidance. The Company maintains an offsetting reinsurance recoverable related to these reserves. See Note 9 for further information.

Preneed Business — no longer offered

Interest and discount rates for preneed life insurance vary by year of issuance and product, and ranged from 4.7% to 7.3% in 2016 and 2015 before provisions for adverse deviation, which ranged from 0.2% to 0.5% in both 2016 and 2015.

Interest and discount rates for traditional life insurance vary by year of issuance and products and were 7.5% grading to 5.3% over 20 years in 2016 and 2015 with the exception of a block of pre-1980 business which had a level 8.8% discount rate in 2016 and 2015.

Mortality assumptions are based upon pricing assumptions and modified to allow for provisions for adverse deviation. Surrender rates vary by product and are based upon pricing assumptions.

Future policy benefit increases on preneed life insurance policies ranged from 1.0% to 7.0% in 2016 and 2015. Some policies have future policy benefit increases that are guaranteed or tied to equal some measure of inflation. The inflation assumption for most of these inflation-linked benefits was 3.0% in both 2016 and 2015 with the exception of most policies issued in 2005 through 2007 where the assumption was 2.3%.

The reserves for preneed annuities are based on assumed interest rates credited on deferred annuities, which vary by year of issue, and ranged from 1.0% to 5.5% in 2016 and 2015. Withdrawal charges, if any, can range from 7.0% to 0.0% and grade to zero over a period of seven years.

Reserve Roll Forward

The following table provides a roll forward of the Company's beginning and ending claims and benefits payable balances. Claims and benefits payable is the liability for unpaid loss and loss adjustment expenses and is comprised of case and IBNR reserves.

Since unpaid loss and loss adjustment expenses are estimates, the Company's actual losses incurred may be more or less than the Company's previously developed estimates, which is referred to as either unfavorable or favorable development.



	Years Ended December 31,
	2016			2015			2014
Claims and benefits payable, at beginning of year	$	1,719,916		$	1,717,938		$	1,679,730
Less: Reinsurance ceded and other	(384,297		)	(344,742		)	(272,687		)
Net claims and benefits payable, at beginning of year	1,335,619			1,373,196			1,407,043
Incurred losses and loss adjustment expenses related to:
Current year	181,588			721,099			728,099
Prior year's interest	9,382			56,661			58,472
Prior year (s)	(40,350		)	(35,026		)	(50,065		)
Total incurred losses and loss adjustment expenses	150,620			742,734			736,506
Paid losses and loss adjustment expenses related to:
Current year	177,218			444,567			436,752
Prior year (s)	1,297,926			335,744			333,601
Total paid losses and loss adjustment expenses	1,475,144			780,311			770,353
Net claims and benefits payable, at end of year	11,095			1,335,619			1,373,196
Plus: Reinsurance ceded and other	1,401,777			384,297			344,742
Claims and benefits payable, at end of year	$	1,412,872		$	1,719,916		$	1,717,938

The Company experienced net favorable development in all three years. The discontinued Assurant Health and AEB businesses had a substantial contribution to the overall favorable development. Combined, the favorable development for Assurant Health and AEB was $39,946, $35,046 and $50,075 in 2016, 2015 and 2014, respectively. For Assurant Health the favorable development in all years was attributed to lower medical provider utilization and lower medical inflation than assumed in the Company’s prior-year pricing and reserving processes. For AEB, the favorable development in all years was attributed to lower mortality rates and higher claim recovery rates than assumed in the Company’s prior year reserving processes.