Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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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, 2014 (“Twelve Months 2014”), twelve months ended December 31, 2013 (“Twelve Months 2013”) and twelve months ended December 31, 2012 (“Twelve Months 2012”). 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 $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.

Assurant Solutions net income increased $93,796, or 75%, to $218,948 for Twelve Months 2014 from $125,152 for Twelve Months 2013. The increase was primarily due to continued growth in covered mobile devices and favorable domestic loss experience. Results also benefited from operational efficiencies achieved from restructuring efforts that began in 2013.

Net earned premiums and fees increased 19.2% primarily reflecting continued growth in mobile subscribers and mobile client marketing programs. In addition, net earned premiums grew due to contributions from a large service contract client, as well as from increased sales of vehicle service contracts. These items were partially offset by the unfavorable impact of changes in foreign exchange rates in Latin America and Canada.

Overall, we expect Assurant Solutions 2015 net income and net earned premiums and fees to approximate Twelve Months 2014 amounts. Continued growth from our mobile and vehicle service contract businesses will be offset by the loss of a domestic mobile tablet program, reduced mobile carrier marketing programs and declines at certain domestic retailers. Foreign currency exchange rate volatility will also impact results.

Assurant Specialty Property net income decreased $81,829, or 19%, to $341,757 for Twelve Months 2014 from $423,586 for Twelve Months 2013. The decrease was primarily due to lower placement and premium rates and higher non-catastrophe losses in our lender-placed insurance business.

Net earned premiums and fees increased in Twelve Months 2014 compared with Twelve Months 2013. The increase was mainly attributable to the residual benefit of the previously disclosed discontinuation of a client quota share reinsurance agreement and recent acquisitions. These items were partially offset by lower placement and premium rates.

The Twelve Months 2014 expense ratio increased 400 basis points compared with Twelve Months 2013. The increase was primarily due to growth in fee-based businesses, which have higher expense ratios than our insurance products, and lower lender placed premiums.

For 2015, we expect Assurant Specialty Property net income and net earned premiums to decrease compared with Twelve Months 2014, reflecting continued normalization of lender-placed insurance business, the previously announced loss of client business and the sale of ARIC. Contributions from multi-family housing and mortgage solutions businesses to partially offset the decline. Overall results may be affected by catastrophe losses.

Assurant Health results decreased $69,605, or 1,188%, to a net loss of $63,748 for Twelve Months 2014 from net income of $5,857 for Twelve Months 2013. The loss was primarily attributable to increased claims from new Affordable Care Act qualified policies, reflecting the guaranteed issue requirements and the health profiles of many first-time buyers, as well as higher non-deductible expenses and reform fees related to the Affordable Care Act. 2014 pricing assumptions were made prior to last year’s open enrollment period regarding the risk pool of consumers buying policies in a guaranteed issue environment. At that time, we believed that existing policyholders who were required to transition to Affordable Care Act plans would be healthier than new enrollees. However, rule changes announced in November 2013 and March 2014 allowed policyholders to extend their existing coverage through 2016. This resulted in Affordable Care Act business having worse morbidity characteristics than we had assumed and 2014 policy pricing could not be modified.

Increased claims were partially offset by estimated recoveries from the Affordable Care Act risk mitigation programs. Estimated recoveries from the Risk Adjuster program are based on each carrier’s risk relative to that of the overall market.

The expense ratio for Twelve Months 2014 declined 200 basis points compared with Twelve Months 2013 primarily due to continued operational discipline. Twelve Months 2014 includes a $19,937 annual insurer fee related to the Affordable Care Act.

In 2015 we expect Assurant Health’s results to vary based on claims development on Affordable Care Act policies and estimated recoveries under Affordable Care Act risk mitigation programs. In addition, we expect net earned premiums and fees to increase in 2015 due to increased premium rates and strong sales of individual major medical policies.

Assurant Employee Benefits net income increased $14,128, or 41%, to $48,681 for Twelve Months 2014 from $34,553 for Twelve Months 2013. The increase was primarily attributable to favorable loss experience across all major product lines.

Net earned premiums and fees increased by 4% due to growth in voluntary products. This increase was partially offset by declines in employer-paid products.

During 2015, we expect net earned premiums and fees to increase compared with Twelve Months 2014 due to growth in voluntary products. Continued expense management actions should offset lower net investment income. In addition, we expect overall results to be affected by the continued low interest rate environment, employment trends and capital market conditions.

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 2014, 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 $313,782; net cash provided by investing activities totaled $63,889 and net cash used in financing activities totaled $776,199. We had $1,318,656 in cash and cash equivalents as of December 31, 2014. 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 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 2014 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.

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 2014, the Company did not participate in any insurance public marketplaces so the risk corridor program had no impact on the Company’s 2014 operations.

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.

The following table provides reserve information for our major product lines for the years ended December 31, 2014 and 2013:


	December 31, 2014								December 31, 2013
					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	$	4,618,505	$	4,872	$	14,696	$	6,456	$	4,453,154	$	185,863	$	14,236	$	5,901
Life insurance no longer offered		418,672		570		2,272		1,301		432,075		565		2,200		2,690
Universal life and other products no longer offered		168,808		136		704		1,959		189,319		125		735		3,110
FFG, LTC and other disposed businesses		4,153,741		46,585		881,514		97,524		3,440,947		34,158		740,704		75,195
Medical		87,563		7,254		1,959		7,886		94,436		10,454		3,840		9,799
All other		36,383		382		13,863		9,803		36,641		475		14,943		8,422
Short Duration Contracts:
Group term life		—		2,905		169,006		28,786		—		4,135		169,972		29,799
Group disability		—		1,564		1,127,068		107,961		—		2,537		1,156,693		115,158
Medical		—		130,185		137,370		240,830		—		125,817		68,869		153,313
Dental		—		4,013		2,251		17,037		—		5,140		2,402		17,461
Property and warranty		—		2,386,719		130,517		546,979		—		2,514,356		201,336		437,888
Credit life and disability		—		241,092		34,581		43,298		—		314,420		39,419		52,096
Extended service contracts		—		3,568,352		6,780		42,054		—		3,331,936		6,622		36,790
All other		—		135,046		5,375		18,776		—		132,691		3,203		16,575

Total	$	9,483,672	$	6,529,675	$	2,527,956	$	1,170,650	$	8,646,572	$	6,662,672	$	2,425,174	$	964,197

For a description of our reserving methodology, see Note 13 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

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, 2014 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	$	1,296,094	Group disability, claim termination rate 10% lower	$	1,269,025
Group disability, as reported	$	1,235,029	Group disability, as reported	$	1,235,029
Group disability, discount rate increased by 100 basis points	$	1,179,483	Group disability, claim termination rate 10% higher	$	1,205,361

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		$206,161
Group term life, as reported		$197,792
Group term life, discount rate increased by 100 basis points		$190,274

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, 2014 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*	$	401,200
Short duration medical, as reported	$	378,200
Short duration medical, loss development factors 1% higher*	$	358,200

*	This refers to loss development factors for the most recent four months. Our historical claims experience indicates that approximately 84% 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.

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 2014 would be as follows:


Change in both loss frequency and severity for all Property and Warranty	Ultimate cost of claims occurring in 2014		Change in cost of claims occurring in 2014
3% higher	$	718,756	$	41,260
2% higher	$	704,867	$	27,371
1% higher	$	691,114	$	13,618
Base scenario	$	677,496	$	—
1% lower	$	663,878	$	(13,618	)
2% lower	$	650,125	$	(27,371	)
3% lower	$	636,236	$	(41,260	)

Reserving for Asbestos and Other Claims

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 $30,036 (before reinsurance) and $27,085 (net of reinsurance) at December 31, 2014. 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.

Acquisition costs relating to individual voluntary limited benefit health policies issued in 2007 and later are deferred and amortized over the estimated average terms of the underlying contracts. These acquisition costs relate to commission expenses which result from commission schedules that pay significantly higher rates in the first year.

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 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, 2014				December 31, 2013
Reinsurance recoverables		$	7,254,585			$	5,752,134

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 $4,549,699 and $3,680,176 at December 31, 2014 and 2013, 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:


	2014		2013
Ceded future policyholder benefits and expense	$	4,052,976	$	3,355,706
Ceded unearned premium		1,587,583		1,283,674
Ceded claims and benefits payable		1,283,510		1,053,640
Ceded paid losses		330,516		59,114

Total	$	7,254,585	$	5,752,134

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. 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 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 our consolidated financial statements.

As of December 31, 2013, the Company had a cumulative valuation allowance of $16,474 against deferred tax assets of international subsidiaries. During Twelve Months 2014, the Company recognized a cumulative income tax expense of $1,690 primarily related to operating losses of international subsidiaries. As of December 31, 2014, the Company has a cumulative valuation allowance of $18,164 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 $841,239 and $784,561 of our $31,562,466 and $29,714,689 of total assets as of December 31, 2014 and 2013, 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, 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,
	2014		2013
Assurant Solutions	$	539,653	$	496,201
Assurant Specialty Property		301,586		288,360
Assurant Health		—		—
Assurant Employee Benefits		—		—

Total	$	841,239	$	784,561

For the 2014 impairment test, we compared each reporting unit’s estimated fair value with its net book value (“Step 1”). For both the Assurant Solutions and Assurant Specialty Property reporting units, goodwill was deemed not to be impaired because their estimated fair values exceeded their net book values. No further testing was necessary.

The following describes the valuation methodologies used in the Step 1 test to derive the estimated fair value of the reporting units.

For each reporting unit, we identified a group of peer companies, which have operations that are as similar as possible to the reporting unit. Certain of our reporting units have a very limited number of peer companies. A Guideline Company Method is used to value the reporting unit based upon its relative performance to its peer companies, based on several measures, including price to trailing 12 month earnings, price to projected earnings, price to tangible net worth and return on equity.

A Dividend Discount Method (“DDM”) is used to value each reporting unit based upon the present value of expected cash flows available for distribution over future periods. Cash flows are estimated for a discrete projection period based on detailed assumptions, and a terminal value is calculated to reflect the value attributable to cash flows beyond the discrete period. Cash flows and the terminal value are then discounted using the reporting unit’s estimated cost of capital. The estimated fair value of the reporting unit equals the sum of the discounted cash flows and terminal value.

A Guideline Transaction Method values the reporting unit based on available data concerning the purchase prices paid in acquisitions of companies operating in the insurance industry. The application of certain financial multiples calculated from these transactions provides an indication of estimated fair value of the reporting units.

While all three valuation methodologies were considered in assessing fair value, the DDM was weighed more heavily since in the current economic environment, management believes that expected cash flows are the most important factor in the valuation of a business enterprise. In addition, recent dislocations in the economy, the scarcity of M&A transactions in the insurance marketplace and the relative lack of directly comparable companies, particularly for Assurant Solutions, make the other methods less credible.

Following the 2014 Step 1 test, the Company concluded that the estimated fair value of the Assurant Solutions reporting unit exceeded its net book value by 25.4%, while the Assurant Specialty Property reporting unit exceeded its net book value by 33.3%.

Following the 2013 Step 1 test, the Company concluded that the estimated fair value of the Assurant Solutions reporting unit exceeded its net book value by 16.3%.

In 2013, the Company chose the option to perform a qualitative assessment for our Assurant Specialty Property reporting unit. 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. In undertaking our qualitative assessment of the Assurant Specialty Property reporting unit in 2013, 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) Assurant Specialty Property’s sustaining market share over the year; (iii) lack of turnover in key management; (iv) 2013 actual performance as compared to expected 2013 performance from our 2012 Step 1 assessment; and, (v) the overall market position and share price of Assurant, Inc. If, after assessing the totality of events or circumstances, an entity determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then it is required to perform a Step 1test.

Based on our qualitative assessment, having considered the factors in totality, we determined that it was not necessary to perform a Step 1 test for Assurant Specialty Property and that it was more-likely-than-not that the fair value of Assurant Specialty Property continued to exceed its net book value at year-end 2013.

The determination of fair value of our reporting units requires many estimates and assumptions. These estimates and assumptions primarily include, but are not limited to, earnings and required capital projections discussed above, discount rates, terminal growth rates, operating income and dividend forecasts for each reporting unit and the weighting assigned to the results of each of the three valuation methods described above. Changes in certain assumptions could have a significant impact on the goodwill impairment assessment. For example, an increase of the discount rate of 250 basis points, with all other assumptions held constant, for Assurant Solutions, would result in its estimated fair value being less than its net book value as of December 31, 2014. Likewise, a reduction of 1,280 basis points in the terminal growth rate, with all other assumptions held constant, for Assurant Solutions would result in its estimated fair value being less than its net book value as of December 31, 2014. It would take more significant movements in our estimates and assumptions in order for Assurant Specialty Property’s estimated fair value to be less than its net book value.

We evaluated the significant assumptions used to determine the estimated fair values of Assurant Solutions and Assurant Specialty Property, both individually and in the aggregate, and concluded they are reasonable.

However, should the operating results of either reporting unit decline substantially compared to projected results, or should further interest rate declines further increase the net unrealized investment portfolio gain position, we could determine that we need to record an impairment charge related to goodwill in Assurant Solutions and Assurant Specialty Property.

Had the net book value exceeded its estimated fair value in the Step 1 test, we would have then performed a second test to calculate the amount of impairment, if any. To determine the amount of any impairment, we would determine the implied fair value of goodwill in the same manner as if the reporting unit were being acquired in a business combination. Specifically, we would determine the fair value of all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a hypothetical calculation that yields the implied fair value of goodwill. If the implied fair value of goodwill is less than the recorded goodwill, we would record an impairment charge for the difference.

Recent Accounting Pronouncements – Adopted

On December 31, 2014, the Company adopted the amended guidance on reporting discontinued operations and disclosures of disposals of components of an entity. To qualify as a discontinued operation under the amended guidance, a component or group of components must represent a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The amended guidance includes expanded disclosures for discontinued operations and requires comparative balance sheet presentation. New disclosures are also required for disposals of individually significant components that do not qualify as discontinued operations. The adoption of this amended guidance did not impact the Company’s financial position or results of operations.

On January 1, 2014, the Company adopted the new guidance on presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The amendments in this guidance state that an unrecognized tax benefit, or a portion thereof, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. An exception to this guidance would be where a net operating loss carryforward or similar tax loss or credit carryforward would not be available under the tax law to settle any additional income taxes that would result from the disallowance of a tax position, or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose. In such a case, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The adoption of this new presentation guidance did not impact the Company’s financial position or results of operations.

On January 1, 2014, the Company adopted the other expenses guidance that addresses how health insurers should recognize and classify in their statements of operations fees mandated by the Affordable Care Act. The Affordable Care Act imposes an annual fee on health insurers for each calendar year beginning on or after January 1, 2014. The amendments specify that the liability for the fee should be estimated and recorded in full once the entity provides qualifying health insurance in the applicable calendar year in which the fee is payable with a corresponding deferred cost that is amortized to expense ratably over the calendar year during which it is payable. The Company’s adoption of this guidance impacts the results of our Assurant Health and Assurant Employee Benefits segments. For the calendar year ended December 31, 2014, the Company ratably recorded $25,723 in underwriting, general and administrative expenses in the consolidated statements of operations, and paid, in full, the final assessment during the third quarter of 2014.

Recent Accounting Pronouncements – Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued amended guidance on revenue recognition. The amended guidance affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. Insurance contracts are within the scope of other standards and therefore are specifically excluded from the scope of the amended revenue recognition guidance. The core principle of the amended guidance is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To

achieve the core principle, the entity applies a five-step process outlined in the amended guidance. The amended guidance also includes a cohesive set of disclosure requirements. The amended guidance is effective for interim and annual periods beginning after December 15, 2016 and early adoption is not permitted. Therefore, the Company is required to adopt the guidance on January 1, 2017. An entity can choose to apply the amended guidance using either the full retrospective approach or a modified retrospective approach. The Company is currently evaluating the requirements of the revenue recognition guidance as it relates to its non-insurance contract revenue and the potential impact on the Company’s financial position and results of operations.

Results of Operations

Assurant Consolidated

Overview

The table below presents information regarding our consolidated results of operations:


	For the Years Ended December 31,
	2014			2013		2012
Revenues:
Net earned premiums	$	8,632,142		$	7,759,796	$	7,236,984
Net investment income		656,429			650,296		713,128
Net realized gains on investments		60,783			34,525		64,353
Amortization of deferred gains on disposal of businesses		(1,506	)		16,310		18,413
Fees and other income		1,033,805			586,730		475,392

Total revenues		10,381,653			9,047,657		8,508,270

Benefits, losses and expenses:
Policyholder benefits		4,405,333			3,675,532		3,655,404
Selling, underwriting and general expenses (1)		5,173,788			4,504,691		4,034,809
Interest expense		58,395			77,735		60,306

Total benefits, losses and expenses		9,637,516			8,257,958		7,750,519

Income before provision for income taxes		744,137			789,699		757,751
Provision for income taxes		273,230			300,792		274,046

Net income	$	470,907		$	488,907	$	483,705

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

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.

Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012

Net income increased $5,202, or 1%, to $488,907 for Twelve Months 2013 from $483,705 for Twelve Months 2012. The increase was primarily related to a $143,457 (after-tax) decrease in reportable catastrophe losses in our Assurant Specialty Property segment. Partially offsetting this item was lower net income in our Assurant Health and Assurant Employee Benefits segments. In addition, the Corporate and Other net loss increased as net realized gains on investments decreased $19,388 (after-tax) and interest expense increased $11,329 (after-tax) due to the March 2013 issuance of senior notes with an aggregate principal amount of $700,000.

Assurant Solutions

Overview

The table below presents information regarding Assurant Solutions’ segment results of operations:


	For the Years Ended December 31,
	2014			2013			2012
Revenues:
Net earned premiums	$	3,128,868		$	2,783,758		$	2,579,220
Net investment income		382,640			376,245			396,681
Fees and other income		667,852			400,370			314,072

Total revenues		4,179,360			3,560,373			3,289,973

Benefits, losses and expenses:
Policyholder benefits		1,027,469			895,504			840,133
Selling, underwriting and general expenses (4)		2,830,058			2,474,259			2,267,986

Total benefits, losses and expenses		3,857,527			3,369,763			3,108,119

Segment income before provision for income taxes		321,833			190,610			181,854

Provision for income taxes		102,885			65,458			58,101

Segment net income	$	218,948		$	125,152		$	123,753

Net earned premiums:
Domestic:
Credit	$	160,794		$	166,417		$	165,765
Service contracts		1,631,339			1,372,314			1,260,578
Other (1)		73,254			82,864			62,298

Total Domestic		1,865,387			1,621,595			1,488,641

International:
Credit		318,104			380,683			425,078
Service contracts		850,454			685,039			556,207
Other (1)		33,830			29,918			28,316

Total International		1,202,388			1,095,640			1,009,601

Preneed		61,093			66,523			80,978

Total	$	3,128,868		$	2,783,758		$	2,579,220

Fees and other income:
Domestic:
Debt protection	$	30,938		$	29,100		$	27,912
Service contracts		424,259			206,130			139,636
Other (1)		8,344			6,920			4,039

Total Domestic		463,541			242,150			171,587

International		97,265			51,873			38,840
Preneed		107,046			106,347			103,645

Total	$	667,852		$	400,370		$	314,072

Gross written premiums (2):
Domestic:
Credit	$	316,815		$	387,038		$	390,648
Service contracts		3,112,526			2,090,160			1,799,577
Other (1)		88,298			106,256			113,067

Total Domestic		3,517,639			2,583,454			2,303,292

International:
Credit		879,526			964,236			1,002,347
Service contracts		826,046			780,393			722,251
Other (1)		63,211			47,932			44,721

Total International		1,768,783			1,792,561			1,769,319

Total	$	5,286,422		$	4,376,015		$	4,072,611

Preneed (face sales)	$	969,784		$	1,007,915		$	863,734

Combined ratio (3):
Domestic		93.3	%		97.9	%		98.9	%
International		101.5	%		102.8	%		104.8	%

(1)	This includes emerging products and run-off products lines.

(2)	Gross written premiums does not necessarily translate to an equal amount of subsequent net earned premiums since Assurant Solutions reinsures a portion of its premiums to insurance subsidiaries of its clients.

(3)	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.

(4)	2012 selling, underwriting and general expenses includes $26,458 of intangible asset impairment charges.

Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013

Net Income

Segment net income increased $93,796, or 75%, to $218,948 for Twelve Months 2014 from $125,152 for Twelve Months 2013. The increase was primarily driven by improved results in our domestic mobile business, reflecting growth in mobile subscribers, contributions from ongoing client marketing programs, continued favorable loss experience and expense savings in our domestic credit and domestic service contract businesses.

Total Revenues

Total revenues increased $618,987, or 17%, to $4,179,360 for Twelve Months 2014 from $3,560,373 for Twelve Months 2013. The increase was primarily driven by higher net earned premiums in our domestic and international service contract businesses. The increase in domestic service contract business reflects continued growth in mobile subscribers, growth at a large client due to increased subscribers and price increases as well as higher contributions from vehicle service contracts due to increased sales from new and existing dealers. The increase in international service contracts is due to growth in mobile subscribers. Fees and other income increased $267,482 primarily driven by mobile client marketing programs and from the Lifestyle Service Group (“LSG”) acquisition in October 2013.

Gross written premiums increased $910,407, or 21%, to $5,286,422 for Twelve Months 2014 from $4,376,015 for Twelve Months 2013. Gross written premiums from our domestic service contract business increased $1,022,366 primarily driven by growth in mobile subscribers. Gross written premiums from our international service contract business increased $45,653 primarily due to growth in the number of global mobile subscribers, the LSG acquisition and new and existing clients in Latin America. This increase was partially offset by the unfavorable impact of changes in foreign exchange rates, primarily in Latin America and Canada.

Preneed face sales decreased $38,131, or 4%, to $969,784 for Twelve Months 2014 from $1,007,915 for Twelve Months 2013. This decrease was mostly attributable to a change in product offerings and a client’s temporary operational change. On June 25, 2014, we extended our exclusive distribution partnership with SCI, for an additional 10 years, through September 29, 2024.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $487,764, or 14%, to $3,857,527 for Twelve Months 2014 from $3,369,763 for Twelve Months 2013. Policyholder benefits increased $131,965 primarily related to the LSG acquisition partially offset by favorable loss experience in our domestic mobile business. Selling, underwriting and general expenses increased $355,799. Commissions, taxes, licenses and fees, of which amortization of DAC is a component, increased $82,828 due to higher net earned premiums in our domestic service contract and domestic mobile business. General expenses increased $272,971 primarily due to increased administration expenses directly related to growth in our domestic mobile business and expenses related to the LSG acquisition. These items were partially offset by expense savings in our domestic credit and domestic service contract businesses.

Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012

Net Income

Segment net income increased $1,399, or 1%, to $125,152 for Twelve Months 2013 from $123,753 for Twelve Months 2012. Twelve Months 2012 included a $20,373 (after-tax) intangible asset impairment charge in our U.K. business and a workforce restructuring charge of $7,724 (after-tax). Twelve Months 2013 included $15,554 (after-tax) of workforce restructuring charges, primarily in our European operations (in connection with our recent acquisition of LSG, a mobile phone insurance provider business based in the U.K.), and in our

domestic credit insurance and extended protection businesses. Excluding these items, segment net income for Twelve Months 2013 decreased due to unfavorable domestic mobile underwriting experience. Preneed income also declined due to lower investment yields and higher mortality experience.

Total Revenues

Total revenues increased $270,400, or 8%, to $3,560,373 for Twelve Months 2013 from $3,289,973 for Twelve Months 2012 mainly due to a $204,538 increase in net earned premiums. Domestic net earned premiums increased primarily due to service contract growth from an existing service contract client as well as additional vehicle service contract clients, excluding $17,123 from a one-time assumption of a block of business in 2012. This was partially offset by a previously disclosed loss of a mobile client. International net earned premiums increased mostly due to service contract growth in Latin America and Europe, including the acquisition of LSG, partially offset by the unfavorable impact of changes in foreign exchange rates. Fees and other income increased $86,298 driven primarily by new domestic mobile programs introduced during the year and the acquisition of LSG.

Gross written premiums increased $303,404, or 7%, to $4,376,015 for Twelve Months 2013 from $4,072,611 for Twelve Months 2012. Gross written premiums from our domestic service contract business increased $290,583. Gross written premiums from our international service contract business increased $58,142 primarily due to growth in Latin America from new and existing clients and growth in Europe from the acquisition of LSG and from existing clients. This increase was partially offset by the unfavorable impact of changes in foreign exchange rates.

Preneed face sales increased $144,181 or 17%, to $1,007,915 for Twelve Months 2013 from $863,734 for Twelve Months 2012. This increase was mostly attributable to growth from our exclusive distribution partnership with SCI, the largest funeral provider in North America.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $261,644, or 8%, to $3,369,763 for Twelve Months 2013 from $3,108,119 for Twelve Months 2012. Policyholder benefits increased $55,371 due to unfavorable loss experience in our domestic service contract business and an increase in Europe due to policyholder benefits associated with the acquisition of LSG. Selling, underwriting and general expenses increased $206,273. Commissions, taxes, licenses and fees, of which amortization of DAC is a component, increased $192,044 due to earnings in our domestic service contract and international businesses. General expenses increased $14,229 primarily due to increased administration expenses directly related to growth in our domestic mobile business, workforce restructuring charges, primarily in our European operations and acquisition-related expenses. These items were partially offset by expense savings in our domestic credit and domestic service contract businesses.

Assurant Specialty Property

Overview

The table below presents information regarding Assurant Specialty Property’s segment results of operations:


	For the Years Ended December 31,
	2014			2013			2012
Revenues:
Net earned premiums	$	2,506,097		$	2,380,044		$	2,054,041
Net investment income		101,908			98,935			103,327
Fees and other income		301,048			133,135			98,621

Total revenues		2,909,053			2,612,114			2,255,989

Benefits, losses and expenses:
Policyholder benefits		1,085,339			890,409			949,157
Selling, underwriting and general expenses		1,305,286			1,068,273			844,288

Total benefits, losses and expenses		2,390,625			1,958,682			1,793,445

Segment income before provision for income taxes		518,428			653,432			462,544
Provision for income taxes		176,671			229,846			157,593

Segment net income	$	341,757		$	423,586		$	304,951

Net earned premiums:
Homeowners (lender-placed and voluntary)	$	1,743,965		$	1,678,172		$	1,418,061
Manufactured housing (lender-placed and voluntary)		237,576			226,058			207,675
Other (1)		524,556			475,814			428,305

Total	$	2,506,097		$	2,380,044		$	2,054,041

Ratios:
Loss ratio (2)		43.3	%		37.4	%		46.2	%
Expense ratio (3)		46.5	%		42.5	%		39.2	%
Combined ratio (4)		85.2	%		77.9	%		83.3	%

(1)	This primarily includes lender-placed flood, miscellaneous specialty property and multi-family housing 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.

Regulatory Matters

In January 2015, the New York Department of Financial Services (“NYDFS”) issued regulations regarding tracking costs associated with lender placed insurance rates. We are currently assessing the new regulations, however, at this time we believe that they will not have a material financial impact on our lender-placed insurance business.

As previously disclosed, on March 21, 2013, the Company and two of its wholly owned subsidiaries, American Security Insurance Company (“ASIC”) and American Bankers Insurance Company of Florida (“ABIC”), reached an agreement with the NYDFS regarding the Company’s lender-placed insurance business in the State of New York. Under the terms of the agreement, and without admitting or denying any wrongdoing, ASIC made a $14,000 (non tax-deductible) settlement payment to the NYDFS. In addition, among other things, ASIC and ABIC agreed to modify certain business practices in accordance with requirements that apply to all

New York-licensed lender-placed insurers of properties in the state, and filed their new lender-placed program and new rates in New York, which were approved in August 2014. The changes to the program affect annual lender-placed hazard and real estate owned policies issued in the State of New York, which accounted for approximately $120,000 and $101,000 of Assurant Specialty Property’s net earned premiums for Twelve Months 2014 and Twelve Months 2013, respectively.

On October 7, 2013, the Company reached an agreement with the Florida Office of Insurance Regulation to file for a 10% reduction in lender-placed hazard insurance rates in Florida. The rates have been filed and approved, and were effective for new and renewing policies starting in the first quarter of 2014. As part of the agreement, ASIC eliminated commissions and client quota-share reinsurance arrangements to meet new requirements of lender-placed insurance providers in Florida. ASIC recorded approximately $283,000 and $547,000 of direct earned premiums in Florida for Twelve Months 2014 and Twelve Months 2013, respectively, for the type of policies that are subject to the rate reduction.

At the federal level, in early 2013, the Consumer Financial Protection Bureau published mortgage servicing guidelines that incorporate certain requirements mandated by the Dodd-Frank Act. In addition, the Federal Housing Finance Agency (“FHFA”) issued new mortgage servicer guidelines, which became effective in June 2014, that eliminated lender-placed insurance-related commissions and client quota share arrangements on properties securing government-sponsored entity loans. At the directive of the FHFA, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation each issued bulletins in December 2013 implementing these mortgage servicer guidelines.

Lender-placed insurance products accounted for 71% and 73% of net earned premiums for Twelve Months 2014 and Twelve Months 2013, respectively. The approximate corresponding contributions to the segment net income in these periods were 73% and 87%, respectively. 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.

Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013

Net Income

Segment net income decreased $81,829, or 19%, to $341,757 for Twelve Months 2014 from $423,586 for Twelve Months 2013. The decrease is primarily due to lower placement and premium rates and higher non-catastrophe losses in our lender-placed insurance business. Twelve Months 2013 results included a $14,000 (non-tax deductible) regulatory settlement with the NYDFS.

Total Revenues

Total revenues increased $296,939, or 11%, to $2,909,053 for Twelve Months 2014 from $2,612,114 for Twelve Months 2013. The increase was primarily due to growth in lender-placed homeowners insurance net earned premiums, as well as fee income from the acquisitions of Field Asset Services (“FAS”) and StreetLinks. Growth in lender-placed homeowners insurance was primarily due to the previously disclosed discontinuation of a client quota share reinsurance agreement and loan portfolios added in 2013 and was partially offset by the impact of lower placement and premium rates.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $431,943 or 22%, to $2,390,625 for Twelve Months 2014 from $1,958,682 for Twelve Months 2013. The loss ratio increased to 43.3% for Twelve Months 2014 from 37.4% for Twelve Months 2013 due to higher non-catastrophe losses from severe weather, high severity fire claims and lower premium rates from the new lender-placed homeowners insurance product. Reportable

catastrophe losses for Twelve Months 2014 were $28,410 compared to reportable catastrophe losses for Twelve Months 2013 of $29,503. 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. The expense ratio increased to 46.5% for Twelve Months 2014 from 42.5% for Twelve Months 2013 primarily due to growth in fee-based businesses. Twelve Months 2013 included a $14,000 (non-tax deductible) regulatory settlement with the NYDFS.

Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012

Net Income

Segment net income increased $118,635, or 39%, to $423,586 for Twelve Months 2013 from $304,951 for Twelve Months 2012. The increase is primarily due to a $143,457 (after-tax) decrease in reportable catastrophe losses and an increase in lender-placed homeowners net earned premiums attributable to newly added loan portfolios and the discontinuation of a client quota share reinsurance agreement. Partially offsetting these items were higher non-catastrophe losses, an increase in operating expenses to support new loan portfolios, additional customer service initiatives and increased legal and regulatory expenses, including a $14,000 (non tax-deductible) regulatory settlement noted above and expenses related to pending class actions related to our lender-placed insurance programs.

Total Revenues

Total revenues increased $356,125, or 16%, to $2,612,114 for Twelve Months 2013 from $2,255,989 for Twelve Months 2012. Growth in lender-placed homeowners insurance was the main driver primarily due to newly added loan portfolios and the discontinuation of a client quota share reinsurance agreement.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $165,237 or 9%, to $1,958,682 for Twelve Months 2013 from $1,793,445 for Twelve Months 2012. The loss ratio decreased 880 basis points primarily due to lower reportable catastrophe losses of $29,503 in Twelve Months 2013 compared to $250,206 of reportable catastrophe losses in Twelve Months 2012. Reportable catastrophe losses include only individual catastrophic events that generated losses in excess of $5,000, pre-tax and net of reinsurance. The expense ratio increased 330 basis points in Twelve Months 2013 primarily due to higher legal and regulatory expenses described above and higher operating costs to support business growth, including costs for the newly acquired FAS business.

Assurant Health

Overview

The table below presents information regarding Assurant Health’s segment results of operations:


	For the Years Ended December 31,
	2014			2013			2012
Revenues:
Net earned premiums	$	1,945,452		$	1,581,407		$	1,589,459
Net investment income		35,369			36,664			64,308
Fees and other income		40,016			29,132			30,518

Total revenues		2,020,837			1,647,203			1,684,285

Benefits, losses and expenses:
Policyholder benefits		1,575,633			1,169,075			1,174,108
Selling, underwriting and general expenses		495,818			435,550			421,070

Total benefits, losses and expenses		2,071,451			1,604,625			1,595,178

Segment income before provision for income taxes		(50,614	)		42,578			89,107
Provision for income taxes		13,134			36,721			37,107

Segment net (loss) income	$	(63,748	)	$	5,857		$	52,000

Net earned premiums:
Individual	$	1,544,968		$	1,174,141		$	1,178,878
Small employer group		400,484			407,266			410,581

Total	$	1,945,452		$	1,581,407		$	1,589,459

Insured lives by product line:
Individual		829			780			663
Small employer group		138			127			109

Total		967			907			772

Ratios:
Loss ratio (1)		81.0	%		73.9	%		73.9	%
Expense ratio (2)		25.0	%		27.0	%		26.0	%
Combined ratio (3)		104.3	%		99.6	%		98.5	%

(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.

The Affordable Care Act

Most provisions of the Affordable Care Act have now taken effect. Given the sweeping nature of the changes represented by the Affordable Care Act, our results of operations and financial position could be materially adversely affected. For more information, see Item 1A, “Risk Factors – Risk related to our industry – Reform of the health insurance industry could materially reduce the profitability of certain of our businesses or render them unprofitable” in this report.

Because all individuals now have a guaranteed right to purchase health insurance policies, the Affordable Care Act introduced new and significant premium stabilization programs in 2014: reinsurance, risk adjustment, and risk corridor (together, the “3 Rs”). 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.

Reinsurance

This is a transitional program for 2014-2016, with decreasing benefit over the three years. All commercial individual and group medical health plans are required to contribute to the funding of the program. Only individual health plans that are compliant with the essential health benefits of the Affordable Care Act are eligible to receive benefits from the program.

We are required to make contributions, which are recorded quarterly, based on both our Affordable Care Act and non-Affordable Care Act business. Contributions based on our non-Affordable Care Act business are included in selling, underwriting and general expenses and contributions based on our Affordable Care Act business are included as ceded premiums. Recoveries are recorded quarterly as ceded policyholder benefits and reflect the anticipated experience of our Affordable Care Act plans based on our analysis of current and historical claim data.

For the Twelve Months 2014, we recorded reinsurance contributions of $5,894 and reinsurance recoveries of $276,980 in our consolidated statements of operations. As of December 31, 2014, we recorded reinsurance contributions payable of $5,894 and reinsurance recoverables of $276,980 on our consolidated balance sheets. Both contributions and recoveries for the 2014 program are scheduled to be settled in 2015.

Risk adjustment

This is a permanent program to transfer funds between health insurers based on the average health risk scores of their Affordable Care Act insured populations. Insurers with below-average risk scores will contribute into the pool. Insurers with above-average risk scores will receive payments out of the pool.

Risk scores are evaluated at the state, market, and legal entity level for Affordable Care Act-compliant policies. Risk adjustment amounts payable and receivable are reflected as adjustments to net earned premiums, and are recorded quarterly based on our current estimated loss experience of our Affordable Care Act business.

Based on the demographics of our Affordable Care Act population, extensive analytical evaluations, current and historical claim data as well as other internal and external data sources, external market studies and other published data, we believe that our average risk scores will be significantly higher than the industry averages.

For the Twelve Months 2014, we recorded net risk adjustment premiums of $121,888 in our consolidated statements of operations, and we carried net risk adjustment receivables of $121,888 on our consolidated balance sheets. Risk transfer payments and receipts for the 2014 program are scheduled to be settled in 2015.

Risk corridor

This is a temporary risk-sharing program for 2014-2016. Based on ratios of allowable costs to target costs as defined by the Affordable Care Act, health insurers will make payments to the Department of Health and Human Services (“HHS”) or receive funds from HHS. Because Assurant Health did not participate in any public insurance marketplaces for 2014, risk corridors have no impact on our 2014 operations. Because the reinsurance and risk-adjustment programs are brand new and historical results are not available, estimates of amounts receivable from them are subject to considerable uncertainty. Actual amounts received may vary substantially from our estimates.

Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013

Net (Loss) Income

Segment results decreased $69,605, or 1,188%, to a net loss of $63,748 for Twelve Months 2014 from net income of $5,857 for Twelve Months 2013. The decrease was primarily attributable to increased claims from the new Affordable Care Act qualified policies, reflecting the guaranteed issue requirements and the health profiles of many first-time buyers, as well as a higher non-deductible expenses and reform fees related to the Affordable Care Act. These items were partially offset by estimated recoveries from Affordable Care Act risk mitigation programs.

Total Revenues

Total revenues increased $373,634, or 23%, to $2,020,837 for Twelve Months 2014 from $1,647,203 for Twelve Months 2013. Net earned premiums from our individual medical business increased $370,827, or 32%, due to growth in individual major medical product sales, and estimated recoveries from the Affordable Care Act’s risk adjustment program.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $466,826, or 29%, to $2,071,451 for Twelve Months 2014 from $1,604,625 for Twelve Months 2013. Policyholder benefits increased $406,558, or 35%, and the benefit loss ratio increased to 81.0% from 73.9%. The increases in policyholder benefits and the benefit loss ratio were primarily attributable to higher volumes of individual business and higher loss experience on individual Affordable Care Act medical policies. Selling, underwriting and general expenses increased $60,268, or 14%, due to higher commissions on new sales and health reform fees. Fourth quarter 2013 included $4,589 of severance expense.

Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012

Net Income

Segment net income decreased $46,143, or 89%, to $5,857 for Twelve Months 2013 from $52,000 for Twelve Months 2012. The decrease was primarily attributable to a higher provision for income taxes in connection with the Affordable Care Act due to a change in estimated non-deductible compensation expenses, including a $10,205 tax liability increase, and a decrease in net earned premiums. In addition, Twelve Months 2012 results included an additional $14,337 (after-tax) of investment income from real estate joint venture partnerships.

Total Revenues

Total revenues decreased $37,082, or 2%, to $1,647,203 for Twelve Months 2013 from $1,684,285 for Twelve Months 2012. Net earned premiums from our individual medical business decreased $4,737, or less than 1%, due to a decline in individual major medical premiums, partially offset by growth in supplemental and affordable choice products and premium rate increases. Net earned premiums from our small employer group business decreased $3,315, or 1%, due to a decline in renewal business, partially offset by new sales and premium rate increases. Net investment income decreased $27,644, primarily due to less investment income from real estate joint venture partnerships.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $9,447, or less than 1%, to $1,604,625 for Twelve Months 2013 from $1,595,178 for Twelve Months 2012. Policyholder benefits decreased $5,033, or less than 1%, while the benefit loss ratio stayed level at 73.9%.The decrease in policyholder benefits was primarily attributable to a decline in renewal business, partially offset by less favorable loss experience and increasing first year business. Selling, underwriting and general expenses increased $14,480, or 3%, primarily due to higher expenses associated with increased first year sales of individual and small employer group major medical policies. Twelve Months 2013 also includes $4,589 of restructuring costs primarily due to the elimination of the underwriting functions for major medical products effective January 2014 as required by the Affordable Care Act.

Assurant Employee Benefits

Overview

The table below presents information regarding Assurant Employee Benefits’ segment results of operations:


	For the Years Ended December 31,
	2014			2013			2012
Revenues:
Net earned premiums	$	1,051,725		$	1,014,587		$	1,014,264
Net investment income		117,192			117,853			128,485
Fees and other income		24,204			23,434			28,468

Total revenues		1,193,121			1,155,874			1,171,217

Benefits, losses and expenses:
Policyholder benefits		716,892			715,656			693,067
Selling, underwriting and general expenses		399,548			388,159			390,042

Total benefits, losses and expenses		1,116,440			1,103,815			1,083,109

Segment income before provision for income taxes		76,681			52,059			88,108
Provision for income taxes		28,000			17,506			30,049

Segment net income	$	48,681		$	34,553		$	58,059

Net earned premiums:
Group disability	$	409,028		$	403,286		$	409,757
Group dental		392,502			383,223			394,413
Group life		200,285			192,392			188,246
Group supplemental and vision products		49,910			35,686			21,848

Total	$	1,051,725		$	1,014,587		$	1,014,264

Voluntary	$	441,479		$	393,969		$	368,576
Employer-paid and other		610,246			620,618			645,688

Total	$	1,051,725		$	1,014,587		$	1,014,264

Ratios:
Loss ratio (1)		68.2	%		70.5	%		68.3	%
Expense ratio (2)		37.1	%		37.4	%		37.4	%

(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.

Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013

Net Income

Segment net income increased $14,128, or 41%, to $48,681 for Twelve Months 2014 from $34,553 for Twelve Months 2013. The increase was primarily attributable to favorable loss experience in all major product lines.

Total Revenues

Total revenues increased $37,247, or 3%, to $1,193,121 for Twelve Months 2014 from $1,155,874 for Twelve Months 2013. Net earned premiums growth was driven by voluntary products which increased $47,510, or 12%, partially offset by declines in employer paid products.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $12,625, or 1%, to $1,116,440 for Twelve Months 2014 from $1,103,815 for Twelve Months 2013. The loss ratio decreased to 68.2% from 70.5% driven by favorable experience in all major product lines. The expense ratio remained relatively consistent at 37.1% for Twelve Months 2014 compared with 37.4% for Twelve Months 2013.

Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012

Net Income

Segment net income decreased $23,506 or 40%, to $34,553 for Twelve Months 2013 from $58,059 for Twelve Months 2012. The decrease was primarily attributable to less favorable disability loss experience, including a previously disclosed decrease in the reserve discount rate primarily for new long-term disability claims. Additionally, Twelve Months 2013 results were also impacted by lower investment income compared to Twelve Months 2012.

Total Revenues

Total revenues decreased $15,343 or 1%, to $1,155,874 for Twelve Months 2013 from $1,171,217 for Twelve Months 2012. Twelve Months 2013 net earned premiums increased slightly as growth in our voluntary products was offset by declines in employer-paid products. Net investment income decreased 8% or $10,632 driven by lower average invested assets, a decrease in the average investment yield and lower real estate joint venture income in Twelve Months 2013 compared to Twelve Months 2012.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $20,706 or 2%, to $1,103,815 for Twelve Months 2013 from $1,083,109 for Twelve Months 2012. The loss ratio increased to 70.5% from 68.3% primarily driven by unfavorable disability and life loss experience. The expense ratio remained flat at 37.4%.

Corporate and Other

The table below presents information regarding the Corporate and Other segment’s results of operations:


	For the Years Ended December 31,
	2014			2013			2012
Revenues:
Net investment income	$	19,320		$	20,599		$	20,327
Net realized gains on investments		60,783			34,525			64,353
Amortization of deferred gain on disposal of businesses		(1,506	)		16,310			18,413
Fees and other income		685			659			3,713

Total revenues		79,282			72,093			106,806

Benefits, losses and expenses:
Policyholder benefits		—			4,888			(1,061	)
Selling, underwriting and general expenses		143,078			138,450			111,423
Interest expense		58,395			77,735			60,306

Total benefits, losses and expenses		201,473			221,073			170,668

Segment loss before benefit for income taxes		(122,191	)		(148,980	)		(63,862	)
Benefit for income taxes		(47,460	)		(48,739	)		(8,804	)

Segment net loss	$	(74,731	)	$	(100,241	)	$	(55,058	)

Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013

Net Loss

Segment net loss decreased $25,510 or 25%, to $74,731 for Twelve Months 2014 compared with a net loss of $100,241 for Twelve Months 2013. The decrease is primarily due to 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, a $17,068 (after-tax) change in net realized gains on investments, lower employee-related costs and impact of expense reduction initiatives. These items were partially offset by a $19,400 (after-tax) loss on an asset held for sale.

Total Revenues

Total revenues increased $7,189 or 10%, to $79,282 for Twelve Months 2014 compared with $72,093 for Twelve Months 2013. The increase in revenues is mainly due to an $26,258 increase in net realized gains on investments partially offset by a decrease of $17,816 in amortization of deferred gain on disposal of businesses (“amortization of deferred gain”). The reduction in the amortization of deferred gain is related to a change in estimate for the recognition of a deferred gain associated with FFG that we previously sold through reinsurance.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses decreased $19,600 or 9%, to $201,473 in Twelve Months 2014 compared with $221,073 in Twelve Months 2013. Interest expense declined $19,340 primarily due to repayment of the 2004 Senior Notes with an aggregate principal amount of $500,000 on February 18, 2014. Included in selling, underwriting and general expenses is a $21,526 loss on an asset held for sale. Excluding this item, Twelve Months 2014 had lower selling, underwriting and general expenses compared with Twelve Months 2013 primarily due to lower employee-related costs and impact of expense reduction initiatives.

Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012

Net Loss

Segment net loss increased $45,183 or 82%, to $100,241 for Twelve Months 2013 compared with a net loss of $55,058 for Twelve Months 2012. The increase is primarily related to a $19,388 (after-tax) decrease in net realized gains on investments, increased employee-related and business acquisition-related expenses and additional expenses in areas targeted for growth. In addition, interest expense increased $11,329 (after-tax) due to the March 2013 issuance of senior notes with an aggregate principal amount of $700,000.

Total Revenues

Total revenues decreased $34,713 or 33%, to $72,093 for Twelve Months 2013 compared with $106,806 for Twelve Months 2012. The decrease in revenues is mainly due to decreased net realized gains on investments.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $50,405 or 30%, to $221,073 in Twelve Months 2013 compared with $170,668 in Twelve Months 2012. The increase is primarily due to increased employee-related and business acquisition-related expenses, additional expenses in areas targeted for growth and increased interest expense related to the March 2013 debt issuance mentioned above. In addition, policyholders benefits increased $5,949 attributable to increased claims payable accruals associated with discontinued businesses.

Investments

The Company had total investments of $14,131,452 and $14,244,015 as of December 31, 2014 and December 31, 2013, respectively. For more information on our investments see Note 5 to the Consolidated Financial Statements included elsewhere in this report.

The following table shows the credit quality of our fixed maturity securities portfolio as of the dates indicated:


	As of
Fixed Maturity Securities by Credit Quality (Fair Value)	December 31, 2014				December 31, 2013
Aaa / Aa / A	$	7,314,208	65.0	%	$	7,214,256	63.9	%
Baa		3,255,505	28.9	%		3,316,035	29.4	%
Ba		432,203	3.8	%		523,175	4.6	%
B and lower		261,258	2.3	%		238,409	2.1	%

Total	$	11,263,174	100.0	%	$	11,291,875	100.0	%

Major categories of net investment income were as follows:


	Years Ended December 31,
	2014			2013			2012
Fixed maturity securities	$	522,309		$	530,144		$	553,668
Equity securities		28,014			27,013			24,771
Commercial mortgage loans on real estate		73,959			76,665			79,108
Policy loans		2,939			3,426			3,204
Short-term investments		1,950			2,156			4,889
Other investments		34,527			20,573			54,581
Cash and cash equivalents		18,556			14,679			15,323

Total investment income		682,254			674,656			735,544

Investment expenses		(25,825	)		(24,360	)		(22,416	)

Net investment income	$	656,429		$	650,296		$	713,128

Net investment income increased $6,133, or 1%, to $656,429 for 2014 from $650,296 for 2013. The increase for the period was primarily related to $12,353 in additional investment income from real estate joint venture partnerships and $3,195 in additional investment income related to the loss recovery on certain mortgage-backed securities as a result of a trust settlement agreement. Excluding the investment income from the real estate joint venture partnerships and the trust settlement agreement, net investment income decreased $9,415, primarily reflecting lower investment yields.

Net investment income decreased $62,832, or 9%, to $650,296 for 2013 from $713,128 for 2012. The decrease is primarily due to $29,549 less investment income from real estate joint venture partnerships. Excluding the investment income from real estate joint venture partnerships, net investment income decreased $33,283, primarily reflecting lower investment yields.

The net unrealized gain position increased to $1,279,606 as of December 31, 2014, compared to $812,388 as of December 31, 2013 primarily due to a decrease in Treasury yields offset by an increase in credit spreads.

As of December 31, 2014, the Company owned $184,860 of securities guaranteed by financial guarantee insurance companies. Included in this amount was $174,850 of municipal securities, whose credit rating was A+ with the guarantee, but would have had a rating of A without the guarantee.

Our states, municipalities and political subdivisions holdings are highly diversified across the U.S. and Puerto Rico, with no individual state’s exposure (including both general obligation and revenue securities) exceeding 0.5% of the overall investment portfolio as of December 31, 2014 and 2013. At December 31, 2014 and 2013, the securities include general obligation and revenue bonds issued by states, cities, counties, school districts and similar issuers, including $270,107 and $234,640, 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 December 31, 2014 and 2013, revenue bonds account for 51% and 53% 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, transit, 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 December 31, 2014, approximately 76%, 10%, and 5% of the foreign government securities were held in the Canadian government/provincials and the governments of Brazil and Germany, respectively. At December 31, 2013, approximately 70%, 15% and 6% 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 our foreign government securities as of December 31, 2014 and 2013, respectively.

The Company has European investment exposure in its corporate fixed maturity and equity securities of $1,060,655 with a net unrealized gain of $116,975 at December 31, 2014 and $1,082,129 with a net unrealized gain of $78,126 at December 31, 2013. Approximately 22% and 25% of the corporate European exposure is held in the financial industry at December 31, 2014 and 2013, respectively. Our largest European country exposure represented approximately 5% and 6% of the fair value of our corporate securities as of December 31, 2014 and 2013, respectively. Approximately 5% of the fair value of the corporate European securities are pound and euro-denominated and are not hedged to U.S. dollars, but held to support those foreign-denominated liabilities. Our international investments are managed as part of our overall portfolio with the same approach to risk management and focus on diversification.

The Company has exposure to the energy sector in its corporate fixed maturity securities of $992,012 with a net unrealized gain of $89,590 at December 31, 2014 and $996,901 with a net unrealized gain of $78,667 at December 31, 2013. Approximately 89% and 87% of the energy exposure is rated as investment grade as of December 31, 2014 and 2013, respectively.

The Company has exposure to sub-prime and related mortgages within our fixed maturity security portfolio. At December 31, 2014, approximately 3% of the residential mortgage-backed holdings had exposure to sub-prime mortgage collateral. This represented approximately 0.2% of the total fixed income portfolio and 1% of the total unrealized gain position. Of the securities with sub-prime exposure, approximately 11% are rated as investment grade. All residential mortgage-backed securities, including those with sub-prime exposure, are reviewed as part of the ongoing other-than-temporary impairment monitoring process.

As required by the fair value measurements and disclosures guidance, the Company has identified and disclosed its financial assets in a fair value hierarchy, which consists of the following three levels:

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

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

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

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

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

When market observable inputs are unavailable to the pricing service, the remaining unpriced securities are submitted to independent brokers who provide non-binding broker quotes or are priced by other qualified sources. If the Company cannot corroborate the non-binding broker quotes with Level 2 inputs, these securities are categorized as Level 3.

A non-pricing service source prices certain privately placed corporate bonds using a model with observable inputs including, but not limited to, the credit rating, credit spreads, sector add-ons, and issuer specific add-ons. A non-pricing service source prices our CPI Caps using a model with inputs including, but not limited to, the time to expiration, the notional amount, the strike price, the forward rate, implied volatility and the discount rate.

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

	•		There are few recent transactions,

	•		Little information is released publicly,

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

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

	•		The magnitude of the bid-ask spread.

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

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

Collateralized Transactions

The Company engages in transactions in which fixed maturity securities, primarily bonds issued by the U.S. government and government agencies and authorities, and U.S. corporations, are loaned to selected broker/dealers. Collateral, greater than or equal to 102% of the fair value of the securities lent, plus accrued interest, is received in the form of cash and cash equivalents held by a custodian bank for the benefit of the Company. The use of cash collateral received is unrestricted. The Company reinvests the cash collateral received, generally in

investments of high credit quality that are designated as available-for-sale. The Company monitors the fair value of securities loaned and the collateral received, with additional collateral obtained, as necessary. The Company is subject to the risk of loss to the extent there is a loss on the re-investment of cash collateral.

As of December 31, 2014 and 2013, our collateral held under securities lending, of which its use is unrestricted, was $95,985 and $95,215, and is included in the consolidated balance sheets under the collateral held/pledged under securities agreements. Our liability to the borrower for collateral received was $95,986 and $95,206, respectively, and is included in the consolidated balance sheets under the obligation under securities agreements. The difference between the collateral held and obligations under securities lending is recorded as an unrealized gain (loss) and is included as part of AOCI. All securities with unrealized losses have been in a continuous loss position for less than 12 months as of December 31, 2014. All securities were in an unrealized gain position as of December 31, 2013. The Company includes the available-for-sale investments purchased with the cash collateral in its evaluation of other-than-temporary impairments.

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

Liquidity and Capital Resources

Regulatory Requirements

Assurant, Inc. is a holding company and, as such, has limited direct operations of its own. 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, such as payments under our tax allocation agreement and under management agreements with our subsidiaries. The ability to pay such dividends and to make such other payments will be limited by applicable laws and regulations of the states in which our subsidiaries are domiciled, which subject our subsidiaries to significant regulatory restrictions. The dividend requirements and regulations vary from state to state and by type of insurance provided by the applicable subsidiary. These laws and regulations require, among other things, our insurance subsidiaries to maintain minimum solvency requirements and limit the amount of dividends these subsidiaries can pay to the holding company. For further information on pending amendments to state insurance holding company laws, including the NAIC’s “Solvency Modernization Initiative,” see “Item 1A – Risk Factors – Risks Related to Our Industry – Changes in regulation may reduce our profitability and limit our growth.” Along with solvency regulations, the primary driver in determining the amount of capital used for dividends is the level of capital needed to maintain desired financial strength ratings from A.M. Best.

It is possible that regulators or rating agencies could become more conservative in their methodology and criteria, including increasing capital requirements for our insurance subsidiaries which, in turn, could negatively affect our capital resources. On November 21, 2014, A.M. Best affirmed the financial strength ratings for the legal entities of Assurant’s businesses with a stable outlook. At that time, A.M. Best also affirmed the Company’s debt rating of bbb with a positive outlook. On July 31, 2014, Moody’s Investor Services (“Moody’s”) affirmed the Senior Debt rating of Baa2 with a stable outlook for Assurant, Inc. At that time, Moody’s also affirmed the financial strength ratings of A2 with a stable outlook for American Security Insurance Company and American Bankers Insurance Company of Florida. In addition, Moody’s also affirmed American Bankers Life Assurance Company of Florida and Union Security Insurance Company’s financial strength ratings of A3 with a stable outlook. Moody’s downgraded the financial strength ratings from Baa1 to Baa2 for Time Insurance Company and John Alden Life Insurance Company due to pressures on earnings and concerns about the impact of the Affordable Care Act but, revised their outlook from negative to stable for these two entities. On July 1, 2014, Standard and Poor’s (“S&P”) affirmed the Senior Debt rating of BBB+ with a stable outlook for Assurant, Inc. In addition, S&P affirmed the financial strength ratings of Assurant’s rated entities with a stable outlook. For further information on our ratings and the risks of ratings downgrades, see “Item 1 – Business” and “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.” For 2015, the maximum amount of dividends our U.S. domiciled insurance subsidiaries could pay, under applicable laws and regulations without prior regulatory approval, is approximately $476,000.

Liquidity

As of December 31, 2014, we had $561,456 in holding company capital. We use the term “holding company capital” to represent cash and other liquid marketable securities held at Assurant, Inc., out of a total of $785,626, that we are not otherwise holding for a specific purpose as of the balance sheet date, but can be used for stock repurchases, stockholder dividends, acquisitions, and other corporate purposes. $250,000 of the $561,456 of holding company capital is intended to serve as a buffer against remote risks (such as large-scale hurricanes). Dividends or returns of capital, net of infusions and amounts used for acquisitions, made to the holding company from its operating companies were $453,485, $607,295, and $581,908 for the years ended December 31, 2014, 2013, and 2012, respectively. We use these cash inflows primarily to pay expenses, to make interest payments on indebtedness, to make dividend payments to our stockholders, to make subsidiary capital contributions, to fund acquisitions and to repurchase our outstanding shares.

In addition to paying expenses and making interest payments on indebtedness, our capital management strategy provides for several uses of the cash generated by our subsidiaries, including without limitation, returning capital to shareholders through share repurchases and dividends, investing in our businesses to support growth in targeted areas, and making prudent and opportunistic acquisitions. During 2014, 2013 and 2012 we made share repurchases and paid dividends to our stockholders of $295,765, $472,308 and $472,103, respectively. We expect 2015 dividends from the operating segments to approximate their earnings subject to the growth of the businesses, rating agency and regulatory capital requirements as well as investment performance.

The primary sources of funds for our subsidiaries consist of premiums and fees collected, proceeds from the sales and maturity of investments and net investment income. Cash is primarily used to pay insurance claims, agent commissions, operating expenses and taxes. We generally invest our subsidiaries’ excess funds in order to generate investment income.

We conduct periodic asset liability studies to measure the duration of our insurance liabilities, to develop optimal asset portfolio maturity structures for our significant lines of business and ultimately to assess that cash flows are sufficient to meet the timing of cash needs. These studies are conducted in accordance with formal company-wide Asset Liability Management (“ALM”) guidelines.

To complete a study for a particular line of business, models are developed to project asset and liability cash flows and balance sheet items under a large, varied set of plausible economic scenarios. These models consider many factors including the current investment portfolio, the required capital for the related assets and liabilities, our tax position and projected cash flows from both existing and projected new business.

Alternative asset portfolio structures are analyzed for significant lines of business. An investment portfolio maturity structure is then selected from these profiles given our return hurdle and risk preference. Sensitivity testing of significant liability assumptions and new business projections is also performed.

Our liabilities generally have limited policyholder optionality, which means that the timing of payments is relatively insensitive to the interest rate environment. In addition, our investment portfolio is largely comprised of highly liquid fixed maturity securities with a sufficient component of such securities invested that are near maturity which may be sold with minimal risk of loss to meet cash needs. Therefore, we believe we have limited exposure to disintermediation risk.

Generally, our subsidiaries’ premiums, fees and investment income, along with planned asset sales and maturities, provide sufficient cash to pay claims and expenses. However, there may be instances when unexpected cash needs arise in excess of that available from usual operating sources. In such instances, we have several options to raise needed funds, including selling assets from the subsidiaries’ investment portfolios, using

holding company cash (if available), issuing commercial paper, or drawing funds from our revolving credit facility. In addition, we have filed an automatically effective shelf registration statement on Form S-3 with the SEC. This registration statement allows us to issue equity, debt or other types of securities through one or more methods of distribution. The terms of any offering would be established at the time of the offering, subject to market conditions. If we decide to make an offering of securities, we will consider the nature of the cash requirement as well as the cost of capital in determining what type of securities we may offer.

On January 9, 2015, our Board of Directors declared a quarterly dividend of $0.27 per common share payable on March 9, 2015 to stockholders of record as of February 23, 2015. We paid dividends of $0.27 per common share on December 15, 2014 to stockholders of record as of December 1, 2014, $0.27 per common share on September 9, 2014 to stockholders of record as of August 25, 2014, and $0.27 per common share on June 10, 2014 to stockholders of record as of May 27, 2014. This represents an 8 percent increase above the quarterly dividend of $0.25 per common share paid on March 10, 2014 to stockholders of record as of February 24, 2014. Any determination to pay future dividends will be at the discretion of our Board of Directors and will be dependent upon: our subsidiaries’ payments 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; legal, tax, regulatory and contractual restrictions on the payment of dividends; and other factors our Board of Directors deems relevant.

On November 15, 2013, our Board of Directors authorized the Company to repurchase up to an additional $600,000 of its outstanding common stock, making its total authorization $752,436 at that date. During the year ended December 31, 2014, we repurchased 3,298,490 shares of our outstanding common stock at a cost of $218,204, exclusive of commissions. As of December 31, 2014, $486,670 remained under the total repurchase authorization. The timing and the amount of future repurchases will depend on market conditions, our financial condition, results of operations, liquidity and other 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 shares.

Retirement and Other Employee Benefits

The Pension Protection Act of 2006 (“PPA”) requires certain qualified plans, like the Assurant Pension Plan, to meet specified funding thresholds. If these funding thresholds are not met, there are negative consequences to the Assurant Pension Plan and participants. If the funded percentage falls below 80%, full payment of lump sum benefits as well as implementation of amendments improving benefits are restricted.

As of January 1, 2014, the Assurant Pension Plan’s funded percentage was 135% on a PPA calculated basis (based on an actuarial average value of assets compared to the funding target). Therefore, benefit and payment restrictions did not occur during 2014. The 2014 funded measure will also be used to determine restrictions, if any, that can occur during the first nine months of 2015. Due to the funding status of the Assurant Pension Plan in 2014, no restrictions will exist before October 2015 (the time that the January 1, 2015 actuarial valuation needs to be completed). Also, based on the estimated funded status as of January 1, 2015, we do not anticipate any restrictions on benefits for the remainder of 2015.

The Assurant Pension Plan was under-funded by $28,956 and over-funded by $18,078 (based on the fair value of the assets compared to the projected benefit obligation) on a GAAP basis at December 31, 2014 and 2013, respectively. This equates to an 97% and 102% funded status at December 31, 2014 and 2013, respectively. The change in funded status is mainly due to a decrease in the discount rate and a change in the mortality rates used to determine the projected benefit obligation.

The Company’s funding policy is to contribute amounts to the plan sufficient to meet the minimum funding requirements in ERISA, plus such additional amounts as the Company may determine to be appropriate from time to time up to the maximum permitted. The funding policy considers several factors to determine such additional amounts including items such as the amount of service cost plus 15% of the Assurant Pension Plan deficit and the capital position of the Company. During 2014, we contributed $30,000 in cash to the Assurant Pension Plan. We expect to contribute up to $43,000 in cash to the Assurant Pension Plan over the course of 2015. See Note 21 to the Consolidated Financial Statements included elsewhere in this report for the components of the net periodic benefit cost.

The impact of a 25 basis point change in the discount rate on the 2015 projected benefit expense would result in a change of $3,000 for the Assurant Pension Plan and the various non-qualified pension plans and no impact on the retirement health benefit plan. The impact of a 25 basis point change in the expected return on assets assumption on the 2015 projected benefit expense would result in a change of $2,000 for the Assurant Pension Plan and the various non-qualified pension plans and $100 for the retirement health benefits plan.

Commercial Paper Program

Our commercial paper program requires us to maintain liquidity facilities either in an available amount equal to any outstanding notes from the program or in an amount sufficient to maintain the ratings assigned to the notes issued from the program. Our commercial paper is rated AMB-2 by A.M. Best, P-2 by Moody’s and A-2 by S&P. Our subsidiaries do not maintain commercial paper or other borrowing facilities. This program is currently backed up by a $400,000 senior revolving credit facility, of which $395,740 was available at December 31, 2014, due to $4,260 of outstanding letters of credit related to this program.

On September 16, 2014, we entered into a five-year unsecured $400,000 revolving credit agreement (“2014 Credit Facility”) with a syndicate of banks arranged by JP Morgan Chase Bank, N.A. and Wells Fargo, N.A. The 2014 Credit Facility replaces our prior four-year $350,000 revolving credit facility (“2011 Credit Facility”), which was entered into on September 21, 2011 and was scheduled to expire in September 2015. The 2011 Credit Facility terminated upon the effectiveness of the 2014 Credit Facility. The 2014 Credit Facility provides for revolving loans and the issuance of multi-bank, syndicated letters of credit and/or letters of credit from a sole issuing bank in an aggregate amount of $400,000 and is available until September 30, 2019, provided we are in compliance with all covenants. The 2014 Credit Facility has a sublimit for letters of credit issued thereunder of $50,000. The proceeds of these loans may be used for our commercial paper program or for general corporate purposes. The Company may increase the total amount available under the 2014 Credit Facility to $525,000 subject to certain conditions. No bank is obligated to provide commitments above their current share of the $400,000 facility.

We did not use the commercial paper program during the twelve months ended December 31, 2014 and 2013 and there were no amounts relating to the commercial paper program outstanding at December 31, 2014 and December 31, 2013. The Company made no borrowings using either the 2011 Credit Facility or the 2014 Credit Facility and no loans were outstanding at December 31, 2014.

The 2014 Credit Facility contains restrictive covenants, all of which were met as of December 31, 2014. These covenants include (but are not limited to):

	(i)	Maintenance of a maximum debt to total capitalization ratio on the last day of any fiscal quarter of not greater than 35%, and

	(ii)	Maintenance of a consolidated adjusted net worth in an amount not less than the “Minimum Amount”. For the purpose of this calculation the “Minimum Amount” is an amount equal to the sum of (a) the

	base amount $3,317,000 plus (b) 25% of consolidated net income for each fiscal quarter (if positive) ending after June 30, 2014, plus (c) 25% of the net proceeds received by the Company from any capital contribution to, or issuance of any Capital Stock or Hybrid Securities received after June 30, 2014.

At December 31, 2014, our ratio of debt to total capitalization as calculated under the covenant was 20%, the consolidated Minimum Amount described in (ii) above was $3,365,481 and our actual consolidated adjusted net worth as calculated under the covenant was $4,778,526.

In the event of the breach of certain covenants all obligations under the 2014 Credit Facility, including unpaid principal and accrued interest and outstanding letters of credit, may become immediately due and payable.

Senior Notes

On March 28, 2013, we issued two series of senior notes with an aggregate principal amount of $700,000 (the “2013 Senior Notes”). The first series is $350,000 in principal amount, bears interest at 2.50% per year and is payable in a single installment due March 15, 2018. The second series is $350,000 in principal amount, bears interest at 4.00% per year and is payable in a single installment due March 15, 2023.

The net proceeds from the sale of the 2013 Senior Notes were $698,093, which represents the principal amount less the discount before offering expenses. The Company used the net proceeds of the 2013 Senior Notes for general corporate purposes, including to repay $500,000 of debt that matured in February 2014.

In addition, during 2014, we had two series of senior notes outstanding in an aggregate principal amount of $975,000 (the “2004 Senior Notes”). The first series was $500,000 in principal amount, bore interest at 5.63% per year and was repaid on February 18, 2014. The second series is $475,000 in principal amount, bears interest at 6.75% per year and is due February 15, 2034.

Interest on our 2004 Senior Notes is payable semi-annually on February 15 and August 15 of each year. The interest expense incurred related to the 2004 Senior Notes was $35,414, $59,414 and $60,306 for the years ended December 31, 2014, 2013, and 2012, respectively. There was $12,023 and $21,876 of accrued interest at December 31, 2014 and 2013, respectively. The 2004 Senior Notes are unsecured obligations and rank equally with all of our other senior unsecured indebtedness. The 2004 Senior Notes are not redeemable prior to maturity.

Interest on our 2013 Senior Notes is payable semi-annually on March 15 and September 15 of each year. The interest expense incurred related to the 2013 Senior Notes was $22,981 and $17,357 for the twelve months ended December 31, 2014 and 2013, respectively. There was $6,635 of accrued interest at December 31, 2014 and 2013, respectively. The 2013 Senior Notes are unsecured obligations and rank equally with all of the Company’s other senior unsecured indebtedness. The Company may redeem each series of the 2013 Senior Notes in whole or in part at any time and from time to time before their maturity at the redemption price set forth in the Indenture.

In management’s opinion, dividends from our subsidiaries together with our income and gains from our investment portfolio will provide sufficient liquidity to meet our needs in the ordinary course of business.

Cash Flows

We monitor cash flows at the consolidated, holding company and subsidiary levels. Cash flow forecasts at the consolidated and subsidiary levels are provided on a monthly basis, and we use trend and variance analyses to project future cash needs making adjustments to the forecasts when needed.

The table below shows our recent net cash flows:


	For the Years Ended December 31,
	2014			2013			2012
Net cash provided by (used in):
Operating activities (1)	$	313,782		$	1,003,819		$	673,215
Investing activities		63,889			(392,738	)		(449,883	)
Financing activities		(776,199	)		196,699			(480,641	)

Net change in cash	$	(398,528	)	$	807,780		$	(257,309	)

(1)	Includes effect of exchange rates changes and the reclassification of assets held for sale on cash and cash equivalents.

Cash Flows for the Years Ended December 31, 2014, 2013 and 2012.

Operating Activities:

We typically generate operating cash inflows from premiums collected from our insurance products and income received from our investments while outflows consist of policy acquisition costs, benefits paid, and operating expenses. These net cash flows are then invested to support the obligations of our insurance products and required capital supporting these products. Our cash flows from operating activities are affected by the timing of premiums, fees, and investment income received and expenses paid.

Net cash provided by operating activities was $313,782 and $1,003,819 for the years ended December 31, 2014 and 2013, respectively. The decrease in cash provided by operating activities was primarily due to changes in the timing of payments and by amounts yet to be recovered under the 3 R’s program, partially offset by increased net written premiums in Assurant Solutions, Assurant Health and Assurant Employee Benefits. For more information on the 3 R’s, please refer to Assurant Health’s Results of Operations section in this Item 7.

Net cash provided by operating activities was $1,003,819 and $673,215 for the years ended December 31, 2013 and 2012, respectively. The increase in cash provided by operating activities was primarily due to decreased catastrophe loss payments, decreased tax payments and increased net written premiums in our Assurant Solutions and Assurant Specialty Property segments. These items were partially offset by a $14,000 settlement payment with the NYDFS in our Assurant Specialty Property segment during Twelve Months 2013.

Investing Activities:

Net cash provided by (used in) investing activities was $63,889 and $(392,738) for the years ended December 31, 2014 and 2013, respectively. The change in investing activities is primarily due to decreased purchases of fixed maturity securities and less cash spent on acquisitions and equity interests, partially offset by a decrease in sales of fixed maturity securities. For more information on acquisitions, please see Note 3 to the Consolidated Financial Statements contained elsewhere in the report.

Net cash used in investing activities was $392,738 and $449,883 for the years ended December 31, 2013 and 2012, respectively. The decrease in cash used in investing activities is primarily due to increased sales of fixed maturity securities and decreased purchases of fixed maturity securities, partially offset by the acquisitions of FAS and LSG, and an equity investment in Iké, all during Twelve Months 2013, and changes in our short term investments.

Financing Activities:

Net cash (used in) provided by financing activities was $(776,199) and $196,699 for the years ended December 31, 2014 and 2013, respectively. The cash used in financing activities during Twelve Months 2014 was primarily due to repayment of $467,330 of 2004 Senior Notes, which represents $500,000 in principal less

amounts repurchased in 2013, and the payment of a contingent liability related to the acquisition of LSG. The cash provided by activities during Twelve Months 2013 was due to the issuance of two series of senior notes during Twelve Months 2013. The company received proceeds of $698,093 from this transaction, which represents the principal amount less the discount before offering expenses.

Net cash provided by (used in) financing activities was $196,699 and $(480,641) for the years ended December 31, 2013 and 2012, respectively. The increase in financing activities was primarily due to the issuance of two series of senior notes during Twelve Months 2013. The company received proceeds of $698,093 from this transaction, which represents the principal amount less the discount before offering expenses.

The table below shows our cash outflows for taxes, interest and dividends for the periods indicated:


	For the Years Ended December 31,
	2014		2013		2012
Income taxes paid	$	247,771	$	132,487	$	289,850
Interest paid on debt		68,875		70,741		60,188
Common stock dividends		77,495		74,128		69,393

Total	$	394,141	$	277,356	$	419,431

Commitments and Contingencies

We have obligations and commitments to third parties as a result of our operations. These obligations and commitments, as of December 31, 2014, are detailed in the table below by maturity date as of the dates indicated:


	As of December 31, 2014
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Contractual obligations :
Insurance liabilities (1)	$	22,217,185	$	1,975,701	$	1,812,682	$	1,712,555	$	16,716,247
Debt and related interest		1,949,844		54,813		109,625		446,500		1,338,906
Operating leases		126,251		30,587		44,422		27,970		23,272
Pension obligations and postretirement benefit		720,115		68,933		116,751		127,459		406,972
Commitments:
Investment purchases outstanding:
Commercial mortgage loans on real estate		26,959		26,959		—		—		—
Capital contributions to real estate joint ventures		5,320		5,320		—		—		—
Liability for unrecognized tax benefit		7,631		—		2,804		855		3,972

Total obligations and commitments	$	25,053,305	$	2,162,313	$	2,086,284	$	2,315,339	$	18,489,369

(1)	Insurance liabilities reflect estimated cash payments to be made to policyholders.

Liabilities for future policy benefits and expenses of $9,483,672 and claims and benefits payable of $3,698,606 have been included in the commitments and contingencies table. Significant uncertainties relating to these liabilities include mortality, morbidity, expenses, persistency, investment returns, inflation, contract terms and the timing of payments.

Letters of Credit

In the normal course of business, letters of credit are issued primarily to support reinsurance arrangements. These letters of credit are supported by commitments with financial institutions. We had $17,871 and $17,343 of letters of credit outstanding as of December 31, 2014 and December 31, 2013, respectively.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that are reasonably likely to have a material effect on the financial condition, results of operations, liquidity, or capital resources of the Company.

Previous: Item 6. Selected Financial Data · Next: Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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