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: Global Housing, Global Lifestyle, Global Preneed, Total Corporate and Other and Assurant Employee Benefits. Total Corporate and Other includes Corporate and Other activities of the holding company, financing and interest expenses, net realized gains (losses) on investments and interest income earned from short-term investments held. Corporate and Other also includes the amortization of deferred gains and gains associated with the sales of FFG, LTC and Assurant Employee Benefits, through reinsurance agreements and other unusual and infrequent items as described below. Additionally, the Total Corporate and Other segment includes amounts related to the runoff of the Assurant Health business. As Assurant Health was a reportable segment in prior years, these amounts are disclosed for comparability purposes. In addition, Assurant Employee Benefits was a separate reportable segment in 2016 and primarily includes the results of operations for the periods prior to its sale on March 1, 2016.

The following discussion covers the twelve months ended December 31, 2016 (“Twelve Months 2016”), twelve months ended December 31, 2015 (“Twelve Months 2015”) and twelve months ended December 31, 2014 (“Twelve Months 2014”). Please see the discussion that follows, for each of these segments, for a more detailed analysis of the fluctuations.

Executive Summary

The Company made significant progress in executing its multi-year transformation in 2016. As part of its portfolio realignment to focus on specialty housing and lifestyle protection products and services, the Company has substantially exited the health insurance market and completed the sale, mainly through a series of reinsurance transactions, of its Assurant Employee Benefits segment to Sun Life Assurance Company of Canada, a subsidiary of Sun Life Financial Inc. (“Sun Life”). For more information on the sale, see Note 5 to the Consolidated Financial Statements included elsewhere in this Report.

Consolidated net income increased $423,795, or 299%, to $565,350 for Twelve Months 2016 from $141,555 for Twelve Months 2015. The increase was primarily related to lower losses and exit-related charges from the wind down of the Assurant Health runoff operations, a $247,991 (after-tax) increase in amortization of deferred gains and gains on disposal of businesses and an additional $84,732 (after-tax) in net realized gains on investments. The increase in amortization of deferred gains and gains on disposal of businesses and net realized gains on investments both primarily relate to the sale of the Assurant Employee Benefits segment. These items were partially offset by higher reportable catastrophe losses and the ongoing declines in lender-placed insurance in our Global Housing segment.

Global Housing net income decreased $119,039, or 39%, to $188,666 for Twelve Months 2016 from $307,705 for Twelve Months 2015. The decrease is primarily due to an $83,060 (after-tax) increase in reportable catastrophe losses and the ongoing declines in our lender-placed homeowners insurance business, including a decline in real-estate owned business and the previously disclosed loss of client business. This decline was partially offset by savings realized from expense initiatives.

Net earned premiums and fees decreased $161,445 to $2,288,801 for Twelve Months 2016 compared with Twelve Months 2015, primarily due to lower placement and premium rates in the lender-placed insurance business and the loss of client business mentioned above. The decrease was partially offset by growth in our multi-family housing and mortgage solutions businesses. The multi-family housing revenue increase was primarily due to a higher volume of renters’ policies sold through our affinity channels and increased penetration rates across our property management network, while the mortgage solutions businesses revenue increase was primarily due to the July 2016 acquisition of American Title, Inc., a leader in title and valuation services for home equity lenders.

For 2017, we anticipate Global Housing net income, excluding catastrophe losses, and net earned premiums, fees and other income to decline compared with 2016 as our lender-placed insurance business moves closer to a normalized, steady state. We also expect revenue growth in our multi-family housing and mortgage solutions businesses to continue and overall, we believe these offerings will account for a larger portion of this segment’s earnings as we expand market share. Additional expense savings from initiatives implemented across Global Housing are also expected.

Global Lifestyle net income increased $1,421, or 1%, to $154,425 for Twelve Months 2016 from $153,004 for Twelve Months 2015. The increase was primarily due to an increased net tax benefit related to a redemption of shares in our international structure and better mobile business performance globally. These items were partly offset by the loss of a domestic tablet program and lower contributions from legacy extended service contracts from North American retailers and our credit insurance business.

Twelve Months 2016 net earned premiums, fees and other income increased $72,151 to $3,706,167 compared with Twelve Months 2015 primarily due to an increase in mobile programs and subscribers partially offset by declines in business from certain North American retailers, the loss of a domestic tablet program and foreign currency exchange volatility.

In 2017, we expect Global Lifestyle net income to increase from 2016 driven primarily by improved mobile and vehicle protection business results and expense savings initiatives. These items will be partially offset by declines from credit insurance business and legacy North American retail clients. Net earned premiums, fees and other income are expected to decline in 2017 compared with 2016, primarily due to a change in program structure at a large service contract client. This program structure change will have no impact on net income. Excluding this program structure change, net earned premiums, fees and other income are expected to increase due to growth globally in our mobile and vehicle protection businesses. Foreign exchange volatility and variability in the mobile market will impact results.

Global Preneed net income decreased $1,875, or 4%, to $42,304 for Twelve Months 2016 from $44,179 for Twelve Months 2015. This decrease was primarily due to an adjustment related to the amortization of deferred acquisition costs and policyholder benefits for an older block of policies, partially offset by higher investment income from real estate joint venture partnerships. Twelve Months 2016 net earned premiums, fees and other income increased $3,838 to $171,279 compared with Twelve Months 2015 primarily due to premium from policies written in previous years.

In 2017, we expect Global Preneed net income and fees and other income to increase compared with 2016 due to sales growth across North America and operational efficiencies.

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, our ability to manage our expenses and achieve expense savings and catastrophe losses. Our results will also depend on our ability to profitably grow our fee-based, capital-light businesses, including global connected living, multi-family housing, mortgage solutions, as well as vehicle protection services, and manage the pace of declines in placement rates in our lender-placed business. Factors affecting these items, including conditions in financial markets, the global economy and the markets in which we operate, and fluctuations in the exchange rate, 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 2016, 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 $124,238; net cash provided by investing activities totaled $725,621 and net cash used in financing activities totaled $1,106,193. We had $1,031,971 in cash and cash equivalents as of December 31, 2016. 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 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 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 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.

Our revenues may also be impacted by our ability to continue to grow in the markets in which we operate, including the mobile device insurance market, the renters insurance market and the field services and valuation markets. For example, our business is subject to fluctuations in mobile device trade-in volumes based on the release of new devices and carrier promotional programs, as well as to changes in the mobile device market dynamics. Our revenues will also be impacted by the lender-placed market.

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. In connection with our transformation, we are undertaking various expense savings initiatives while also making investments in information technology, among other things, which will impact our expenses.

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.

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, were 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 the Department of Health and Human Services ("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, and estimated reinsurance recoveries are established as reinsurance recoverables with an offsetting reduction in policyholder benefits. Reinsurance fee contributions for non-Affordable Care Act business are reported in underwriting, general and administrative expenses.

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 premiums), with an offsetting adjustment to net earned premiums.

A three-year (2014-2016) risk corridor program limits insurer gains and losses by comparing allowable medical costs to a target amount as defined by HHS. This program applies to a subset of Affordable Care Act eligible individual and small group products certified as Qualified Health Plans. The public marketplace can only sell Qualified Health Plans. In addition, carriers who sell Qualified Health Plans on the public marketplace can also sell them off the public marketplace. Variances from the target amount exceeding certain thresholds may result in amounts due to or due from HHS. During 2015, the Company participated in the Federal insurance public marketplace for several states so the risk corridor program is applicable. However, as the funding status for this program is in significant doubt since amounts under the prior year program would need to be funded first and there appear to be insufficient funds available, a full allowance was established against recorded receivable amounts from this program for 2015. The Company did not participate in the risk corridor program for 2016 given the wind down of the business.

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 the incidence of incurred claims, the extent to which all claims have been reported, reporting lags, expenses, inflation rates, future investment earnings, and other relevant factors. While the methods of making such estimates and establishing the related liabilities are periodically reviewed and updated, the estimation of reserves is not an exact process given that management is using historical information and methods to help project future events and reserve outcomes.

The recorded reserves represent management's best estimate 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 uncertainty 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 determined.

Because establishment of reserves is an inherently complex process involving significant judgment and estimates, there can be no certainty that future settlement amounts for claims incurred through the financial reporting date will not vary from reported claim reserves. Future loss development could require reserves to be increased or decreased, which could have a material adverse or positive effect on our earnings in the periods in which such increases or decreases are made. See "Item 1A - Risk Factors - Risks related to our Company - Our actual claims losses may exceed our reserves for claims, requiring us to establish additional reserves or to incur additional expense for settling unreserved liabilities, which could materially affect our results of operations, profitability and capital" for more detail on this risk.

The following table provides reserve information for our reporting segment lines for the years ended December 31, 2016 and 2015:

	December 31, 2016																December 31, 2015
									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:
Global Preneed	$	5,401,379			$	111,887			$	16,593			$	7,856			$	5,082,545			$	135,038			$	16,674			$	7,464
Disposed and runoff businesses	4,573,778				37,930				1,161,816				143,836				4,230,348				48,201				987,263				116,738
All other	137,721				158				1,026				1,485				153,801				118				773				1,674
Short Duration Contracts:
Global Lifestyle	—				5,041,571				78,136				181,355				—				4,822,633				81,980				173,513
Global Housing	—				1,424,224				220,211				357,399				—				1,382,668				130,455				394,853
Disposed and runoff businesses	—				10,755				991,491				140,053				—				35,062				1,518,709				466,623
Total	$	10,112,878			$	6,626,525			$	2,469,273			$	831,984			$	9,466,694			$	6,423,720			$	2,735,854			$	1,160,865

For additional information regarding our reserves, see Note 14 to the Consolidated Financial Statements included elsewhere in this Report.

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.

Global Housing and Global Lifestyle

Ultimate loss and loss adjustment expenses are estimated utilizing generally accepted actuarial loss reserving methods. Both paid claims development as well as case incurred development are typically analyzed at the product or product grouping level, giving consideration to product size and data credibility. The reserving methods widely employed within the Company include the Chain Ladder, Munich Chain Ladder and Bornhuetter-Ferguson. For Global Housing, reportable catastrophes are analyzed and reserved for separately using a frequency and severity approach.

The methods all involve aggregating paid and case-incurred loss data by accident quarter (or accident year) and accident age for each product grouping. As the data ages, development factors are calculated that measure emerging claim development patterns between reporting periods. By selecting loss development factors indicative of remaining development, known losses are projected to an ultimate incurred basis for each accident period. The underlying premise of the Chain Ladder method is that future claims development is best estimated using past claims development, whereas the Bornhuetter-Ferguson method employs a combination of past claims development and prior estimates of ultimate losses based on an expected loss ratio. The Munich Chain Ladder method takes into account the correlations between paid and incurred development in projecting future development factors, and is typically more applicable to products experiencing more variability in incurred to paid ratios.

Each of these methods applied to the data groupings produces an estimate of the loss reserves for the product grouping. The best estimate is generally selected from a blend of the different methods. The IBNR associated with the best estimate is then allocated to accident year based on a weighting of the underlying actuarial methods. The determination of the best estimate is 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 expected future economic and market conditions;

•	regulatory, legislative, and judicial considerations;

•	the extent of data segmentation - data should be homogeneous yet credible enough for loss development methods to apply;

•	trends in loss frequencies and severities for various causes of loss;

•	consideration of the positive skew in the distribution of loss reserves, resulting in the best estimate likely exceeding an estimate based on median values, suggesting that favorable development may be more likely than unfavorable development; and

•	hindsight testing of prior loss estimates - the loss estimates on some product lines will vary from actual loss experience more than others.

When employing the reserving methods, consideration is given to contractual requirements, historical utilization trends and payment patterns, coverage changes, seasonality, product mix, legislative and regulatory environment, economic factors, natural catastrophes, and other relevant factors. The Company consistently applies reserving principles and methodologies from year to year, while also giving due consideration to the potential variability of these factors.

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, changes in economic activity and 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 2016 would be as follows:

Change in both loss frequency and severity for all Global Housing and Global Lifestyle	Ultimate cost of claims occurring in 2016				Change in cost of claims occurring in 2016
3% higher	$	888,080			$	50,979
2% higher	$	870,920			$	33,819
1% higher	$	853,927			$	16,826
Base scenario (1)	$	837,101			$	—
1% lower	$	820,275			$	(16,826	)
2% lower	$	803,282			$	(33,819	)
3% lower	$	786,122			$	(50,979	)

(1)	Represents the sum of the case reserves and incurred but not reported reserves as of December 31, 2016 for Global Housing and Global Lifestyle.

Disposed and Runoff Short Duration Lines

The Company has 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 $30,161 (before reinsurance) and $25,092 (net of reinsurance) at December 31, 2016. 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. Based on information currently available, and after consideration of the reserves reflected in the Consolidated Financial Statements, we do not believe or expect that changes in reserve estimates for these claims are likely to be material.

Reserves for the previously written Assurant Health business are established using generally accepted actuarial methods. Factors used in the reserve calculation include experience derived from historical claim payments and actuarial assumptions, such as trends, the incidence of incurred claims, the extent to which all claims have been reported, and internal claims processing changes.

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.

Global Preneed

Global Preneed includes pre-funded funeral life insurance and annuity contracts and legacy traditional life insurance (no longer offered). The reserve assumptions for future policy benefits and expenses are determined based upon pricing, which approximates actual experience.

For preneed life insurance issued after 2008 with discretionary death benefit growth, reserve assumptions are made without provision for adverse deviation. Interest and discount rates are based upon investment returns of the assets acquired to support the business. Expected mortality rates, lapse rates, and future death benefit increases are based upon pricing assumptions.

For preneed life insurance issued after 2008 with either no death benefit growth or death benefit growth linked to an inflation index, reserve assumptions are made with provision for adverse deviation. Interest and discount rates are based upon investment returns of the assets acquired to support the business. Expected mortality rates and lapse rates are based upon pricing assumptions. For contracts with minimum benefit increases associated with an inflation index, the reserves assume expected benefit increases equal the discount rate less a spread.

For preneed life insurance issued prior to 2009, reserve assumptions are made with provision for adverse deviation. Interest and discount rates are based upon investment returns of the assets acquired to support the business. Expected mortality rates, lapse rates, and future death benefit increases are based upon pricing assumptions.

Annuity contracts have reserve assumptions made without provision for adverse deviation. Assumed discount rates and interest rates credited on deferred annuities vary by year of issue. Withdrawal charge assumptions are based upon contract provisions. Nearly all of the deferred annuity contracts have a minimum guaranteed interest rate.

For life insurance and annuity contracts acquired in 2000 and prior, interest and discount rates as well as mortality assumptions are based on statutory valuation requirements, which approximate GAAP, with no explicit provision for lapses.

Disposed and Runoff Long Duration Lines

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.

Deferred Acquisition Costs ("DAC")

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.

Premium deficiency testing is performed annually and generally reviewed quarterly. Such testing involves the use of best estimate assumptions including the anticipation of investment income to determine if anticipated future policy premiums are adequate to recover all DAC and related claims, benefits and expenses. To the extent a premium deficiency exists, it is recognized immediately by a charge to expense and a corresponding reduction in DAC. If the premium deficiency is greater than unamortized DAC, a liability is accrued for the excess deficiency.

Long Duration Contracts

Acquisition costs for pre-funded funeral ("preneed") life insurance policies issued prior to 2009 and certain life insurance policies no longer offered are 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.

Acquisition costs relating to group worksite insurance products no longer offered 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.

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 annuities (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.

Short Duration Contracts

Acquisition costs relating to extended service contracts, vehicle service contracts, mobile device protection, credit insurance, lender-placed homeowners and flood, multi-family housing and manufactured housing are amortized over the term of the contracts in relation to premiums earned. These acquisition costs consist primarily of advance commissions paid to agents.

Acquisition costs relating to disposed lines of business (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 6 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. 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, 2016				December 31, 2015
Reinsurance recoverables	$	9,083,207			$	7,470,403

We have used reinsurance to exit certain businesses, including Assurant Employee Benefits business and blocks of individual life, annuity, and long-term care business. The reinsurance recoverables relating to these dispositions amounted to $6,294,991 and $4,607,056 at December 31, 2016 and 2015, 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:

	2016				2015
Ceded future policyholder benefits and expense	$	4,523,295			$	4,037,682
Ceded unearned premium	1,836,609				1,667,228
Ceded claims and benefits payable	2,643,203				1,429,128
Ceded paid losses	80,100				336,365
Total	$	9,083,207			$	7,470,403

We utilize reinsurance for loss protection and capital management, business dispositions and, in Global Lifestyle and Global Housing, client risk and profit sharing. See also “Item 1A – Risk Factors – Reinsurance may not be available or adequate to protect us against losses, and we are subject to the credit risk of reinsurers,” and “Item 7A – Quantitative and Qualitative Disclosures About Market Risk – Credit Risk.”

Retirement and Other Employee Benefits

We sponsor a qualified pension plan, (the “Assurant Pension Plan”) and various non-qualified pension plans (including an Executive Pension Plan), along with a retirement health benefits plan covering our employees who meet specified eligibility requirements. Effective March 1, 2016, benefit accruals for the Assurant Pension Plan, the various non-qualified pension plans and the retirement health benefits plan were frozen. The reported amounts associated with these plans requires an extensive use of assumptions which include, but are not limited to, the discount rate and expected return on plan assets. 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 and higher or lower withdrawal rates.

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 9 to the Consolidated Financial Statements included elsewhere in this Report.

As of December 31, 2015, the Company had a cumulative valuation allowance of $13,218 against deferred tax assets of international subsidiaries. During Twelve Months 2016, the Company recognized a cumulative income tax benefit of $689 primarily related to the utilization of foreign net operating losses offsetting operating income of international subsidiaries. As of December 31, 2016, the Company had a cumulative valuation allowance of $12,529 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. 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 $830,956 and $833,512 of our $29,709,128 and $30,036,402 of total assets as of December 31, 2016 and 2015, 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.

As of December 31, 2016, we reorganized our operating segments. In connection with this change we were required to reallocate the carrying amount of our Assurant Solutions legacy goodwill, based on the fair value of our new reporting units, Global Lifestyle and Global Preneed. No reallocation of the Assurant Specialty Property reporting units' legacy goodwill was necessary. See Notes 3 and 12 to the Consolidated Financial Statements contained elsewhere in this Report for more information on the re-segmentation and the amounts allocated to each new reporting unit.

We have concluded that our reporting units for goodwill testing are appropriately aggregated at the same level as 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 (including the effects of the 2016 reallocation of goodwill):

	December 31,
	2016				2015
Global Housing	$	320,930			$	304,419
Global Lifestyle	372,319				529,093
Global Preneed	137,707				—
Total	$	830,956			$	833,512

In 2016, the Company performed a Step 1 goodwill impairment test on its legacy Assurant Solutions and Assurant Specialty Property reporting units. In addition, after the re-segmentation, we performed an additional Step 1 test assigned to the new reporting units. Consistent with accounting requirements, the impairment testing required us to compare each reporting unit’s estimated fair value with its net book value. For both impairment tests, goodwill was deemed not to be impaired because the estimated fair values of the reporting units 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 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 similar 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, make the other methods less credible.

Following the initial 2016 Step 1 test, the Company concluded that the estimated fair value of the legacy Assurant Solutions reporting unit exceeded its net book value by 51.1%, while the legacy Assurant Specialty Property reporting unit exceeded its net book value by 67.7%. Following the subsequent 2016 Step 1 test due to the resegmentation, the Company concluded that the estimated fair value of the Global Housing reporting unit exceeded its net book value by 69.7%, while the Global Lifestyle and Global Preneed reporting units exceeded their net book values by 66.9% and 5.6%, respectively.

In 2015, the Company chose the option to perform qualitative assessments for our legacy Assurant Solutions and legacy Assurant Specialty Property reporting units. This option allowed us to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test.

Based on our qualitative assessments, having considered the factors in totality we determined that it was not necessary to perform a Step 1 quantitative goodwill impairment test for the legacy Assurant Solutions and legacy Assurant Specialty Property reporting units and that it was more-likely-than-not that the fair value of each reporting unit continued to exceed its net book value in 2015.

In undertaking our qualitative assessments for the legacy Assurant Solutions and legacy Assurant Specialty Property reporting units, we considered macro-economic, industry and reporting unit-specific factors. These included (i.) the effect of the current interest rate environment on our cost of capital; (ii.) each reporting unit’s ability to sustain market share over the year; (iii.) lack of turnover in key management; (iv.) 2015 actual performance as compared to expected 2015 performance from our 2014 Step 1 assessment; and, (v.) the overall market position and share price of Assurant, Inc.

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 80 basis points, with all other assumptions held constant, for Global Preneed would result in its estimated fair value being less than its net book value as of December 31, 2016. Likewise, a reduction of 370 basis points in the terminal growth rate, with all other assumptions held constant, for Global Preneed would result in its estimated fair value being less than its net book value as of December 31, 2016. It would take more significant movements in our estimates and assumptions in order for Global Housing and Global Lifestyle estimated fair values to be less than their net book value.

We evaluated the significant assumptions used to determine the estimated fair values of Global Housing, Global Lifestyle and Global Preneed, both individually and in the aggregate, and concluded they are reasonable. However, should the operating results of these reporting units decline substantially compared to projected results, or should further interest rate declines increase the net unrealized investment portfolio gain position, we could determine that we need to record an impairment charge related to goodwill in any of our reporting units.

Had the net book value for any of our reporting units 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

Please see Note 2 of the Notes to the Consolidated Financial Statements.

Results of Operations

Assurant Consolidated

Overview

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

	For the Years Ended December 31,
	2016				2015				2014
Revenues:
Net earned premiums	$	5,007,364			$	8,350,997			$	8,632,142
Fees and other income	1,422,464				1,303,466				1,033,805
Net investment income	515,678				626,217				656,429
Net realized gains on investments	162,183				31,826				60,783
Amortization of deferred gains and gains on disposal of businesses	394,513				12,988				(1,506		)
Gain on pension plan curtailment	29,578				—				—
Total revenues	7,531,780				10,325,494				10,381,653
Benefits, losses and expenses:
Policyholder benefits	1,808,472				4,742,535				4,405,333
Selling, underwriting and general expenses	4,794,070				5,326,662				5,173,788
Interest expense	57,619				55,116				58,395
Total benefits, losses and expenses	6,683,192				10,124,313				9,637,516
Income before provision for income taxes	848,588				201,181				744,137
Provision for income taxes	283,238				59,626				273,230
Net income	$	565,350			$	141,555			$	470,907

Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

Net income increased $423,795, or 299%, to $565,350 for Twelve Months 2016 from $141,555 for Twelve Months 2015. The increase was primarily related to lower losses and exit-related charges from the wind down of the Assurant Health runoff operations, a $247,991 (after-tax) increase in amortization of deferred gains and gains on disposal of businesses and an additional $84,732 (after-tax) in net realized gains on investments. The increase in amortization of deferred gains and gains on disposal of businesses and net realized gains on investments both primarily relate to the sale of Assurant Employee Benefits segment. For more information on the sale, see Note 5 to the Consolidated Financial Statements, included elsewhere in this Report. These items were partially offset by higher reportable catastrophe losses and the ongoing declines of lender-placed insurance in our Global Housing segment.

Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014

Net income decreased $329,352, or 70%, to $141,555 for Twelve Months 2015 from $470,907 for Twelve Months 2014. The decrease was primarily related to higher loss experience and adverse claims development on 2015 individual major medical policies, a reduction in the 2014 estimated recoveries from the Affordable Care Act risk mitigation program and $106,389 (after-tax) of exit and disposal costs, including premium deficiency reserves, severance and retention costs, long-lived asset impairments and other costs associated with our exit from the health insurance market. For more information see Note 4 of the Notes to the Consolidated Financial Statements included elsewhere in this Report.

Global Housing

Overview

The table below presents information regarding the Global Housing segment's results of operations:

	For the Years Ended December 31,
	2016				2015				2014
Revenues:
Net earned premiums	$	1,829,112			$	2,044,701			$	2,506,097
Fees and other income	459,689				405,545				301,048
Net investment income	72,713				92,859				101,908
Total revenues	2,361,514				2,543,105				2,909,053
Benefits, losses and expenses:
Policyholder benefits	828,565				788,549				1,085,339
Selling, underwriting and general expenses	1,251,911				1,290,937				1,305,286
Total benefits, losses and expenses	2,080,476				2,079,486				2,390,625
Segment income before provision for income taxes	281,038				463,619				518,428
Provision for income taxes	92,372				155,914				176,671
Segment net income	$	188,666			$	307,705			$	341,757
Net earned premiums, fees and other:
Lender-placed insurance	$	1,317,190			$	1,561,396			$	1,849,149
Multi-family housing	320,941				282,680				232,252
Mortgage solutions	329,265				289,575				189,396
Manufactured housing and other	321,405				316,595				536,348
Total	$	2,288,801			$	2,450,246			$	2,807,145
Ratios:
Combined ratio for risk-based businesses (1)	91.1		%		83.4		%		83.9		%
Pre-tax income margin for fee-based, capital-light businesses (2)	10.8		%		11.6		%		8.9		%

(1)	The combined ratio for risk-based businesses is equal to total benefits, losses and expenses, including reportable catastrophe losses, divided by net earned premiums and fees and other income for lender-placed insurance including manufactured housing and other insurance businesses.

(2)	The pre-tax margin for fee-based, capital-light businesses equals income before provision for income taxes divided by net earned premiums and fees and other income for multi-family housing and mortgage solutions.

Regulatory Matters

In December 2016, Assurant announced that it reached agreement with the relevant regulators on the settlement of the previously disclosed lender-placed insurance multistate targeted market conduct examination authorized by the National Association of Insurance Commissioners (the “multistate agreement”) and a separate agreement with the Minnesota Department of Commerce to settle its lender-placed insurance market conduct examination (together, with the multistate agreement, the “agreements”). The agreements resolve outstanding regulatory matters related to lender-placed insurance within the scope of the examinations and will align lender-placed business practices with procedures already implemented across much of Global Housing's lender-placed business. Once the agreements take effect, Global Housing will pay approximately $85,000 to the participating jurisdictions for examination, compliance and monitoring costs, no part of which shall constitute a fine or penalty. The Company will also re-file its lender-placed insurance rates at least once every four years, and modify certain lender-placed business practices which other significant providers in the lender-placed market will also be subject.

In January 2015, NYDFS issued regulations regarding tracking costs associated with lender placed insurance rates. The Company reached an agreement with the NYDFS to file for a 6.2% reduction in lender-placed hazard insurance rates in New York. The rates have been filed and approved, and were effective for new and renewing policies starting February 1, 2016.

Lender-placed insurance products accounted for 58% and 64% of net earned premiums, fees and other income for Twelve Months 2016 and Twelve Months 2015, respectively. The approximate corresponding contributions to the segment net income in these periods were 56% and 69%, 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, 2016 Compared to the Year Ended December 31, 2015

Net Income

Segment net income decreased $119,039, or 39%, to $188,666 for Twelve Months 2016 from $307,705 for Twelve Months 2015. The decrease is primarily due to an $83,060 (after-tax) increase in reportable catastrophe losses and the ongoing declines of our lender-placed homeowners insurance business, primarily related to reduced placement rates given stability in the U.S. economy, including a decline in real-estate owned business and the previously disclosed loss of client business. This decline was partially offset by savings realized from expense initiatives.

Total Revenues

Total revenues decreased $181,591, or 7%, to $2,361,514 for Twelve Months 2016 from $2,543,105 for Twelve Months 2015. The decrease was primarily due to declines in lender-placed homeowners insurance net earned premiums, mainly due to expected reduction in placement rates, lower premium rates, and previously disclosed loss of client business. The decrease was partially offset by an increase from the multi-family housing and mortgage solutions businesses, including the impact of the July 1, 2016 acquisition of American Title, Inc. Multi-family housing increased primarily due to higher volume of renters' policies sold through our affinity channels and increased penetration rates across our property management network.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses remained relatively flat at $2,080,476 for Twelve Months 2016 from $2,079,486 for Twelve Months 2015. Total policyholder benefits increased $40,016 to $828,565 for Twelve Months 2016 compared with $788,549 for Twelve Months 2015. The increase was primarily due to $157,437 of reportable catastrophe losses for Twelve Months 2016 compared to $29,652 for Twelve Months 2015, partially offset by favorable non-catastrophe losses due to lower frequency in theft and vandalism claims. 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. Selling, underwriting and general expenses decreased $39,026 in Twelve Months 2016 compared with Twelve Months 2015 mainly due to savings from expense initiatives, partially offset by expenses to support growth in mortgage solutions businesses.

Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014

Net Income

Segment net income decreased $34,052, or 10%, to $307,705 for Twelve Months 2015 from $341,757 for Twelve Months 2014. The decrease is primarily due to the ongoing declines of our lender-placed homeowners insurance business, previously disclosed loss of client business, and increased legal expenses, partially offset by more favorable non-catastrophe loss experience and lower catastrophe reinsurance costs. The divestiture of American Reliable Insurance Company ("ARIC") also contributed to the decrease in net income.

Total Revenues

Total revenues decreased $365,948, or 13%, to $2,543,105 for Twelve Months 2015 from $2,909,053 for Twelve Months 2014. The decrease was primarily due to the divestiture of ARIC, combined with lower lender-placed homeowners insurance net earned premiums. The decline in lender-placed homeowners insurance net earned premiums is primarily due to a decline in placement rates, lower premium rates and previously disclosed loss of client business. These items were partially offset by an increase in fees and other income reflecting contributions from the mortgage solutions business.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses decreased $311,139 or 13%, to $2,079,486 for Twelve Months 2015 from $2,390,625 for Twelve Months 2014. Policyholder benefits decreased $296,790 primarily due to fewer non-catastrophe losses primarily attributable to lower frequency and severity of theft and fire claims and the impact of the ARIC divestiture, partially offset by lower premium rates from the implementation of a new lender-placed insurance product. Reportable catastrophe losses for Twelve Months 2015 were $29,652 compared to $28,410 for Twelve Months 2014. 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.

Global Lifestyle

Overview

The table below presents information regarding the Global Lifestyle segment's results of operations:

	For the Years Ended December 31,
	2016				2015				2014
Revenues:
Net earned premiums	$	2,901,480			$	2,955,443			$	3,067,775
Fees and other income	804,687				678,573				560,806
Net investment income	113,085				126,855				128,978
Total revenues	3,819,252				3,760,871				3,757,559
Benefits, losses and expenses:
Policyholder benefits	663,781				679,750				777,568
Selling, underwriting and general expenses	2,947,702				2,869,760				2,715,543
Total benefits, losses and expenses	3,611,483				3,549,510				3,493,111
Segment income before provision for income taxes	207,769				211,361				264,448
Provision for income taxes	53,344				58,357				87,610
Segment net income	$	154,425			$	153,004			$	176,838
Net earned premiums, fees and other:
Global connected living (mobile and service contracts)	$	2,570,143			$	2,550,990			$	2,553,848
Global vehicle protection services	715,794				608,372				503,308
Global credit and other	420,230				474,654				571,425
Total	$	3,706,167			$	3,634,016			$	3,628,581
Net earned premiums, fees and other:
Domestic	$	2,561,632			$	2,409,300			$	2,328,929
International	1,144,535				1,224,716				1,299,652
Total	$	3,706,167			$	3,634,016			$	3,628,581
Ratios:
Combined ratio for risk-based businesses (1)	95.9		%		95.5		%		95.9		%
Pre-tax income margin for fee-based, capital-light businesses (2)	3.5		%		3.6		%		5.9		%

(1)	The combined ratio for risk-based businesses is equal to total benefits, losses and expenses divided by net earned premiums and fees and other income for global vehicle protection services, global credit and other insurance businesses.

(2)	The pre-tax income margin for fee-based, capital-light businesses equals income before provision for income taxes divided by net earned premiums and fees and other income for global connected living.

Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

Net Income

Segment net income increased $1,421, or 1%, to $154,425 for Twelve Months 2016 from $153,004 for Twelve Months 2015. The increase was primarily due to improved mobile performance globally and $5,100 of increased net tax benefits related to a redemption of shares in our international structure. These items were mostly offset by the loss of a domestic tablet program, declines in legacy extended service contracts from North American retail clients and the continued runoff of our credit insurance business.

Total Revenues

Total revenues increased $58,381, or 2%, to $3,819,252 for Twelve Months 2016 from $3,760,871 for Twelve Months 2015. The increase was mainly due to growth from our domestic vehicle protection and global connected living businesses. Fees and other income increased $126,114, primarily driven by contributions from global mobile programs and subscribers. These increases were offset by a $53,963 decrease in net earned premiums, primarily due to a large North American retail

client, foreign exchange volatility, the loss of a domestic mobile tablet program and the continued runoff of our credit insurance business.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $61,973, or 2%, to $3,611,483 for Twelve Months 2016 from $3,549,510 for Twelve Months 2015. Policyholder benefits decreased $15,969, primarily driven by improved loss experience in our domestic service contract business and results from a North American connected living retail client. This decrease was partially offset by higher loss experience in our global mobile protection programs due in part to expansion of our international mobile business in Asia and Europe. Selling, underwriting and general expenses increased $77,942. Commissions, taxes, licenses and fees, of which amortization of DAC is a component, decreased $26,446 due to foreign exchange volatility, lower contributions from legacy extended service contracts from North American retailers, the continued runoff of our credit business and the loss of a domestic mobile tablet program. These items were partially offset by increased expenses from growth from our domestic vehicle protection and connected living businesses. General expenses increased $104,388 primarily due to increased expenses from growth in our domestic mobile protection programs and related services.

Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014

Net Income

Segment net income decreased $23,834, or 14%, to $153,004 for Twelve Months 2015 from $176,838 for Twelve Months 2014. The decrease was primarily due to the previously disclosed loss of a domestic mobile tablet program and declining service contract volumes from North American retail clients.

Total Revenues

Total revenues were relatively flat at $3,760,871 for Twelve Months 2015 from $3,757,559 for Twelve Months 2014. Net earned premiums decreased $112,332 primarily due to foreign exchange volatility, the loss of a domestic mobile tablet program, lower extended service contract volumes from North American retail clients and the continued runoff of our credit insurance business. These items were partially offset by growth from our vehicle protection services business and from a large domestic service contract client. Fees and other income increased $117,767 primarily driven by contributions from global mobile programs and related services.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $56,399, or 2%, to $3,549,510 for Twelve Months 2015 from $3,493,111 for Twelve Months 2014. Policyholder benefits decreased $97,818 driven by favorable loss experience in our domestic extended service contract business and from our mobile business in Europe. Selling, underwriting and general expenses increased $154,217. Commissions, taxes, licenses and fees, of which amortization of DAC is a component, decreased $14,635 due to the loss of a domestic mobile tablet program. General expenses increased $168,852 primarily due to growth in our domestic mobile business and the 2014 CWI acquisition.

Global Preneed

Overview

The table below presents information regarding the Global Preneed segment's results of operations:

	For the Years Ended December 31,
	2016				2015				2014
Revenues:
Net earned premiums	$	61,691			$	60,403			$	61,093
Fees and other income	109,588				107,038				107,046
Net investment income	259,755				249,828				253,662
Total revenues	431,034				417,269				421,801
Benefits, losses and expenses:
Policyholder benefits	250,370				239,653				249,901
Selling, underwriting and general expenses	116,837				112,503				114,515
Total benefits, losses and expenses	367,207				352,156				364,416
Segment income before provision for income taxes	63,827				65,113				57,385
Provision for income taxes	21,523				20,934				15,275
Segment net income	$	42,304			$	44,179			$	42,110

Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

Net Income

Segment net income decreased $1,875, or 4%, to $42,304 for Twelve Months 2016 from $44,179 for Twelve Months 2015. This decrease was primarily due to an adjustment related to the amortization of deferred acquisition costs and policyholder benefits for an older block of policies, partially offset by higher investment income from real estate joint venture partnerships.

Total Revenues

Total revenues increased $13,765, or 3%, to $431,034 for Twelve Months 2016 from $417,269 for Twelve Months 2015. This increase was primarily due to increased net investment income as a result of higher invested assets and investment income from real estate joint venture partnerships. Also contributing to the increase was premium from policies written in prior years.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $15,051, or 4%, to $367,207 for Twelve Months 2016 from $352,156 for Twelve Months 2015. This increase was primarily due to an adjustment related to the amortization of deferred acquisition costs and policyholder benefits for an older block of policies and higher expenses related to certain technology.

Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014

Net Income

Segment net income increased $2,069, or 5%, to $44,179 for Twelve Months 2015 from $42,110 for Twelve Months 2014. This increase was primarily due to a decrease in policyholder benefits, partially offset by lower net investment income.

Total Revenues

Total revenues decreased $4,532, or 1%, to $417,269 for Twelve Months 2015 from $421,801 for Twelve Months 2014. This decrease was primarily due to a decrease in net investment income primarily driven by lower investment yields.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses decreased by $12,260, or 3%, to $352,156 for Twelve Months 2015 from $364,416 for Twelve Months 2014. The decrease was primarily due to lower policyholder benefits driven by improved mortality experience.

Assurant Employee Benefits

Overview

The table below presents information regarding the Assurant Employee Benefits segment's results of operations:

	For the Years Ended December 31,
	2016				2015				2014
Revenues:
Net earned premiums	$	177,971			$	1,066,754			$	1,051,725
Fees and other income	4,244				25,006				24,204
Net investment income	17,340				110,998				117,192
Total revenues	199,555				1,202,758				1,193,121
Benefits, losses and expenses:
Policyholder benefits	118,481				730,192				716,892
Selling, underwriting and general expenses	67,365				398,757				399,548
Total benefits, losses and expenses	185,846				1,128,949				1,116,440
Segment income before provision for income taxes	13,709				73,809				76,681
Provision for income taxes	5,272				26,487				28,000
Segment net income	$	8,437			$	47,322			$	48,681

On March 1, 2016, the Company sold its Assurant Employee Benefits segment to Sun Life Assurance Company of Canada, the wholly-owned subsidiary of Sun Life Financial, Inc. For more information on the sale see Note 5 to the Consolidated Financial Statements, included elsewhere in this Report.

The amounts included in Twelve Months 2016 primarily represent January and February 2016 results of operations, the period prior to the sale. All amounts related to the sale are included in the Total Corporate and Other segment, discussed later. Since this business has been sold and is no longer part of our ongoing operations, a discussion of results for the periods presented has been excluded.

Total Corporate and Other

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

	For the Years Ended December 31,
	2016												2015												2014
	Corporate & Other				Health				Total Corporate & Other				Corporate & Other				Health				Total Corporate & Other				Corporate & Other				Health				Total Corporate & Other
Revenues:
Net earned premiums	$	—			$	37,110			$	37,110			$	—			$	2,223,696			$	2,223,696			$	—			$	1,945,452			$	1,945,452
Fees and other income	24,418				19,838				44,256				32,682				54,622				87,304				685				40,016				40,701
Net investment income	43,996				8,789				52,785				21,190				24,487				45,677				19,320				35,369				54,689
Net realized gains on investments	162,183				—				162,183				31,826				—				31,826				60,783				—				60,783
Amortization of deferred gains and gains on disposal of businesses	394,513				—				394,513				12,988				—				12,988				(1,506		)		—				(1,506		)
Gain on pension plan curtailment	29,578				—				29,578				—				—				—				—				—				—
Total revenues	654,688				65,737				720,425				98,686				2,302,805				2,401,491				79,282				2,020,837				2,100,119
Benefits, losses and expenses:
Policyholder benefits	—				(52,725		)		(52,725		)		3,150				2,301,241				2,304,391				—				1,575,633				1,575,633
Selling, underwriting and general expenses	244,496				165,759				410,255				127,285				527,420				654,705				143,078				495,818				638,896
Interest expense	57,619				—				57,619				55,116				—				55,116				58,395				—				58,395
Loss on extinguishment of debt	23,031				—				23,031				—				—				—				—				—				—
Total benefits, losses and expenses	325,146				113,034				438,180				185,551				2,828,661				3,014,212				201,473				2,071,451				2,272,924
Segment income (loss) before benefit for income taxes	329,542				(47,297		)		282,245				(86,865		)		(525,856		)		(612,721		)		(122,191		)		(50,614		)		(172,805		)
Provision (Benefit) for income taxes	116,983				(6,256		)		110,727				(44,117		)		(157,949		)		(202,066		)		(47,460		)		13,134				(34,326		)
Segment net income (loss)	$	212,559			$	(41,041	)		$	171,518			$	(42,748	)		$	(367,907	)		$	(410,655	)		$	(74,731	)		$	(63,748	)		$	(138,479	)

Corporate & Other

Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

Net Income (Loss)

Results improved $255,307 or 597%, to net income of $212,559 for Twelve Months 2016 compared with a net loss of $42,748 for Twelve Months 2015. The improvement is primarily due to an additional $247,991 (after-tax) in amortization of deferred gains and gains on disposal of businesses and an $84,732 (after-tax) increase in net realized gains on investments, both related to the transfer of assets and other items associated with the sale of Assurant Employee Benefits segment. For more information on the sale see Note 5 to the Consolidated Financial Statements included elsewhere in this Report. Partially offsetting these items is the initial $17,323 (after-tax) loss on the sale of our Assurant Employee Benefits segment (prior to recognition of the deferred gains and the realized gains associated with investments transferred), a $14,950 (after-tax) post-close expense related to a previous disposition, a $10,837 (after-tax) intangible asset impairment charge and a $14,970 (after-tax) loss on extinguishment of debt. For more information on the extinguishment loss see Note 16 to the Consolidated Financial Statements included elsewhere in this Report.

Total Revenues

Total revenues increased $556,002 or 563%, to $654,688 for Twelve Months 2016 compared with $98,686 for Twelve Months 2015. The increase in revenues is mainly due to an increase of $381,525 in amortization of deferred gains and gains on disposal of business and an increase of $130,357 in net realized gains on investments, both related to the sale of our Assurant Employee Benefits segment. In addition, Twelve Months 2016 includes a $29,578 one-time curtailment gain associated with our pension plan freeze.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $139,595 or 75%, to $325,146 in Twelve Months 2016 compared with $185,551 in Twelve Months 2015. This increase is primarily attributable to the initial $26,650 loss on the sale of Assurant Employee Benefits segment (prior to recognition of the deferred gains and the realized gains associated with assets transferred), mainly representing transaction fees incurred, residual expenses related to the sale of Assurant Employee Benefits segment (which we expect to continue in 2017), $23,000 post-close contractual indemnification expense related to a previous disposition and a $16,672 intangible asset impairment charge. In addition, Twelve Months 2016 includes a one-time $23,031 loss on extinguishment of debt as a result of our December 2016 cash tender offer for $100,000 of our 6.75% Senior Notes. For more information on the post-close contractual indemnification expense and the loss on extinguishment of debt, see Notes 5 and 16, respectively, to the Consolidated Financial Statements included elsewhere in this Report.

Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014

Net Loss

Segment net loss decreased $31,983 or 43%, to $42,748 for Twelve Months 2015 compared with a net loss of $74,731 for Twelve Months 2014. The decrease is primarily due to a $10,016 (after-tax) gain on the sale of our vehicle title administration business in Twelve Months 2015, while Twelve Months 2014 includes a $19,400 (after-tax) loss on the sale of ARIC.

Total Revenues

Total revenues increased $19,404 or 24%, to $98,686 for Twelve Months 2015 compared with $79,282 for Twelve Months 2014. The increase in revenues is mainly due to a $16,773 gain on sale of our vehicle title administration business, mentioned above.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses decreased $15,922 or 8%, to $185,551 in Twelve Months 2015 compared with $201,473 in Twelve Months 2014. This decrease is primarily attributable to a $21,526 loss on sale of ARIC included in Twelve Months 2014, mentioned above.

Assurant Health

Assurant began to wind down its major medical operations in June 2015, and the Company has substantially completed its exit of the health insurance market in 2016. For more information, see Notes 4 and 5 of the Notes to the Consolidated Financial Statements included elsewhere in this Report.

The Affordable Care Act

Because all individuals 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, were 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

As of December 31, 2016, we have reinsurance recoverables of $31,678 on our consolidated balance sheets. During Twelve Months 2016, we collected $256,992 under the 2015 program. As of December 31, 2016 we have no contributions payable recorded.

Risk adjustment

As of December 31, 2016, we carried a net risk adjustment payable related to 2016 of $1,474 on our consolidated balance sheets. During Twelve Months 2016, we collected $7,635 under the 2014 program and had net collections of $197,283 under the 2015 program.

Risk corridor

As of December 31, 2016, we have not recorded a net receivable because payments from HHS under the 2015 program are unlikely.

Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

Net Loss

Segment net loss decreased $326,866, or 89%, to a net loss of $41,041 for Twelve Months 2016 from a net loss of $367,907 for Twelve Months 2015. The decrease was primarily attributable to the establishment of a premium deficiency reserve and exit related costs in Twelve Months 2015 due to the aforementioned decision to put the segment into runoff.

Total Revenues

Total revenues decreased $2,237,068, or 97%, to $65,737 for Twelve Months 2016 from $2,302,805 for Twelve Months 2015. Net earned premiums from our individual medical business decreased $1,876,111, or 99%, while net earned premiums from our small employer group business decreased $310,475, or 95%. The decrease for both products was due to the decline in membership and sales, which has steadily declined over the course of 2016 as we exit the health insurance market.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses decreased $2,715,627, or 96%, to $113,034 for Twelve Months 2016 from $2,828,661 for Twelve Months 2015. Policyholder benefits decreased $2,353,966, or 102%, primarily attributable to the reduction of in-force policies as a result of the exit from the health insurance market, including all of the individual Affordable Care Act medical policies which were terminated at the end of 2015. Selling, underwriting and general expenses decreased $361,661 primarily due to reduced commission expense resulting from the discontinuance of sales and decreased general expenses as we runoff the business. This decrease was partially offset by an increase in guaranty fund assessment expenses. For more information on guaranty assessments see Note 25 to the Consolidated Financial Statements included elsewhere in this Report.

Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014

Net Loss

Segment net loss increased $304,159, or 477%, to a net loss of $367,907 for Twelve Months 2015 from a net loss of $63,748 for Twelve Months 2014. The increase was primarily attributable to higher loss experience and adverse claims development on 2015 individual major medical policies, a reduction in the 2014 estimated recoveries from the Affordable Care Act risk mitigation programs and $106,389 (after-tax) of exit and disposal costs, including premium deficiency reserves, severance and retention costs, long-lived asset impairments and similar exit and disposal costs related to the decision to exit the health business mentioned above.

Total Revenues

Total revenues increased $281,968, or 14%, to $2,302,805 for Twelve Months 2015 from $2,020,837 for Twelve Months 2014. Net earned premiums from our individual medical business increased $351,002, or 23%, due to growth in the major medical product line. Net earned premiums from our small employer group business decreased $72,758, or 18%, due to policy lapses and the sale of supplemental and small-group self-funded lines of business and certain assets to National General on October 1, 2015. For more information see Note 5 of the Notes to the Consolidated Financial Statements included elsewhere in this Report. Fees and other income increased $14,606, or 37%, due to growth of our self funded product until its sale on October 1, 2015, noted above.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $757,210, or 37%, to $2,828,661 for Twelve Months 2015 from $2,071,451 for Twelve Months 2014. Policyholder benefits increased $725,608, or 46% which is primarily attributable to higher loss experience and adverse claims development on 2015 individual major medical policies as well as the establishment of premium deficiency reserves. At December 31, 2015, a $78,047 premium deficiency reserve remained on the Company's consolidated balance sheet. Selling, underwriting and general expenses increased $31,602 due to severance and retention costs, long-lived asset impairments and other exit and disposal costs, as well as a net $10,643 loss on the sale of our supplemental and small-group self-funded lines of business and certain assets to National General on October 1, 2015.

Investments

The Company had total investments of $11,479,076 and $12,994,772 as of December 31, 2016 and 2015, respectively. Net unrealized gains on the Company's fixed maturity portfolio decreased $43,225 during 2016, from $744,533 at December 31, 2015 to $701,308 at December 31, 2016. This decrease was mainly due to an increase in Treasury yields, partially offset by a decrease in credit spreads. For more information on the Company's investments see Note 6 to the Consolidated Financial Statements included elsewhere in this Report.

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

		As of
Fixed Maturity Securities by Credit Quality (Fair Value)		December 31, 2016							December 31, 2015
Aaa / Aa / A		$	6,000,734			62.7	%		$	6,326,800			61.9	%
Baa		2,903,843				30.3	%		3,309,719				32.4	%
Ba		435,202				4.6	%		389,349				3.8	%
B and lower		232,366				2.4	%		189,460				1.9	%
Total		$	9,572,145			100.0	%		$	10,215,328			100.0	%

Major categories of net investment income were as follows:

	Years Ended December 31,
	2016				2015				2014
Fixed maturity securities	$	419,347			$	486,165			$	522,309
Equity securities	25,161				29,957				28,014
Commercial mortgage loans on real estate	41,669				72,658				73,959
Policy loans	2,577				2,478				2,939
Short-term investments	5,508				2,033				1,950
Other investments	21,671				37,759				34,527
Cash and cash equivalents	17,462				18,416				18,556
Total investment income	533,395				649,466				682,254
Investment expenses	(17,717		)		(23,249		)		(25,825		)
Net investment income	$	515,678			$	626,217			$	656,429

Net investment income decreased $110,539, or 18%, to $515,678 for Twelve Months 2016 from $626,217 for Twelve Months 2015. The decrease is primarily attributable to lower investment yields, lower invested assets and a $7,871 decrease in investment income from real estate joint venture partnerships.

Net investment income decreased $30,212, or 5%, to $626,217 for Twelve Months 2015 from $656,429 for Twelve Months 2014. The decrease is primarily attributable to a decrease in invested assets as well as lower investment yields, partially offset by an increase of $5,747 in investment income from real estate joint venture partnerships.

As of December 31, 2016, the Company owned $107,396 of securities guaranteed by financial guarantee insurance companies. Included in this amount was $97,054 of municipal securities, whose credit rating was A+ with the guarantee, but would have had a rating of A without the guarantee.

For more information on the Company's investments, please see Notes 6 and 7 to the Consolidated Financial Statements included elsewhere in this Report.

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 they 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.

Regulators or rating agencies could become more conservative in their methodology and criteria, increasing capital requirements for our insurance subsidiaries. This in turn, could negatively affect our capital resources. As previously announced, the Company is exiting the health insurance market and has sold its Assurant Employee Benefits segment on March 1, 2016, mainly through a series of reinsurance transactions with Sun Life. Following the sale of Assurant Employee Benefits and continued wind down of Assurant Health, the following actions were taken by the rating agencies:

A.M. Best

•	Removed ratings of Union Security Insurance Company and Union Security Life Insurance Company of New York from under review with negative implications and affirmed with a stable outlook.

•	Ratings of Assurant's senior debt were upgraded from bbb to bbb+.

•	Ratings of Assurant's commercial paper were upgraded from AMB-2 to AMB-1.

•	Ratings of all other rated entities were affirmed with a stable outlook.

Moody's Investor Services ("Moody's")

•	Rating of Union Security Insurance Company was affirmed and the outlook revised from developing to stable.

•	Withdrew the ratings of John Alden Life Insurance Company and Time Insurance Company.

•	All other ratings remain unchanged.

Standard and Poor’s (“S&P”)

•	Rating of Union Security Insurance Company was upgraded from A- to A.

•	Withdrew the ratings of John Alden Life Insurance Company and Time Insurance Company.

•	All other ratings remain unchanged.

No actions were taken on Assurant’s debt rating and other financial strength ratings by any of the agencies and these ratings remain unchanged. 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 2017, the maximum amount of dividends our U.S. domiciled insurance subsidiaries could pay, under applicable laws and regulations without prior regulatory approval, is approximately $319,000.

Liquidity

As of December 31, 2016, we had $773,729 in holding company capital. We use the term “holding company capital” to represent the portion of cash and other liquid marketable securities held at Assurant, Inc., out of a total of $1,026,519, which we are not otherwise holding for a specific purpose as of the balance sheet date. We can use such capital for stock repurchases, stockholder dividends, acquisitions, and other corporate purposes. $250,000 of the $773,729 of holding company capital is intended to serve as a buffer against remote risks (such as large-scale hurricanes). Dividends or returns of capital paid by our subsidiaries, net of infusions and excluding amounts used or set aside for acquisitions, was approximately $1,653,000 for the year ended December 31, 2016, which includes approximately $893,753 of dividends from statutory insurance subsidiaries that

received the cash proceeds related to the sale of the Assurant Employee Benefits segment. The sale of Assurant Employee Benefits is expected to ultimately provide approximately $1,000,000 to the holding company including net proceeds and capital releases (including amounts already provided during 2016). For the years ended December 31, 2015 and 2014, dividends, net of infusions, made to the holding company from its operating companies were $174,579, and $453,485, respectively. We use these cash inflows primarily to pay expenses, to make interest payments on indebtedness, to make dividend payments to our stockholders, to fund acquisitions and to repurchase our 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. From time to time, the Company may also seek to purchase outstanding debt in open market repurchases or privately negotiated transactions. During 2016, 2015 and 2014 we made share repurchases and paid dividends to our stockholders of $994,735, $378,819 and $295,765, respectively. We expect 2017 operating segment dividends from Global Housing, Global Lifestyle and Global Preneed to approximate segment net income, subject to the growth of the business, rating agency and regulatory capital requirements. We also expect approximately $100,000 in dividends from Assurant Health and Assurant Employee Benefits for full year 2017, subject to regulatory approval.

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 13, 2017, our Board of Directors declared a quarterly dividend of $0.53 per common share payable on March 20, 2017 to stockholders of record as of February 27, 2017. We paid dividends of $0.53 per common share on December 12, 2016 to stockholders of record as of November 28, 2016. This represents a 6 percent increase above the quarterly dividend of $0.50 per common share paid on September 13, 2016 to stockholders of record as of August 29, 2016, $0.50 per common share paid on June 14, 2016 to stockholders of record as of May 31, 2016, and $0.50 per common share paid on March 14, 2016 to stockholders of record as of February 29, 2016. 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 14, 2016, our Board of Directors authorized the Company to repurchase up to an additional $600,000 of its outstanding common stock. During the year ended December 31, 2016, we repurchased 10,518,552 shares of our outstanding

common stock at a cost of $869,183, exclusive of commissions. As of December 31, 2016, $682,920 remained under the total repurchase authorization (considering the November 2016 and previous authorizations). 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

We have sponsored 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 determination of the reported amounts 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.

As of January 1, 2014, the Assurant Pension Plan and Executive Pension Plans are no longer offered to new hires. Subsequently, effective January 1, 2016, the Assurant Pension Plan was amended and split into two separate plans (Plan No. 1 and Plan No. 2). The new Plan No. 2 will include a subset of the terminated vested population and the total in-payment population as of January 1, 2016. Assets for both plans will remain in the Assurant, Inc. Pension Plan Trust, however separate accounting entities will be maintained for Plan No. 1 and Plan No. 2.

Effective March 1, 2016, the Assurant Pension Plan and various non-qualified pension plans (including an Executive Pension Plan) were frozen. No additional benefits will be earned after February 29, 2016.

During 2016, no cash was contributed to the Assurant Pension Plan. Due to the Plan's current overfunded status, no cash is expected to be contributed to the Assurant Pension Plan over the course of 2017. See Note 22 to the Consolidated Financial Statements included elsewhere in this Report for more information.

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-1 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 $390,960 was available at December 31, 2016, due to $9,040 of outstanding letters of credit related to this program.

In September 2014, we entered into a five-year unsecured $400,000 revolving credit agreement, as amended by Amendment No. 1 in March 2015, and Amendment No. 2 in October 2016 (“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 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 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, 2016 and 2015 and there were no amounts relating to the commercial paper program outstanding at December 31, 2016 and December 31, 2015. The Company made no borrowings using the 2014 Credit Facility and no loans were outstanding at December 31, 2016.

The 2014 Credit Facility contains restrictive covenants, all of which were met as of December 31, 2016. 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, 2016, our ratio of debt to total capitalization as calculated under the covenant was 21%, the consolidated Minimum Amount described in (ii) above was $3,547,640 and our actual consolidated adjusted net worth as calculated under the covenant was $4,156,484.

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

In March 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 in March 2018. The second series is $350,000 in principal amount, bears interest at 4.00% per year and is payable in a single installment in March 2023.

Interest on our 2013 Senior Notes is payable semi-annually in March and September of each year. The interest expense incurred related to the 2013 Senior Notes was $23,789, $22,988 and $22,981 for the twelve months ended December 31, 2016, 2015 and 2014, respectively. There was $6,635 of accrued interest at both December 31, 2016 and 2015. 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 addition, we have senior notes outstanding in an aggregate principal amount of $375,000 (the “2004 Senior Notes”). The 2004 Senior Notes bear interest at 6.75% per year and are due in February 2034.

In December 2016, the Company completed a cash tender offer and purchased $100,000 aggregate principal amount of the outstanding 2004 Senior Notes. This resulted in a $23,031 loss on extinguishment of debt.

Interest on the 2004 Senior Notes is payable semi-annually in February and August of each year. The interest expense incurred related to the 2004 Senior Notes (which included another series of $500,000 principal 5.63% notes that were repaid in February 2014) was $32,099, $32,127 and $35,414 for the years ended December 31, 2016, 2015, and 2014, respectively. There was $9,492 and $12,023 of accrued interest at both December 31, 2016 and 2015, 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.

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,
	2016				2015				2014
Net cash provided by (used in):
Operating activities (1)	$	124,238			$	192,483			$	313,782
Investing activities	725,621				264,293				63,889
Financing activities	(1,106,193		)		(487,127		)		(776,199		)
Net change in cash	$	(256,334	)		$	(30,351	)		$	(398,528	)

(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, 2016, 2015 and 2014

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 $124,238 and $192,483 for the years ended December 31, 2016 and 2015, respectively. The decrease in cash provided by operating activities was primarily due to Assurant Health paying claims without a corresponding collection of premiums since this business is now in runoff and the timing of other payments in the normal course of business. These items were partially offset by changes in the premium stabilization program receivables related to Assurant Health and an increase of our fee business in Global Lifestyle and Global Housing.

Net cash provided by operating activities was $192,483 and $313,782 for the years ended December 31, 2015 and 2014, respectively. The decrease in cash provided by operating activities was primarily due to changes in the timing of payments and higher payments made on 2015 individual major medical policies.

Investing Activities:

Net cash provided by investing activities was $725,621 and $264,293 for the years ended December 31, 2016 and 2015, respectively. The change in investing activities is primarily due to the sale of Assurant Employee Benefits segment, mainly through reinsurance transactions, to Sun Life, higher sales of fixed maturity securities, change in short term investments and an increase in sales of commercial mortgage loans. For more information on the sale of commercial mortgage loans See Note 6 to the Consolidated Financial Statements contained elsewhere in this Report. These increases are partially offset by an increase of purchases of fixed maturity securities.

Net cash provided by investing activities was $264,293 and $63,889 for the years ended December 31, 2015 and 2014, respectively. The change in investing activities is primarily due to higher sales of fixed maturity securities, less cash spent on acquisitions and equity interests and the sale of ARIC to Global Indemnity Group Inc. during 2015. For more information on the ARIC sale, please see Note 5 to the Consolidated Financial Statements contained elsewhere in this Report. These increases are partially offset by changes in our short-term investments and an increase of purchases of fixed maturity securities.

Financing Activities:

Net cash used in financing activities was $1,106,193 and $487,127 for the years ended December 31, 2016 and 2015, respectively. The change in cash used in financing activities was primarily due to an increase in the repurchase of our outstanding common stock.

Net cash used in financing activities was $487,127 and $776,199 for the years ended December 31, 2015 and 2014, respectively. The change in cash used in financing activities was primarily due to the First Quarter 2014 repayment of $467,330 of senior debt, which represents $500,000 in principal less amounts repurchased in 2013, and the payment of a contingent liability related to the acquisition of LSG during First Quarter 2014.

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

	For the Years Ended December 31,
	2016				2015				2014
Income taxes paid	$	226,078			$	80,140			$	247,771
Interest paid on debt	56,161				54,813				68,875
Common stock dividends	125,346				94,168				77,495
Total	$	407,585			$	229,121			$	394,141

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, 2016, are detailed in the table below by maturity date as of the dates indicated:

	As of December 31, 2016
	Total				Less than 1 Year				1-3 Years				3-5 Years				More than 5 Years
Contractual obligations :
Insurance liabilities (1)	$	7,827,321			$	964,275			$	709,702			$	674,851			$	5,478,493
Debt and related interest	1,622,094				48,063				433,000				78,625				1,062,406
Operating leases	83,221				23,779				35,041				18,586				5,815
Pension obligations and postretirement benefit	568,096				55,402				107,039				115,137				290,518
Commitments:
Investment purchases outstanding:
Commercial mortgage loans on real estate	7,500				7,500				—				—				—
Liability for unrecognized tax benefit	34,544				—				29,979				—				4,565
Total obligations and commitments	$	10,142,776			$	1,099,019			$	1,314,761			$	887,199			$	6,841,797

(1) Insurance liabilities reflect estimated cash payments to be made to policyholders excluding fully reinsured runoff operations whose inclusion would be potentially distortive. The total gross reserve excluded is $6,858,610 which, if the reinsurers defaulted, would be payable over a 30+ year period with the majority of the payments occurring after 5 years. Additional information on the reinsurance arrangements can be found in Note 15.

Liabilities for future policy benefits and expenses 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 $17,150 and $19,809 of letters of credit outstanding as of December 31, 2016 and December 31, 2015, 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.