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ASSURANT INC - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations.

Edgar Online, Inc.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and accompanying notes which appear elsewhere in this report. It
contains forward-looking statements that involve risks and uncertainties. Our
actual results may differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those
discussed below and elsewhere in this report, particularly under the headings
"Item 1A-Risk Factors" and "Forward-Looking Statements."



General



We report our results through five segments: Assurant Solutions, Assurant
Specialty Property, Assurant Health, Assurant Employee Benefits, and Corporate
and Other. The Corporate and Other segment includes activities of the holding
company, financing and interest expenses, net realized gains (losses) on
investments and interest income earned from short-term investments held. The
Corporate and Other segment also includes the amortization of deferred gains
associated with the sales of FFG and LTC, through reinsurance agreements as
described below.



The following discussion covers the twelve months ended December 31, 2012
("Twelve Months 2012"), twelve months ended December 31, 2011 ("Twelve Months
2011") and twelve months ended December 31, 2010 ("Twelve Months 2010"). Please
see the discussion that follows, for each of these segments, for a more detailed
analysis of the fluctuations.



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Executive Summary




Consolidated net income decreased $55,251, or 10%, to $483,705 for Twelve Months
2012 from $538,956 for Twelve Months 2011. The decrease is primarily due to an
$80,000 release of a capital loss valuation allowance related to deferred tax
assets during Twelve Months 2011. Partially offsetting this item was improved
net income in our Assurant Health and Assurant Employee Benefits segments and an
increase of $20,652 (after-tax) in net realized gains on investments. Twelve
Months 2012 includes $162,634 (after-tax) of Assurant Specialty Property
reportable catastrophe losses, primarily due to Superstorm Sandy, compared to
$102,469 (after-tax) of reportable catastrophe losses in Twelve Months 2011.
Higher catastrophe losses in Twelve Months 2012 were offset by growth in
lender-placed homeowners net earned premiums and lower non-catastrophe losses.



Assurant Solutions net income decreased $12,297, or 9%, to $123,753 for Twelve
Months 2012 from $136,050 for Twelve Months 2011. This decrease was largely due
to a fourth quarter charge of $20,373 (after-tax) for the impairment of certain
other intangible assets established primarily in connection with acquisitions of
two U.K. mortgage insurance brokers in 2007, and a fourth quarter workforce
restructuring charge of $7,724 (after-tax) primarily relating to our domestic
credit and European operations. Twelve Months 2012 also included $6,362
(after-tax) of income from client related settlements.



Absent these items, international results improved primarily from continued
growth and favorable experience in Latin America. Overall, Assurant Solutions'
international combined ratio was 104.8%. In 2013, we expect this combined ratio
to continue to improve primarily from expected profitable growth in Latin
America and additional expense initiatives in Europe.



Domestic results declined primarily from the previously disclosed loss of a
mobile client, effective October 2012, increased expenses in our mobile and
vehicle services businesses to enhance our technology platform and support new
business growth, and less favorable underwriting experience in our service
contract business. These factors increased our domestic combined ratio to 98.9%.
We expect the domestic combined ratio to remain near our target of 98.0% in
2013.



Fee income and sales from our preneed business also improved during Twelve Months 2012, primarily due to our strong relationship with SCI.

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Overall, we expect modest premium growth at Assurant Solutions in 2013. We also expect to continue our expense management initiatives in this segment.




Assurant Specialty Property net income increased $1,228, or less than 1%, to
$304,951 for Twelve Months 2012 from $303,723 for Twelve Months 2011. The
increase is due to increased lender-placed homeowners net earned premiums,
growth in our multifamily housing business and lower non-catastrophe losses,
mainly offset by an increase in reportable catastrophe losses of $60,165
(after-tax). The growth in net earned premiums was driven by lender-placed loan
portfolio additions and increased placement rates.



Our placement rate for Twelve Months 2012 was 2.87% compared to 2.75% in Twelve
Months 2011. The 2.87% placement rate is high, compared to historical standards,
due to the impact of the new loan portfolios added throughout 2012. We expect
placement rates in the near term to fluctuate, reflecting the state of the
housing market and the changing composition of our tracked loan portfolios, but
we expect placement rates to ultimately decline as the housing market
stabilizes.



In late 2012, we began a multi-phased roll-out of our new next generation
product to respond to the changed environment following the housing crisis.
Features of the product include: expanded geographic rating, added premium
rating flexibility and continued enhancements to our customer notification
process. Our next generation product is available in 14 states and we expect to
implement it in 14 more states by the end of the second quarter 2013, with a
full roll-out to all other states by the end of 2013. As we have disclosed, we
continue to engage in discussions with various state and federal regulatory
departments regarding our lender-placed insurance program. For additional detail
on certain of these discussions please refer to Assurant Specialty Property's
results of operations section further below in this Item 7.



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For 2013, we expect Assurant Specialty Property's revenue to increase slightly
from 2012 due to growth in our lender-placed portfolio and multi-family housing
products. We expect overall results to continue to be influenced by placement
rate trends, premium rate changes, loan portfolio activity, client renewals, and
catastrophe losses. We expect our expense ratio to remain approximately level
with 2012 as we continue to improve efficiency while further improving client
and customer service. We also expect our non-catastrophe loss ratio to increase
due to anticipated higher frequency of such losses compared to a mild winter in
2012.


Assurant Health net income increased $11,114, or 27%, to $52,000 for Twelve Months 2012 from $40,886 for Twelve Months 2011. The increase was primarily attributable to $13,856 (after-tax) of additional investment income from a real estate joint venture partnership and lower expenses associated with organizational and operational expense reduction initiatives.




We expect ongoing changes related to health care reform to continue to affect
this business in 2013. As such, we expect our loss ratio to increase, reflecting
the continued impact of the MLR requirements on our pricing. In addition, we
anticipate our effective tax rate to remain elevated due to limitations imposed
by healthcare reform on the deductibility of compensation and certain other
payments. We will continue to look for opportunities to further reduce our
organizational and operational expenses to offset these pressures, but we expect
the rate of reductions to be slower than in the past. We also expect net earned
premiums and fees to decline, reflecting the continued shift to lower premium
products in our individual medical business.



Assurant Employee Benefits net income increased $14,984, or 35%, to $58,059 for
Twelve Months 2012 from $43,075 for Twelve Months 2011. Results for Twelve
Months 2012 were driven by favorable experience across most major product lines.
Voluntary products, an area of focus, accounted for about 50% of Assurant
Employee Benefits sales and over 35% of net earned premiums and fees, as small
and mid-sized business benefit plans have shifted from employer-paid to
employee-paid products.



We expect 2013 net earned premiums and fees at Assurant Employee Benefits to be
consistent with 2012. We anticipate increased sales from our voluntary products
to offset expected lower sales of traditional employer-paid products. We plan to
lower our discount rate for new long-term disability claims incurred in 2013 by
50 basis points, to 4.25%, which we expect will reduce net income by
approximately $4,000.



Critical Factors Affecting Results

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Our results depend on the appropriateness of our product pricing, underwriting
and the accuracy of our methodology for the establishment of reserves for future
policyholder benefits and claims, returns on and values of invested assets and
our ability to manage our expenses. Factors affecting these items, including
unemployment, difficult conditions in financial markets and the global economy,
may have a material adverse effect on our results of operations or financial
condition. For more information on these factors, see "Item 1A-Risk Factors."



Management believes the Company will have sufficient liquidity to satisfy its
needs over the next twelve months including the ability to pay interest on our
Senior Notes and dividends on our common stock.



For Twelve Months 2012, net cash provided by operating activities, including the
effect of exchange rate changes on cash and cash equivalents, totaled $673,215;
net cash used in investing activities totaled $449,883 and net cash used in
financing activities totaled $480,641. We had $909,404 in cash and cash
equivalents as of December 31, 2012. Please see "-Liquidity and Capital
Resources," below for further details.



Revenues



We generate revenues primarily from the sale of our insurance policies and
service contracts and from investment income earned on our investments. Sales of
insurance policies are recognized in revenue as earned premiums while sales of
administrative services are recognized as fee income.



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Under the universal life insurance guidance, income earned on preneed life
insurance policies sold after January 1, 2009 are presented within policy fee
income net of policyholder benefits. Under the limited pay insurance guidance,
the consideration received on preneed policies sold prior to January 1, 2009 is
presented separately as net earned premiums, with policyholder benefits expense
being shown separately.



Our premium and fee income is supplemented by income earned from our investment
portfolio. We recognize revenue from interest payments, dividends and sales of
investments. Currently, our investment portfolio is primarily invested in fixed
maturity securities. Both investment income and realized capital gains on these
investments can be significantly affected by changes in interest rates.



Interest rate volatility can increase or reduce unrealized gains or losses in
our investment portfolios. Interest rates are highly sensitive to many factors,
including governmental monetary policies, domestic and international economic
and political conditions and other factors beyond our control. Fluctuations in
interest rates affect our returns on, and the market value of, fixed maturity
and short-term investments.



The fair market value of the fixed maturity securities in our investment
portfolio and the investment income from these securities fluctuate depending on
general economic and market conditions. The fair market value generally
increases or decreases in an inverse relationship with fluctuations in interest
rates, while net investment income realized by us from future investments in
fixed maturity securities will generally increase or decrease with interest
rates. We also have investments that carry pre-payment risk, such as
mortgage-backed and asset-backed securities. Interest rate fluctuations may
cause actual net investment income and/or cash flows from such investments to
differ from estimates made at the time of investment. In periods of declining
interest rates, mortgage prepayments generally increase and mortgage-backed
securities, commercial mortgage obligations and bonds are more likely to be
prepaid or redeemed as borrowers seek to borrow at lower interest rates.
Therefore, in these circumstances we may be required to reinvest those funds in
lower-interest earning investments.



Expenses


Our expenses are primarily policyholder benefits, selling, underwriting and general expenses and interest expense.

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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.



Selling, underwriting and general expenses consist primarily of commissions,
premium taxes, licenses, fees, amortization of deferred costs, general operating
expenses and income taxes.


We incur interest expense related to our debt.



Critical Accounting Estimates



Certain items in our consolidated financial statements are based on estimates
and judgment. Differences between actual results and these estimates could in
some cases have material impacts on our consolidated financial statements.



On January 1, 2012, the Company adopted the amendments to existing guidance on
accounting for costs associated with acquiring or renewing insurance contracts.
This guidance was adopted retrospectively and has been applied to all prior
period financial information contained in these consolidated financial
statements. See Note 2 to the Notes to Consolidated Financial Statements for
more information.



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The following critical accounting policies require significant estimates. The
actual amounts realized in these areas could ultimately be materially different
from the amounts currently provided for in our consolidated financial
statements.



Health Insurance Premium Rebate Liability




The Affordable Care Act was signed into law in March 2010. One provision of the
Act, effective January 1, 2011, established a minimum medical loss ratio ("MLR")
designed to ensure that a minimum percentage of premiums is paid for clinical
services or health care quality improvement activities. The Affordable Care Act
established an MLR of 80% for individual and small group business and 85% for
large group business. If the actual loss ratios, calculated in a manner
prescribed by the Department of Health and Human Services ("HHS"), are less than
the required MLR, premium rebates are payable to the policyholders by August 1
of the subsequent year.



The Assurant Health loss ratio reported on page 66 (the "GAAP loss ratio")
differs from the loss ratio calculated under the MLR rules. The most significant
differences include the fact that the MLR is calculated separately by state,
legal entity and type of coverage (individual or group); the MLR calculation
includes credibility adjustments for each state/entity/coverage cell, which are
not applicable to the GAAP loss ratio; the MLR calculation applies only to some
of our health insurance products, while the GAAP loss ratio applies to the
entire portfolio, including products not governed by the Affordable Care Act;
the MLR includes quality improvement expenses, taxes and fees; changes in
reserves are treated differently in the MLR calculation; and the MLR premium
rebate amounts are considered adjustments to premiums for GAAP reporting whereas
they are reported as additions to incurred claims in the MLR rebate estimate
calculations.



Assurant Health has estimated the 2012 impact of this regulation based on
definitions and calculation methodologies outlined in the Interim Final
Regulation from HHS released December 1, 2010 with Technical Corrections
released December 29, 2010 and the HHS Final Regulation released December 7,
2011. An estimate was based on separate projection models for individual medical
and small group business using projections of expected premiums, claims, and
enrollment by state, legal entity and market for medical business subject to MLR
requirements for the MLR reporting year. In addition, the projection models
include quality improvement expenses, state assessments and taxes.



Reserves



Reserves are established in accordance with GAAP using generally accepted
actuarial methods and reflect judgments about expected future claim payments.
Calculations incorporate assumptions about inflation rates, the incidence of
incurred claims, the extent to which all claims have been reported, future
claims processing, lags and expenses and future investment earnings, and
numerous other factors. While the methods of making such estimates and
establishing the related liabilities are periodically reviewed and updated, the
calculation of reserves is not an exact process.



Reserves do not represent precise calculations of expected future claims, but
instead represent our best estimates at a point in time of the ultimate costs of
settlement and administration of a claim or group of claims, based upon
actuarial assumptions and projections using facts and circumstances known at the
time of calculation.



Many of the factors affecting reserve adequacy are not directly quantifiable and
not all future events can be anticipated when reserves are established. Reserve
estimates are refined as experience develops. Adjustments to reserves, both
positive and negative, are reflected in the consolidated statement of operations
in the period in which such estimates are updated.



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Because establishment of reserves is an inherently complex process involving
significant judgment and estimates, there can be no certainty that ultimate
losses will not exceed existing claim reserves. Future loss development could
require reserves to be increased, which could have a material adverse effect on
our earnings in the periods in which such increases are made.



The following table provides reserve information for our major product lines for the years ended December 31, 2012 and 2011:



                                                            December 31, 2012                                                 December 31, 2011
                                                                             Claims and Benefits                                               Claims and Benefits
                                                                                   Payable                                                           Payable
                                          Future                                          Incurred           Future                                         Incurred
                                          Policy                                           But Not           Policy                                          But Not
                                       Benefits and       Unearned          Case          Reported        Benefits and       Unearned          Case         Reported
                                         Expenses         Premiums        Reserves        Reserves          Expenses         Premiums         Reserve       Reserves
Long Duration Contracts:
Preneed funeral life insurance
policies and investment-type
annuity contracts                     $    4,306,947     $   154,998     $  

13,139 $ 7,297$ 4,086,025$ 120,067$ 11,342

     $   7,555
Life insurance no longer offered             445,347             574           3,110           4,437            456,860             626           1,428 

4,487

Universal life and other products
no longer offered                            210,037             127             825           5,133            229,726             132             988         6,534
FFG, LTC and other disposed
businesses                                 3,424,511          35,862         713,258          55,661          3,491,994          38,039         641,238        55,151
Medical                                       89,540          10,293           6,831          10,016             86,456          11,097           8,385        10,170
All other                                     37,123             455          15,786           8,904              8,145             352          46,138         6,993
Short Duration Contracts:
Group term life                                    0           3,681         172,804          30,953                  0           4,174         182,355        37,415
Group disability                                   0           2,143       1,189,656         119,431                  0           2,390       1,243,975       133,441
Medical                                            0         111,351          99,549         148,209                  0         135,557          97,964       170,970
Dental                                             0           4,648           2,442          15,896                  0           4,634           2,788        17,436
Property and warranty                              0       2,368,372         459,215         706,849                  0       2,041,190         199,829       370,814
Credit life and disability                         0         300,824          41,711          54,624                  0         286,631          50,645        59,949
Extended service contracts                         0       2,775,715           3,323          36,908                  0       2,498,403           2,425        37,398
All other                                          0         423,217          11,643          22,980                  0         338,725           9,999        19,307

Total                                 $    8,513,505     $ 6,192,260     $ 2,733,292     $ 1,227,298     $    8,359,206     $ 5,482,017     $ 2,499,499     $ 937,620




For a description of our reserving methodology, see Note 12 to the Consolidated Financial Statements included elsewhere in this report.



Long Duration Contracts



Reserves for future policy benefits represent the present value of future
benefits to policyholders and related expenses less the present value of future
net premiums. Reserve assumptions reflect best estimates for expected investment
yield, inflation, mortality, morbidity, expenses and withdrawal rates. These
assumptions are based on our experience to the extent it is credible, modified
where appropriate to reflect current trends, industry experience and provisions
for possible unfavorable deviation. We also record an unearned revenue reserve
which represents premiums received which have not yet been recognized in our
consolidated statements of operations.



Historically, premium deficiency testing has not resulted in material adjustments to deferred acquisition costs or reserves. Such adjustments could occur, however, if economic or mortality conditions significantly deteriorated.




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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 and
mortality assumptions used in the calculation of these reserves will not
directly affect our results of operations unless there is a default by the
assuming reinsurer.



Short Duration Contracts



Claims and benefits payable reserves for short duration contracts include
(1) case reserves for known claims which are unpaid as of the balance sheet
date; (2) IBNR reserves for claims where the insured event has occurred but has
not been reported to us as of the balance sheet date; and (3) loss adjustment
expense reserves for the expected handling costs of settling the claims.
Periodically, we review emerging experience and make adjustments to our reserves
and assumptions where necessary. Below are further discussions on the reserving
process for our major short duration products.



Group Disability and Group Term Life




Case or claim reserves are set for active individual claims on group long term
disability policies and for waiver of premium benefits on group term life
policies. Reserve factors used to calculate these reserves reflect assumptions
regarding disabled life mortality and claim recovery rates, claim management
practices, awards for social security and other benefit offsets and yield rates
earned on assets supporting the reserves. Group long term disability and group
term life waiver of premium reserves are discounted because the payment pattern
and ultimate cost are fixed and determinable on an individual claim basis.



Factors considered when setting IBNR reserves include patterns in elapsed time
from claim incidence to claim reporting, and elapsed time from claim reporting
to claim payment.


Key sensitivities at December 31, 2012 for group long term disability claim reserves include the discount rate and claim termination rates.



                               Claims and                                          Claims and
                            Benefits  Payable                                   Benefits  Payable
Group disability,                                   Group disability, claim
discount rate decreased                             termination rate 10%
by 100 basis points        $         1,373,851      lower                      $         1,343,830
Group disability, as                                Group disability, as
reported                   $         1,309,087      reported                   $         1,309,087
Group disability,                                   Group disability, claim
discount rate increased                             termination rate 10%
by 100 basis points        $         1,250,755      higher                     $         1,277,538



The discount rate is also a key sensitivity for group term life waiver of premium reserves (included within group term life reserves).




                                                            Claims and Benefits Payable
Group term life, discount rate decreased by 100
basis points                                               $                

212,494

Group term life, as reported                               $                

203,757

Group term life, discount rate increased by 100
basis points                                               $                     195,908




Medical



IBNR reserves calculated using generally accepted actuarial methods represent
the largest component of reserves for short duration medical claims and benefits
payable. The primary methods we use in their estimation are the loss development
method and the projected claim method. Under the loss development method, we
estimate ultimate losses for each incident period by multiplying the current
cumulative losses by the appropriate



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loss development factor. When there is not sufficient data to reliably estimate
reserves under the loss development method, such as for recent claim periods,
the projected claim method is used. This method utilizes expected ultimate loss
ratios to estimate the required reserve. Where appropriate, we also use
variations on each method or a blend of the two.



Reserves for our various product lines are calculated using experience data
where credible. If sufficient experience data is not available, data from other
similar blocks may be used. Industry data provides additional benchmarks when
historical experience is too limited. Reserve factors may also be adjusted to
reflect considerations not reflected in historical experience, such as changes
in claims inventory levels, changes in provider negotiated rates or cost savings
initiatives, increasing or decreasing medical cost trends, product changes and
demographic changes in the underlying insured population.



Key sensitivities as of December 31, 2012 for short duration medical reserves include claims processing levels, claims under case management, medical inflation, seasonal effects, medical provider discounts and product mix.




                                                            Claims and Benefits Payable
Short duration medical, loss development factors
1% lower*                                                  $                

262,758

Short duration medical, as reported                        $                

247,758

Short duration medical, loss development factors
1% higher*                                                 $                     234,758



* This refers to loss development factors for the most recent four months. Our

historical claims experience indicates that approximately 87% of medical

    claims are paid within four months of the incurred date.



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




Property and Warranty



Our Property and Warranty lines of business include lender-placed homeowners,
manufactured housing homeowners, multi-family housing, credit property, credit
unemployment and warranty insurance and some longer-tail coverages (e.g.
asbestos, environmental, other general liability and personal accident). Claim
reserves for these lines are calculated on a product line basis using generally
accepted actuarial principles and methods. They consist of case and IBNR
reserves. The method we most often use in setting our Property and Warranty
reserves is the loss development method. Under this method, we estimate ultimate
losses for each accident period by multiplying the current cumulative losses by
the appropriate loss development factor. We then calculate the reserve as the
difference between the estimate of ultimate losses and the current case-incurred
losses (paid losses plus case reserves). We select loss development factors
based on a review of historical averages, adjusted to reflect recent trends and
business-specific matters such as current claims payment practices.



The loss development method involves aggregating loss data (paid losses and
case-incurred losses) by accident quarter (or accident year) and accident age
for each product or product grouping. As the data ages, we compile loss
development factors that measure emerging claim development patterns between
reporting periods. By selecting the most appropriate loss development factors,
we project the known losses to an ultimate incurred basis for each accident
period.



The data is typically analyzed using quarterly paid losses and/or quarterly case-incurred losses. Some product groupings may also use annual paid loss and/or annual case-incurred losses, as well as other actuarially accepted methods.




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Each of these data groupings produces an indication of the loss reserves for the
product or product grouping. The process to select the best estimate differs by
line of business. The single best estimate is determined based on many factors,
including but not limited to:



  •   the nature and extent of the underlying assumptions;




    •   the quality and applicability of historical data-whether internal or
        industry data;



• current and future market conditions-the economic environment will often

        impact the development of loss triangles;




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




    •   the past variability of loss estimates-the loss estimates on some product
        lines will vary from actual loss experience more than others.




Most of our credit property and credit unemployment insurance business is either
reinsured or written on a retrospective commission basis. Business written on a
retrospective commission basis permits management to adjust commissions based on
claims experience. Thus, any adjustment to prior years' incurred claims is
partially offset by a change in commission expense, which is included in the
selling underwriting and general expenses line in our consolidated statements of
operations.



While management has used its best judgment in establishing its estimate of
required reserves, different assumptions and variables could lead to
significantly different reserve estimates. Two key measures of loss activity are
loss frequency, which is a measure of the number of claims per unit of insured
exposure, and loss severity, which is a measure of the average size of claims.
Factors affecting loss frequency include the effectiveness of loss controls and
safety programs and changes in economic activity or weather patterns. Factors
affecting loss severity include changes in policy limits, retentions, rate of
inflation and judicial interpretations.



If the actual level of loss frequency and severity are higher or lower than
expected, the ultimate reserves required will be different than management's
estimate. The effect of higher and lower levels of loss frequency and severity
levels on our ultimate costs for claims occurring in 2012 would be as follows:



Change in both loss frequency and Ultimate cost of claims Change in cost of claims severity for all Property and Warranty occurring in 2012

 occurring in 2012
3% higher                                $                1,237,077     $                    71,013
2% higher                                $                1,213,173     $                    47,109
1% higher                                $                1,189,502     $                    23,438
Base scenario                            $                1,166,064     $                         0
1% lower                                 $                1,142,626     $                   (23,438 )
2% lower                                 $                1,118,955     $                   (47,109 )
3% lower                                 $                1,095,051     $                   (71,013 )



Reserving for Asbestos and Other Claims




Our property and warranty line of business includes exposure to asbestos,
environmental and other general liability claims arising from our participation
in various reinsurance pools from 1971 through 1985. This exposure arose from a
contract that we discontinued writing many years ago. We carry case reserves, as
recommended by the various pool managers, and IBNR reserves totaling $34,946
(before reinsurance) and $27,790 (net of reinsurance) at December 31, 2012. We
believe the balance of case and IBNR reserves for these liabilities are
adequate. However, any estimation of these liabilities is subject to greater
than normal variation and uncertainty due to the general lack of sufficiently
detailed data, reporting delays and absence of a generally accepted actuarial
methodology for those exposures. There are significant unresolved industry legal
issues, including such items as whether coverage exists and what constitutes a
claim. In addition, the determination of



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ultimate damages and the final allocation of losses to financially responsible
parties are highly uncertain. However, based on information currently available,
and after consideration of the reserves reflected in the consolidated financial
statements, we do not believe that changes in reserve estimates for these claims
are likely to be material.



DAC



Information in this report for the years ended December 31, 2011, 2010, 2009,
and 2008 has been revised, as applicable, for the retrospective application of
the Company's adoption of the amendments to existing guidance on accounting for
costs associated with acquiring or renewing insurance contracts. See Note 2 to
the Consolidated Financial Statements for more information.



Only direct incremental costs associated with the successful acquisition of new
or renewal insurance contracts are deferred to the extent that such costs are
deemed recoverable from future premiums or gross profits. Acquisition costs
primarily consist of commissions and premium taxes. Certain direct response
advertising expenses are deferred when the primary purpose of the advertising is
to elicit sales to customers who can be shown to have specifically responded to
the advertising and the direct response advertising results in probable future
benefits.



The deferred acquisition costs ("DAC") asset is tested annually to ensure that
future premiums or gross profits are sufficient to support the amortization of
the asset. Such testing involves the use of best estimate assumptions to
determine if anticipated future policy premiums and investment income are
adequate to cover all DAC and related claims, benefits and expenses. To the
extent a deficiency exists, it is recognized immediately by a charge to the
consolidated statements of operations and a corresponding reduction in the DAC
asset. If the deficiency is greater than unamortized DAC, a liability will be
accrued for the excess deficiency.



Long Duration Contracts



Acquisition costs for preneed life insurance policies issued prior to January 1,
2009 and certain discontinued life insurance policies have been deferred and
amortized in proportion to anticipated premiums over the premium-paying period.
These acquisition costs consist primarily of first year commissions paid to
agents.



For preneed investment-type annuities, preneed life insurance policies with
discretionary death benefit growth issued after January 1, 2009, universal life
insurance policies and investment-type annuity contracts that are no longer
offered, DAC is amortized in proportion to the present value of estimated gross
profits from investment, mortality, expense margins and surrender charges over
the estimated life of the policy or contract. The assumptions used for the
estimates are consistent with those used in computing the policy or contract
liabilities.



Acquisition costs relating to group worksite products, which typically have high
front-end costs and are expected to remain in force for an extended period of
time, consist primarily of first year commissions to brokers, costs of issuing
new certificates and compensation to sales representatives. These acquisition
costs are front-end loaded, thus they are deferred and amortized over the
estimated terms of the underlying contracts.



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



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Short Duration Contracts




Acquisition costs relating to property contracts, warranty and extended service
contracts and single premium credit insurance contracts are amortized over the
term of the contracts in relation to premiums earned.



Acquisition costs relating to monthly pay credit insurance business consist mainly of direct response advertising costs and are deferred and amortized over the estimated average terms and balances of the underlying contracts.




Acquisition costs relating to group term life, group disability, group dental
and group vision consist primarily of compensation to sales representatives.
These acquisition costs are front-end loaded; thus, they are deferred and
amortized over the estimated terms of the underlying contracts.



Investments



We regularly monitor our investment portfolio to ensure investments that may be
other-than-temporarily impaired are identified in a timely fashion, properly
valued, and charged against earnings in the proper period. The determination
that a security has incurred an other-than-temporary decline in value requires
the judgment of management. Assessment factors include, but are not limited to,
the length of time and the extent to which the market value has been less than
cost, the financial condition and rating of the issuer, whether any collateral
is held, the intent and ability of the Company to retain the investment for a
period of time sufficient to allow for recovery for equity securities, and the
intent to sell or whether it is more likely than not that the Company will be
required to sell for fixed maturity securities.



Any equity security whose price decline is deemed other-than-temporary is
written down to its then current market value with the amount of the impairment
reported as a realized loss in that period. The impairment of a fixed maturity
security that the Company has the intent to sell or that it is more likely than
not that the Company will be required to sell is deemed other-than-temporary and
is written down to its market value at the balance sheet date, with the amount
of the impairment reported as a realized loss in that period. For all
other-than-temporarily impaired fixed maturity securities that do not meet
either of these two criteria, the Company analyzes its ability to recover the
amortized cost of the security by calculating the net present value of projected
future cash flows. For these other-than-temporarily impaired fixed maturity
securities, the net amount recognized in earnings is equal to the difference
between its amortized cost and its net present value.



Inherently, there are risks and uncertainties involved in making these
judgments. Changes in circumstances and critical assumptions such as a continued
weak economy, or unforeseen events which affect one or more companies, industry
sectors or countries could result in additional impairments in future periods
for other-than-temporary declines in value. See also Note 4 to the Consolidated
Financial Statements included elsewhere in this report and "Item 1A-Risk
Factors-The value of our investments could decline, affecting our profitability
and financial strength" and "Investments" contained later in this item.



Reinsurance



Reinsurance recoverables include amounts we are owed by reinsurers. Reinsurance
costs are expensed over the terms of the underlying reinsured policies using
assumptions consistent with those used to account for the policies. Amounts
recoverable from reinsurers are estimated in a manner consistent with claim and
claim adjustment expense reserves or future policy benefits reserves and are
reported in our consolidated balance sheets. An estimated allowance for doubtful
accounts is recorded on the basis of periodic evaluations of balances due from
reinsurers (net of collateral), reinsurer solvency, management's experience and
current economic conditions. The ceding of insurance does not discharge our
primary liability to our insureds.



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The following table sets forth our reinsurance recoverables as of the dates
indicated:



                                    December 31, 2012December 31, 2011

Reinsurance recoverables $ 6,141,737 $ 5,411,064

We have used reinsurance to exit certain businesses, including blocks of individual life, annuity, and long-term care business. The reinsurance recoverables relating to these dispositions amounted to $3,619,747 and $3,622,481 at December 31, 2012 and 2011, 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:



                                                         2012            2011

Ceded future policyholder benefits and expense $ 3,338,783$ 3,399,938

     Ceded unearned premium                             1,214,028       

1,013,778

     Ceded claims and benefits payable                  1,540,073         945,900
     Ceded paid losses                                     48,853          51,448

     Total                                            $ 6,141,737     $ 5,411,064





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



Retirement and Other Employee Benefits




We sponsor qualified and non-qualified pension plans and a retirement health
benefits plan covering our employees who meet specified eligibility
requirements. The calculation of reported expense and liability associated with
these plans requires an extensive use of assumptions including factors such as
discount rates, expected long-term returns on plan assets, employee retirement
and termination rates and 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 assumptions we use may
differ materially from actual results. See Note 20 to our consolidated financial
statements for more information on our retirement and other employee benefits,
including a sensitivity analysis for changes in the assumed health care cost
trend 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



                                       53
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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 7 to our consolidated financial statements.



As of December 31, 2011, the Company had a cumulative valuation allowance of
$10,154 against deferred tax assets of international subsidiaries. During Twelve
Months 2012, the Company recognized a cumulative income tax expense of $2,937
related to operating losses of international subsidiaries. As of December 31,
2012, the Company has a cumulative valuation allowance of $13,091 against
deferred tax assets, as it is management's assessment that it is more likely
than not that this amount of deferred tax assets will not be realized. The
realization of deferred tax assets related to net operating loss carryforwards
of international subsidiaries depends upon the existence of sufficient taxable
income of the same character in the same jurisdiction.



In determining whether the deferred tax asset is realizable, the Company weighed
all available evidence, both positive and negative. We considered all sources of
taxable income available to realize the asset, including the future reversal of
existing temporary differences, future taxable income exclusive of reversing
temporary differences, carry forwards and tax-planning strategies.



The Company believes it is more likely than not that the remainder of its deferred tax assets will be realized in the foreseeable future. Accordingly, other than noted herein for certain international subsidiaries, a valuation allowance has not been established.




Future reversal of the valuation allowance will be recognized either when the
benefit is realized or when we determine that it is more likely than not that
the benefit will be realized. Depending on the nature of the taxable income that
results in a reversal of the valuation allowance, and on management's judgment,
the reversal will be recognized either through other comprehensive income (loss)
or through continuing operations in the consolidated statements of operations.
Likewise, if the Company determines that it is not more likely than not that it
would be able to realize all or part of the deferred tax asset in the future, an
adjustment to the deferred tax asset valuation allowance would be recorded
through a charge to continuing operations in the consolidated statements of
operations in the period such determination is made.



In determining the appropriate valuation allowance, management makes judgments
about recoverability of deferred tax assets, use of tax loss and tax credit
carryforwards, levels of expected future taxable income and available tax
planning strategies. The assumptions used in making these judgments are updated
periodically by management based on current business conditions that affect the
Company and overall economic conditions. These management judgments are
therefore subject to change based on factors that include, but are not limited
to, changes in expected capital gain income in the foreseeable future and the
ability of the Company to successfully execute its tax planning strategies.
Please see "Item 1A-Risk Factors-Risks Related to Our Company-Unanticipated
changes in tax provisions or exposure to additional income tax liabilities could
materially and adversely affect our results" for more information.



Valuation and Recoverability of Goodwill




Goodwill represented $640,714 and $639,097 of our $28,946,607 and $27,019,862 of
total assets as of December 31, 2012 and 2011, 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,
a 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.



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We test goodwill for impairment at the reporting unit level and have concluded
that our reporting units for goodwill testing are equivalent to our operating
segments.



The following table illustrates the amount of goodwill carried at each reporting
unit:



                                                   December 31,
                                                2012          2011
                Assurant Solutions            $ 381,262     $ 379,645
                Assurant Specialty Property     259,452       259,452
                Assurant Health                      -             -
                Assurant Employee Benefits           -             -

                Total                         $ 640,714     $ 639,097





For each reporting unit, we first compare its estimated fair value with its net
book value. If the estimated fair value exceeds its net book value, goodwill is
deemed not to be impaired, and no further testing is necessary. If the net book
value exceeds its estimated fair value, we would then perform 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.



During September 2011, the FASB issued amended guidance for goodwill and other
intangibles. This guidance provides the option 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 and circumstances, an entity determines that 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, as described above. During 2011, the Company chose
this option for Assurant Specialty Property, but not for Assurant Solutions.
During 2012, the Company performed the Step 1 test for both reporting units.



In cases where Step 1 testing was performed, the following describes the valuation methodologies used in 2012 and 2011 to derive the estimated fair value of the reporting units.




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



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



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



                                       55
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While all three valuation methodologies were considered in assessing fair value,
the DDM was weighed more heavily since in the current economic environment,
management believes that expected cash flows are the most important factor in
the valuation of a business enterprise. In addition, recent dislocations in the
economy, the scarcity of M&A transactions in the insurance marketplace and the
relative lack of directly comparable companies, particularly for Assurant
Solutions, make the other methods less credible.



Following the 2012 Step 1 test, the Company concluded that the estimated fair
value of the Assurant Solutions reporting unit exceeded its net book value by
10.5%, while the Assurant Specialty Property reporting unit exceeded its net
book value by 17.4%.



Following the 2011 Step 1 test, the Company concluded that the estimated fair
value of the Assurant Solutions reporting unit exceeded its net book value by
19.2%. In undertaking our qualitative assessment of the Specialty Property
reporting unit in 2011, we considered macro-economic, industry and reporting
unit-specific factors. These included (i) the effect of the current interest
rate environment on our cost of capital; (ii) Assurant Specialty Property's
sustaining market share over the year; (iii) lack of turnover in key management;
(iv) 2011 actual performance as compared to expected 2011 performance from our
2010 Step 1 assessment; and, (v) the overall market position and share price of
Assurant, Inc.

Based on our qualitative assessment, having considered the factors in totality we determined that it was not necessary to perform a Step 1 quantitative goodwill impairment test for Assurant Specialty Property and that it was more-likely-than-not that the fair value of Assurant Specialty Property continued to exceed its net book value at year-end 2011.




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 100 basis points, with all other assumptions
held constant, for Assurant Solutions, would result in its estimated fair value
being less than its net book value as of December 31, 2012. Likewise, a
reduction of 350 basis points in the terminal growth rate, with all other
assumptions held constant, for Assurant Solutions would result in its estimated
fair value being less than its net book value as of December 31, 2012. It would
take more significant movements in our estimates and assumptions in order for
Assurant Specialty Property's estimated fair value to be less than its net book
value.



We evaluated the significant assumptions used to determine the estimated fair
values of Assurant Solutions and Assurant Specialty Property, both individually
and in the aggregate, and concluded they are reasonable. However, should the
operating results of either reporting unit decline substantially compared to
projected results, or should further interest rate declines further increase the
net unrealized investment portfolio gain position, we could determine that we
need to record an impairment charge related to goodwill in Assurant Solutions
and Assurant Specialty Property.



Recent Accounting Pronouncements-Adopted




On September 30, 2012, the Company adopted the amended intangibles-goodwill and
other guidance. This guidance allows an entity to first assess qualitative
factors to determine whether it is necessary to perform a quantitative
impairment test for indefinite-lived intangible assets. Under this amended
guidance, an entity would not be required to calculate the fair value of an
indefinite-lived intangible asset, unless the entity determines, based on
qualitative assessment, that it is more likely than not that its fair value is
less than its carrying amount. The amended guidance includes a number of events
and circumstances for an entity to consider in conducting the qualitative
assessment and did not have an impact on the Company's financial position or
results of operations.



                                       56
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On January 1, 2012, the Company adopted the guidance on fair value measurement.
This amended guidance changes certain fair value measurement principles and
expands required disclosures to include quantitative and qualitative information
about unobservable inputs in Level 3 measurements to achieve common fair value
measurement and disclosure requirements in GAAP and International Financial
Reporting Standards. The adoption of this guidance did not have an impact on the
Company's financial position or results of operations.



On January 1, 2012, the Company adopted the amendments to existing guidance on
accounting for costs associated with acquiring or renewing insurance contracts.
The amendments modified the definition of the types of costs incurred by
insurance entities that can be capitalized in the acquisition of new and renewal
contracts. Under this amended guidance, only direct incremental costs associated
with successful insurance contract acquisitions or renewals are deferrable. This
guidance was adopted retrospectively and has been applied to all prior period
financial information contained in these consolidated financial statements. As
of January 1, 2010, the beginning of the earliest period presented, the
cumulative effect adjustment recorded to reflect this guidance resulted in a
decrease of $148,242 in retained earnings, an increase of $2,149 in accumulated
other comprehensive income and a decrease of $146,093 in total stockholders'
equity. For more information, see Note 2 to the Consolidated Financial
Statements.



On December 31, 2011, the Company adopted the new guidance related to the
presentation of comprehensive income. This guidance provides two alternatives
for presenting comprehensive income. An entity can report comprehensive income
either in a single continuous financial statement or in two separate but
consecutive financial statements. Each component of net income and each
component of other comprehensive income, together with totals for comprehensive
income and its two parts, net income and other comprehensive income, are
displayed under either alternative. The statement(s) are to be presented with
equal prominence as the other primary financial statements. The new guidance
eliminates the Company's previously applied option to report other comprehensive
income and its components in the statement of changes in stockholders' equity.
The guidance does not change the items that constitute net income or other
comprehensive income, and does not change when an item of other comprehensive
income must be reclassified to net income. The Company chose to early adopt this
guidance and therefore is reporting comprehensive income in a separate but
consecutive statement, with full retrospective application as required by the
guidance. The adoption of this guidance did not have an impact on the Company's
financial position or results of operations.



On October 1, 2011, the Company adopted the amended intangibles-goodwill and
other guidance. This guidance allows an entity to first assess qualitative
factors to determine whether it is necessary to perform the two-step
quantitative goodwill impairment test. Under this amended guidance, an entity
would not be required to calculate the fair value of a reporting unit unless the
entity determines, based on a qualitative assessment, that it is more likely
than not that its fair value is less than its carrying amount. The amended
guidance includes a number of events and circumstances for an entity to consider
in conducting the qualitative assessment. The Company chose to early adopt the
revised standard and applied the amended guidance to its fourth quarter annual
goodwill impairment test. The adoption of the amended guidance results in a
change to the procedures for assessing goodwill impairment and did not have an
impact on the Company's financial position or results of operations. For more
information, see Notes 2 and 10 to the Consolidated Financial Statements.



On January 1, 2011, the Company adopted the new guidance on multiple deliverable
revenue arrangements. This guidance requires entities to use their best estimate
of the selling price of a deliverable within a multiple deliverable revenue
arrangement if the entity and other entities do not sell the deliverable
separate from the other deliverables within the arrangement. In addition, it
requires both qualitative and quantitative disclosures. The adoption of this
guidance did not have an impact on the Company's financial position or results
of operations.


Recent Accounting Pronouncements-Not Yet Adopted

In July 2011, the Financial Accounting Standards Board ("FASB") issued amendments to the other expenses guidance to address how health insurers should recognize and classify in their income statements fees mandated

                                       57

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by the Affordable Care Act. The Affordable Care Act imposes an annual fee on
health insurers for each calendar year beginning on or after January 1, 2014.
The amendments specify that the liability for the fee should be estimated and
recorded in full once the entity provides qualifying health insurance in the
applicable calendar year in which the fee is payable with a corresponding
deferred cost that is amortized to expense ratably over the calendar year during
which it is payable. The guidance is effective for calendar years beginning
after December 31, 2013, when the fee initially becomes effective. Therefore,
the Company is required to adopt this guidance on January 1, 2014. The Company
is currently evaluating the requirements of the amendments and the potential
impact on the Company's financial position and results of operations.



Results of Operations



Assurant Consolidated



Overview



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



                                                        For the Years Ended December 31,
                                                     2012             2011             2010
Revenues:

Net earned premiums and other considerations $ 7,236,984$ 7,125,368$ 7,403,039 Net investment income

                                 713,128          689,532          703,190
Net realized gains on investments                      64,353           32,580           48,403
Amortization of deferred gains on disposal of
businesses                                             18,413           20,461           10,406
Fees and other income                                 475,392          404,863          362,684

Total revenues                                      8,508,270        8,272,804        8,527,722

Benefits, losses and expenses:
Policyholder benefits                               3,655,404        3,749,734        3,635,999
Selling, underwriting and general expenses (1)      4,034,809        3,756,583        3,918,191
Interest expense                                       60,306           60,360           60,646

Total benefits, losses and expenses                 7,750,519        

7,566,677 7,614,836


Segment income before provision for income
taxes and goodwill impairment                         757,751          706,127          912,886
Provision for income taxes                            274,046          

167,171 327,898


Segment income before goodwill impairment             483,705          538,956          584,988
Goodwill impairment                                         0                0          306,381

Net income                                        $   483,705      $   538,956      $   278,607




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

    administrative expenses.



Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011




Net income decreased $55,251, or 10%, to $483,705 for Twelve Months 2012 from
$538,956 for Twelve Months 2011. The decrease is primarily due to an $80,000
release of a capital loss valuation allowance related to deferred tax assets
during Twelve Months 2011. Partially offsetting this item was improved net
income in our Assurant Health and Assurant Employee Benefits segments and an
increase of $20,652 (after-tax) in net realized gains on investments. Twelve
Months 2012 includes $162,634 (after-tax) of Assurant Specialty Property
reportable catastrophe losses, primarily due to Superstorm Sandy, compared to
$102,469 (after-tax) of reportable catastrophe losses in Twelve Months 2011.
Higher catastrophe losses in Twelve Months 2012 were offset by growth in
lender-placed homeowners net earned premiums and lower non-catastrophe losses.



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Year Ended December 31, 2011 Compared to the Year Ended December 31, 2010




Net income increased $260,349, or 93%, to $538,956 for Twelve Months 2011 from
$278,607 for Twelve Months 2010. Twelve Months 2010 included a $306,381 non-cash
goodwill impairment charge. Absent this charge, net income decreased $46,032 or
8%. The decline is primarily attributable to decreased net income in our
Assurant Specialty Property segment mainly due to an increase in reportable
catastrophe losses of $87,673 (after-tax) in Twelve Months 2011 and declines in
net income at our Assurant Health and Assurant Employee Benefits segments.
Partially offsetting these items was improved net income in our Assurant
Solutions segment and an $80,000 release of a capital loss valuation allowance
related to deferred tax assets during Twelve Months 2011.



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Assurant Solutions



Overview



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



                                                                 For the Years Ended
                                                                    December 31,
                                                       2012             2011             2010
Revenues:
Net earned premiums and other considerations        $ 2,579,220      $ 2,438,407      $ 2,484,299
Net investment income                                   396,681          393,575          397,297
Fees and other income                                   314,072          265,204          228,052

Total revenues                                        3,289,973        3,097,186        3,109,648

Benefits, losses and expenses:
Policyholder benefits                                   840,133          

847,254 884,405 Selling, underwriting and general expenses (4) 2,267,986 2,037,680 2,059,245


Total benefits, losses and expenses                   3,108,119        

2,884,934 2,943,650


Segment income before provision for income taxes        181,854          212,252          165,998

Provision for income taxes                               58,101           76,202           64,465

Segment net income                                  $   123,753      $   136,050      $   101,533

Net earned premiums and other considerations:
Domestic:
Credit                                              $   165,765      $   173,287      $   189,357
Service contracts                                     1,260,578        1,198,510        1,291,725
Other (1)                                                62,298           53,219           49,016

Total Domestic                                        1,488,641        1,425,016        1,530,098

International:
Credit                                                  425,078          391,124          346,475
Service contracts                                       556,207          495,853          459,166
Other (1)                                                28,316           24,692           18,002

Total International                                   1,009,601          911,669          823,643

Preneed                                                  80,978          101,722          130,558

Total                                               $ 2,579,220      $ 2,438,407      $ 2,484,299

Fees and other income:
Domestic:
Debt protection                                     $    27,912      $    29,501      $    33,049
Service contracts                                       139,636          120,896          110,386
Other (1)                                                 4,039            4,123            8,839

Total Domestic                                          171,587          154,520          152,274

International                                            38,840           32,059           28,930
Preneed                                                 103,645           78,625           46,848

Total                                               $   314,072      $   265,204      $   228,052

Gross written premiums (2):
Domestic:
Credit                                              $   390,648      $   399,564      $   422,825
Service contracts                                     1,799,577        1,470,605        1,193,423
Other (1)                                               113,067           86,503           65,732

Total Domestic                                        2,303,292        1,956,672        1,681,980

International:
Credit                                                1,002,347        1,013,486          968,878
Service contracts                                       722,251          622,674          523,382
Other (1)                                                44,721           45,312           22,407

Total International                                   1,769,319        1,681,472        1,514,667

Total                                               $ 4,072,611      $ 3,638,144      $ 3,196,647

Preneed (face sales)                                $   863,734      $   759,692      $   734,884

Combined ratio (3):
Domestic                                                   98.9 %           97.3 %          100.3 %
International                                             104.8 %          104.0 %          106.1 %




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

(2) Gross written premiums does not necessarily translate to an equal amount of

subsequent net earned premiums since Assurant Solutions reinsures a portion

of its premiums to insurance subsidiaries of its clients.

(3) The combined ratio is equal to total benefits, losses and expenses divided by

net earned premiums and other considerations and fees and other income

excluding the preneed business.

(4) 2012 & 2010 selling, underwriting and general expenses include $26,458 and

$47,612, respectively, of intangible asset impairment charges.



Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011



Net Income



Segment net income decreased $12,297, or 9%, to $123,753 for Twelve Months 2012
from $136,050 for Twelve Months 2011, primarily due to an other intangible asset
impairment charge in our U.K. business of $20,373 (after-tax) and a workforce
restructuring charge of $7,724 (after-tax). Both of these items occurred in the
fourth quarter of 2012. In mid-2012, persistency rates of U.K. mortgage
insurance brokers acquired in 2007 declined significantly following actions by
an independent underwriter of the business, resulting in the impairment charge.
The workforce restructuring charge primarily related to our domestic credit and
European operations. Twelve Months 2012 includes $6,362 (after-tax) of income
from client related settlements. Absent these items, net income increased $9,438
primarily due to improved results in our International business. The improved
International business results were mainly due to growth and improved
underwriting experience primarily in our Latin American region. Partially
offsetting the improved International results was less favorable domestic
service contract underwriting experience as well as lower earnings from certain
domestic blocks of credit insurance business that are in run-off.



Total Revenues



Total revenues increased $192,787, or 6%, to $3,289,973 for Twelve Months 2012
from $3,097,186 for Twelve Months 2011 mainly as a result of higher net earned
premiums and other considerations of $140,813. Domestic net earned premiums
increased primarily attributable to service contract growth in the automotive
and retail markets from both new and existing clients including $17,123 related
to a new block of business assumed during Twelve Months 2012. International
service contract and credit businesses net earned premiums increased primarily
in our Latin America and European regions from both new and existing clients.
Fees and other income increased $48,868, mostly driven by growth in our preneed
business and growth in our domestic retail and mobile service contract business,
including a favorable one-time client settlement.



Gross written premiums increased $434,467, or 12%, to $4,072,611 for Twelve
Months 2012 from $3,638,144 for Twelve Months 2011. Gross written premiums from
our domestic service contract business increased $328,972 from both new and
existing clients, including $41,117 related to a new assumed block of business
and a one-time benefit of $33,200 resulting from the correction of a client
reporting error. This correction had no impact on net income since an offsetting
deferred commission amount was recorded. Gross written premiums from our
international service contract business increased $99,577 due to growth in
Europe and Latin America from new and existing clients and products.



Preneed face sales increased $104,042, to $863,734 for Twelve Months 2012 from
$759,692 for Twelve Months 2011. This increase was mostly attributable to growth
from our exclusive distribution partnership with Service Corporation
International ("SCI"), the largest funeral provider in North America. This
exclusive distribution partnership is effective through September 29, 2014.



Total Benefits, Losses and Expenses




Total benefits, losses and expenses increased $223,185, or 8%, to $3,108,119 for
Twelve Months 2012 from $2,884,934 for Twelve Months 2011. Policyholder benefits
declined $7,121 primarily from improved loss experience in our international
business and from a decrease associated with run-off lines in our preneed and



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domestic businesses, partially offset by higher policyholder benefits in our
domestic service contract business related to business growth and $14,617
related to a new assumed block of business. Selling, underwriting and general
expenses increased $230,306. Commissions, taxes, licenses and fees, of which
amortization of DAC is a component, increased $159,623 due to higher earnings in
our domestic service contract and international businesses. General expenses
increased $70,683 primarily due to an other intangible asset impairment charge
of $26,458 and severance expenses of $11,731. Additionally, costs also increased
as a result of supporting the growth of our international businesses, primarily
in Latin America.


Year Ended December 31, 2011 Compared to the Year Ended December 31, 2010



Net Income



Segment net income increased $34,517, or 34%, to $136,050 for Twelve Months 2011
from $101,533 for Twelve Months 2010. Twelve Months 2010 included an intangible
asset impairment charge of $30,948 (after-tax) related to a client notification
of non-renewal of a block of domestic service contract business. Absent this
item, net income increased $3,569, or 3%, as a result of improved underwriting
experience across our international and domestic service contract businesses.
Partially offsetting the improvement was a $4,875 (after-tax) increase to
policyholder benefits for unreported claims in our preneed business during
fourth quarter 2011 as well as continued reduced earnings from certain domestic
blocks of business that are in run-off.



Total Revenues



Total revenues decreased $12,462, or less than 1%, to $3,097,186 for Twelve
Months 2011 from $3,109,648 for Twelve Months 2010. The decrease was mainly the
result of lower net earned premiums of $45,892, which was primarily attributable
to the continued run-off of certain domestic service contract business from
former clients that are no longer in business (mainly Circuit City) and the
continued run-off of our domestic credit insurance business. Net earned premiums
for full year 2011 declined approximately $160,000 from these two sources
compared with 2010.



Partially offsetting these decreases were new domestic service contract business
growth and increases in both our international credit and service contract
businesses, which also benefited from the favorable impact of foreign exchange
rates. Fees and other income increased $37,152 mainly as a result of increases
in our preneed business.



Gross written premiums increased $441,497, or 14%, to $3,638,144 for Twelve
Months 2011 from $3,196,647 for Twelve Months 2010. Gross written premiums from
our domestic service contract business increased $277,182 primarily due to the
2010 addition of a large new client and an increase in automobile vehicle
service contract sales. Our international service contract business increased
$99,292 and our international credit business increased $44,608, primarily due
to growth from new and existing clients, particularly in Latin America, and the
favorable impact of foreign exchange rates. Partially offsetting these increases
was a $23,261 decrease in our domestic credit insurance business, due to the
continued run-off of this product line.



Preneed face sales increased $24,808, to $759,692 for Twelve Months 2011 from
$734,884 for Twelve Months 2010. This increase was primarily attributable to
domestic growth from our exclusive distribution partnership with SCI, the
largest funeral provider in North America. This exclusive distribution
partnership is effective through September 29, 2014. Twelve Months 2011 face
sales also benefited from recent acquisitions made by SCI. This was partially
offset by reduced sales in Canada compared to 2010, when consumer buying
increased in advance of a consumer tax rate change that took effect July 1, 2010
in certain provinces.


Total Benefits, Losses and Expenses




Total benefits, losses and expenses decreased $58,716, or 2%, to $2,884,934 for
Twelve Months 2011 from $2,943,650 for Twelve Months 2010. Policyholder benefits
decreased $37,151 primarily due to improved loss



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experience across our international and domestic service contract businesses and
a decrease associated with certain domestic lines of business that are in
run-off. Partially offsetting these items was a $7,500 increase to policyholder
benefits for unreported claims related to the use of the U.S. Social Security
Administration Death Master File to identify deceased policyholders and
beneficiaries in our preneed business during fourth quarter 2011.



Selling, underwriting and general expenses decreased $21,565. Commissions,
taxes, licenses and fees, of which amortization of DAC is a component, increased
$3,789 due to higher earnings in our international business resulting from
growth of the business coupled with the unfavorable impact of foreign exchange
rates. This was partially offset by lower earnings in our domestic service
contract business. General expenses decreased $25,354 primarily due to the above
mentioned $47,612 intangible asset impairment charge and from expense management
efforts in domestic lines of business that are in run-off. These decreases were
partially offset by higher expenses associated with the growth of our
international and domestic service contract businesses.



Assurant Specialty Property



Overview


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



                                                         For the Years Ended December 31,
                                                     2012              2011              2010
Revenues:
Net earned premiums and other considerations      $ 2,054,041       $ 1,904,638       $ 1,953,223
Net investment income                                 103,327           103,259           107,092
Fees and other income                                  98,621            79,337            69,147

Total revenues                                      2,255,989         2,087,234         2,129,462

Benefits, losses and expenses:
Policyholder benefits                                 949,157           857,223           684,653
Selling, underwriting and general expenses            844,288           769,826           797,620

Total benefits, losses and expenses                 1,793,445         

1,627,049 1,482,273


Segment income before provision for income
taxes                                                 462,544           460,185           647,189
Provision for income taxes                            157,593           156,462           222,658

Segment net income                                $   304,951       $   303,723       $   424,531

Net earned premiums and other considerations
by major product groupings:
Homeowners (lender-placed and voluntary)          $ 1,418,061       $ 1,274,485       $ 1,342,791
Manufactured housing (lender-placed and
voluntary)                                            207,675           216,613           220,309
Other (1)                                             428,305           413,540           390,123

Total                                             $ 2,054,041       $ 1,904,638       $ 1,953,223

Ratios:
Loss ratio (2)                                           46.2 %            45.0 %            35.1 %
Expense ratio (3)                                        39.2 %            38.8 %            39.4 %
Combined ratio (4)                                       83.3 %            82.0 %            73.3 %



(1) This primarily includes multi-family housing, lender-placed flood, and

miscellaneous insurance products.

(2) The loss ratio is equal to policyholder benefits divided by net earned

premiums and other considerations.

(3) The expense ratio is equal to selling, underwriting and general expenses

divided by net earned premiums and other considerations and fees and other

income.

(4) The combined ratio is equal to total benefits, losses and expenses divided by

    net earned premiums and other considerations and fees and other income.




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Regulatory Matters




As previously disclosed, in February 2012, the Company and two of its wholly
owned insurance subsidiaries, ASIC and American Bankers Insurance Company of
Florida, received subpoenas from the NYDFS regarding the Company's lender-placed
insurance business and related document retention practices. Over the next
several months, the Company responded to the subpoenas, participated in
depositions, responded to additional information requests from the NYDFS on the
Company's lender-placed insurance program and, along with other companies in the
industry, participated in public hearings conducted by the NYDFS. The Company
was subsequently served with an order by the NYDFS requiring the Company to
propose and justify amended rates for its lender-placed insurance products sold
in the State of New York, to which it responded in early July 2012. The Company
has since engaged in discussions with the NYDFS and provided additional
information concerning its lender-placed insurance program in the State of New
York. Proposed changes to the program would affect annual lender-placed hazard
and real estate owned policies issued in the State of New York, which accounted
for approximately $79,000 and $64,000 of Assurant Specialty Property's net
earned premiums for Twelve Months 2012 and Twelve Months 2011, respectively. The
Company's discussions with the NYDFS concerning this matter are continuing.



The company files rates with the state departments of insurance in the ordinary
course of business. As previously disclosed, in addition to this routine
correspondence, the Company has been engaged in discussions and proceedings with
certain state regulators regarding our lender-placed insurance business. As the
Company disclosed on October 22, 2012, ASIC reached an agreement with the
California DOI to reduce premium rates for lender-placed hazard insurance
products by 30.5%. This rate reduction reflects factors specific to California
such as continued favorable loss experience in the state and different
assumptions about future experience compared to our previous rate filing. The
new rates in California began to apply to all policies issued or renewed with
effective dates on or after January 19, 2013. During Twelve Months 2012, ASIC
recorded approximately $111,000 of net earned premiums ($154,000 of gross
written premium) in California for the type of policies subject to the rate
reduction. The actual effect of the California rate decrease on the Company's
net earned premiums and net income over the course of 2013 and beyond will
depend on a variety of factors, including the Company's mix of lender-placed
insurance products, lapse rates, rate and timing of renewals, placement rates,
changes in client contracts and actual expenses incurred.



Assurant Specialty Property's business strategy has been to pursue long-term
growth in lender-placed homeowners insurance and adjacent markets with similar
characteristics, such as lender-placed flood insurance and lender-placed mobile
home insurance. Lender-placed insurance products accounted for approximately 71%
of Assurant Specialty Property's net earned premiums for Twelve Months 2012 and
70% for Twelve Months 2011. The approximate corresponding contributions to
segment net income in these periods were 90% and 100%, 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.



It is possible that other state departments of insurance and regulatory
authorities may choose to initiate or continue to review the appropriateness of
the Company's premium rates for its lender-placed insurance products. If in the
aggregate such reviews lead to significant decreases in premium rates for the
Company's lender-placed insurance products, our results of operations could be
materially adversely affected.



Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011



Net Income


Segment net income increased $1,228, or less than 1%, to $304,951 for Twelve Months 2012 from $303,723 for Twelve Months 2011. The increase is due to increased lender-placed homeowners net earned premiums,

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growth in our multi-family housing business and lower non-catastrophe losses,
partially offset by an increase in reportable catastrophe losses of $60,165
(after-tax). Growth in lender-placed homeowners net earned premiums is primarily
due to growth in loan portfolios from both new and existing clients and
increased placement rates.



Total Revenues



Total revenues increased $168,755, or 8%, to $2,255,989 for Twelve Months 2012
from $2,087,234 for Twelve Months 2011. The main drivers of the increase are
growth in lender-placed homeowners and renters insurance net earned premiums as
well as fee income from growth in our resident bond products. Growth in
lender-placed homeowners net earned premiums is primarily due to higher
insurance placement rates and increased loans tracked attributable to client
loan portfolio acquisitions that occurred in 2012 and late 2011.



Total Benefits, Losses and Expenses




Total benefits, losses and expenses increased $166,396, or 10%, to $1,793,445
for Twelve Months 2012 from $1,627,049 for Twelve Months 2011. The loss ratio
increased 120 basis points primarily due to higher reportable catastrophe losses
which increased the loss ratio 390 basis points. Twelve Months 2012 includes
$250,206 of reportable catastrophe losses, mainly due to Superstorm Sandy,
compared to $157,645 of reportable catastrophe losses in Twelve Months 2011.
Reportable catastrophe losses include only individual catastrophic events that
generated losses to the Company in excess of $5,000, pre-tax and net of
reinsurance. The non-catastrophe loss ratio declined 270 basis points primarily
due to a decrease in loss frequency across most product lines. The expense ratio
increased 40 basis points primarily due to higher operating costs to support
business growth partially offset by a decrease in commission expense.



Year Ended December 31, 2011 Compared to the Year Ended December 31, 2010



Net Income



Segment net income decreased $120,808, or 29%, to $303,723 for Twelve Months
2011 from $424,531 for Twelve Months 2010. The decline was primarily due to an
increase in reportable catastrophe losses of $87,673 (after-tax) in Twelve
Months 2011. Increased frequency of non-catastrophe weather related losses
during Twelve Months 2011 compared with Twelve Months 2010 also contributed to
the decline.



Total Revenues



Total revenues decreased $42,228, or 2%, to $2,087,234 for Twelve Months 2011
from $2,129,462 for Twelve Months 2010. Growth in lender-placed homeowners and
multi-family housing gross earned premiums was more than offset by increased
ceded lender-placed homeowners' premiums and $21,501 in increased catastrophe
reinsurance premiums.


Total Benefits, Losses and Expenses




Total benefits, losses and expenses increased $144,776, or 10%, to $1,627,049
for Twelve Months 2011 from $1,482,273 for Twelve Months 2010. The loss ratio
increased 990 basis points with 710 basis points attributed to $134,881 of
increased reportable catastrophe losses in Twelve Months 2011 compared to Twelve
Months 2010. Reportable loss events for Twelve Months 2011 included Hurricane
Irene, Tropical Storm Lee, wildfires in Texas and severe storms, including
tornados in the southeast. The principal causes of loss for these events were
wind and flood. Reportable loss events for Twelve Months 2010 included Arizona
wind and hailstorms and Tennessee storms. 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. Commissions, taxes, licenses,
and fees decreased $36,869 primarily due to client contract changes which
resulted in lower commission expense. General expenses increased $9,075
primarily due to increased employee benefit expenses and costs associated with
the June 2011 SureDeposit acquisition including associated intangible asset
amortization.



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Assurant Health



Overview



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



                                                            For the Years Ended December 31,
                                                        2012              2011              2010
Revenues:
Net earned premiums and other considerations (4)     $ 1,589,459       $ 1,718,300       $ 1,864,122
Net investment income                                     64,308            45,911            48,540
Fees and other income                                     30,518            34,635            40,133

Total revenues                                         1,684,285         1,798,846         1,952,795

Benefits, losses and expenses:
Policyholder benefits                                  1,174,108         1,271,060         1,302,929
Selling, underwriting and general expenses               421,070           460,646           563,759

Total benefits, losses and expenses                    1,595,178         

1,731,706 1,866,688


Segment income before provision for income taxes          89,107            67,140            86,107
Provision for income taxes                                37,107            26,254            31,233

Segment net income                                   $    52,000       $    40,886       $    54,874

Net earned premiums and other considerations:
Individual Markets:
Individual markets                                   $ 1,178,878       $ 1,251,447       $ 1,375,005
Small employer group markets                             410,581           466,853           489,117

Total                                                $ 1,589,459       $ 1,718,300       $ 1,864,122

Insured lives by product line (5):
Individual Markets:
Individual                                                   663               603               617
Small employer group                                         109               129               144

Total                                                        772               732               761

Ratios:
Loss ratio (1)                                              73.9 %            74.0 %            69.9 %
Expense ratio (2)                                           26.0 %            26.3 %            29.6 %
Combined ratio (3)                                          98.5 %            98.8 %            98.0 %



(1) The loss ratio is equal to policyholder benefits divided by net earned

premiums and other considerations.

(2) The expense ratio is equal to selling, underwriting and general expenses

divided by net earned premiums and other considerations and fees and other

income.

(3) The combined ratio is equal to total benefits, losses and expenses divided by

net earned premiums and other considerations and fees and other income.

(4) As of January 1, 2011, the Company began accruing premium rebates to comply

with the minimum medical loss ratio requirements under the Affordable Care

Act. Rebate payments and accruals are reflected within net earned premiums

and other considerations.

(5) As of January 1, 2011, insured lives consist of all policies, including

    supplemental coverages and self-funded group products, purchased by
    policyholders. Prior periods consisted only of medical policies.




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The Affordable Care Act




Some provisions of the Affordable Care Act have taken effect already, and other
provisions will become effective at various dates before the end of 2014. In
December 2010, HHS issued a number of interim final regulations with respect to
the Affordable Care Act. In December 2011, HHS issued its final regulation
regarding the MLR. In November 2012, HHS issued proposed regulations for 2014
regarding the risk adjustment, reinsurance, and risk corridors programs;
cost-sharing reductions; user fees for the federally-facilitated Exchange;
advance payments of the premium tax credit, a federally-facilitated Small
Business Health Option Program; and the medical loss ratio program. HHS has also
issued various technical corrections and FAQ's. For more information, see
Item 1A, "Risk Factors-Risk related to our industry-Reform of the health care
industry could materially reduce the profitability of certain of our businesses"
in this report.


Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011



Net Income



Segment net income increased $11,114 or 27% to $52,000 for Twelve Months 2012
from $40,886 for Twelve Months 2011. The increase was primarily attributable to
$13,856 (after-tax) of additional investment income from a real estate joint
venture partnership and lower expenses associated with organizational and
operational expense reduction initiatives. Partially offsetting these items were
policy lapses and lower sales of new policies. Twelve Months 2011 results
included a $4,780 (after-tax) reimbursement from a pharmacy services provider.



Total Revenues



Total revenues decreased $114,561, or 6%, to $1,684,285 for Twelve Months 2012
from $1,798,846 for Twelve Months 2011. Net earned premiums and other
considerations from our individual markets business decreased $72,569, or 6%,
due to a decline in traditional major medical policies, partially offset by
increased sales of lower priced supplemental and affordable choice products and
premium rate increases. Net earned premiums and other considerations from our
small employer group business decreased $56,272, or 12%, due to lower sales,
partially offset by premium rate increases. Partially offsetting these declines
was increased net investment income of $18,397, due to income from a real estate
joint venture partnership.


Total Benefits, Losses and Expenses




Total benefits, losses and expenses decreased $136,528, or 8%, to $1,595,178 for
Twelve Months 2012 from $1,731,706 for Twelve Months 2011. Policyholder benefits
decreased $96,952, or 8%, and the benefit loss ratio decreased to 73.9% from
74.0%. The decrease in policyholder benefits was primarily attributable to a
decline in business volume, partially offset by higher loss experience. The
slight decrease in the benefit loss ratio reflects a growing proportion of
business with lower loss ratios, partially offset by higher loss experience on
traditional major medical policies. Selling, underwriting and general expenses
decreased $39,576, or 9%, primarily due to reduced employee-related expenses,
lower technology and service provider costs, and reduced commissions due to
lower sales of traditional major medical policies.



Year Ended December 31, 2011 Compared to the Year Ended December 31, 2010



Net Income



Segment net income decreased $13,988, or 25%, to $40,886 for Twelve Months 2011
from $54,874 for Twelve Months 2010. The decrease was partly attributable to
accrued premium rebates of $27,033 (after-tax) associated with the MLR
requirement included in the Affordable Care Act for our comprehensive health
coverage business. Twelve Months 2011 results include $12,900 (after-tax) of
favorable reserve development relative to 2010 year-end reserves, a $4,780
(after-tax) reimbursement from a pharmacy services provider related



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to prior year activity, reduced expenses associated with organizational and
operational expense initiatives, and lower commissions due to agent compensation
changes and lower sales of new policies. Twelve Months 2010 results included
restructuring charges of $8,721 (after-tax) and a $17,421 (after-tax) benefit
from a reserve release related to a legal settlement.



Total Revenues



Total revenues decreased $153,949, or 8%, to $1,798,846 for Twelve Months 2011
from $1,952,795 for Twelve Months 2010. Net earned premiums and other
considerations from our individual markets business decreased $123,558, or 9%,
due to a decline in traditional individual medical product sales, caused by the
transition to supplemental and affordable choice products and changes in agent
commissions, resulting from the Affordable Care Act. These decreases were
partially offset by premium rate increases and increased sales of supplemental
and affordable choice products. Net earned premiums and other considerations
before rebates from our small employer group business decreased $15,464, or 3%,
due to lower sales and a continued high level of policy lapses, partially offset
by premium rate increases. Twelve Months 2011 included a premium rebate accrual
of $41,589 associated with the MLR requirement included in the Affordable Care
Act for our comprehensive health coverage business. There was no premium rebate
accrual in Twelve Months 2010 as the MLR requirement was not yet in effect.



Total Benefits, Losses and Expenses




Total benefits, losses and expenses decreased $134,982, or 7%, to $1,731,706 for
Twelve Months 2011 from $1,866,688 for Twelve Months 2010. Policyholder benefits
decreased $31,869, or 2%, however, the benefit loss ratio increased to 74.0%
from 69.9%. The decrease in policyholder benefits was primarily attributable to
favorable reserve development relative to 2010 year-end reserves, a decline in
business volume, partially offset by a $26,802 benefit from a reserve release
related to a legal settlement in Twelve Months 2010. The increase in the benefit
loss ratio was primarily attributable to the inclusion of premium rebates in net
earned premiums and other considerations, and a disproportionate decline in
benefits in relation to the decrease in net earned premiums and other
considerations. Selling, underwriting and general expenses decreased $103,113,
or 18%, primarily due to reduced employee-related and advertising expenses and
reduced commissions due to agent compensation changes and lower sales of new
policies.



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Assurant Employee Benefits



Overview


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



                                                            For the Years Ended December 31,
                                                        2012              2011              2010
Revenues:
Net earned premiums and other considerations         $ 1,014,264       $ 1,064,023       $ 1,101,395
Net investment income                                    128,485           129,640           132,388
Fees and other income                                     28,468            25,382            25,152

Total revenues                                         1,171,217         1,219,045         1,258,935

Benefits, losses and expenses:
Policyholder benefits                                    693,067           767,723           766,050
Selling, underwriting and general expenses               390,042           386,072           395,737

Total benefits, losses and expenses                    1,083,109         

1,153,795 1,161,787


Segment income before provision for income taxes          88,108            65,250            97,148
Provision for income taxes                                30,049            22,175            33,596

Segment net income                                   $    58,059       $    43,075       $    63,552

Net earned premiums and other considerations:
By major product grouping:
Group dental                                         $   394,413       $   412,339       $   420,439
Group disability (3)                                     409,757           449,293           488,411
Group life                                               188,246           193,914           191,892
Group vision and supplemental products                    21,848             8,477               653

Total                                                $ 1,014,264       $ 1,064,023       $ 1,101,395

Ratios:
Loss ratio (1)                                              68.3 %            72.2 %            69.6 %
Expense ratio (2)                                           37.4 %            35.4 %            35.1 %



(1) The loss ratio is equal to policyholder benefits divided by net earned

premiums and other considerations.

(2) The expense ratio is equal to selling, underwriting and general expenses

divided by net earned premiums and other considerations and fees and other

income.

(3) 2011 includes $4,936 of single premium on closed blocks of business. For

closed blocks of business we receive a single, upfront premium and in turn we

record a virtually equal amount of claim reserves. We then manage the claims

    using our claim management practices.



Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011



Net Income



Segment net income increased $14,984, or 35%, to $58,059 for Twelve Months 2012
from $43,075 for Twelve Months 2011. Results for Twelve Months 2012 were driven
primarily by favorable loss experience across most major product lines.



Total Revenues



Total revenues decreased 4% to $1,171,217 for Twelve Months 2012 from $1,219,045
for Twelve Months 2011. Excluding $4,936 of single premium transactions in
Twelve Months 2011, Twelve Months 2012 net earned premiums decreased $44,823 or
4%. The decrease in net earned premiums was primarily driven by the loss of two
assumed disability clients which decreased net earned premiums $36,161.



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Total Benefits, Losses and Expenses




Total benefits, losses and expenses decreased 6% to $1,083,109 for Twelve Months
2012 from $1,153,795 for Twelve Months 2011. During Twelve Months 2012
policyholder benefits were reduced $5,061 based on the results of our annual
reserve adequacy studies compared to $10,500 in Twelve Months 2011. Excluding
the impact of the annual reserve adequacy studies, the loss ratio decreased to
68.8% from 73.1%, primarily driven by favorable disability, life and dental loss
experience. The expense ratio increased to 37.4% from 35.4% primarily as a
result of decreased net earned premiums.



Year Ended December 31, 2011 Compared to the Year Ended December 31, 2010



Net Income



Segment net income decreased 32% to $43,075 for Twelve Months 2011 from $63,552
for Twelve Months 2010. Lower results were primarily attributable to less
favorable disability and life insurance loss experience, partially offset by
improved dental insurance experience. Twelve Months 2011 results include a
decrease in the reserve interest discount rate primarily for new long-term
disability claims as well as a $6,630 (after-tax) overall loss and loss
adjustment expense reserve release (amounts are included in both policyholders
benefits and selling, underwriting and general expenses) related to annual
reserve adequacy studies in Twelve Months 2011 compared to $1,829 (after-tax) in
Twelve Months 2010. Twelve Months 2010 general expenses included restructuring
costs of $4,349 (after-tax). Twelve Months 2011 had no restructuring costs.



Total Revenues



Total revenues decreased $39,890 to $1,219,045 for Twelve Months Ended 2011 from
$1,258,935 for Twelve Months Ended 2010. Excluding single premiums, net earned
premiums and other considerations decreased $42,308. The decrease in net earned
premiums and other considerations was primarily driven by the loss of
policyholders as a result of pricing actions on a block of assumed disability
reinsurance business.


Total Benefits, Losses and Expenses




Total benefits, losses and expenses decreased $7,992 to $1,153,795 for Twelve
Months 2011 from $1,161,787 for Twelve Months 2010. During Twelve Months 2011
policyholder benefits were reduced $10,500 based on the results of our annual
reserve adequacy studies compared to $5,758 in Twelve Months 2010. Excluding the
impact of the reserve adequacy studies, the loss ratio increased to 73.1% from
70.1%, primarily driven by less favorable loss experience across our disability
and life insurance products.



Selling, underwriting and general expenses decreased 2% to $386,072 for Twelve
Months 2011 from $395,737 for Twelve Months 2010, however the expense ratio
increased slightly to 35.4% from 35.1% driven by lower net earned premiums.
Twelve Months 2010 included $6,690 in restructuring costs. Twelve Months 2011
had no restructuring costs. In addition, general expenses were $2,644 lower in
Twelve Months 2011 compared with Twelve Months 2010 due to our annual reserve
adequacy studies. Excluding the restructuring costs and the reserve adequacy
adjustment in both years, the expense ratio increased to 35.4% for Twelve Months
2011 from 34.3% for Twelve Months 2010.



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Corporate and Other




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



                                                          For the Years Ended December 31,
                                                       2012              2011             2010
Revenues:
Net investment income                               $   20,327        $   17,147        $  17,873
Net realized gains on investments                       64,353            32,580           48,403
Amortization of deferred gains on disposal of
businesses                                              18,413            20,461           10,406
Fees and other income                                    3,713               305              200

Total revenues                                         106,806            70,493           76,882

Benefits, losses and expenses:
Policyholder benefits                                   (1,061 )           6,474           (2,038 )
Selling, underwriting and general expenses             111,423           102,359          101,830
Interest expense                                        60,306            60,360           60,646

Total benefits, losses and expenses                    170,668           

169,193 160,438


Segment loss before benefit for income taxes           (63,862 )         (98,700 )        (83,556 )
Benefit for income taxes                                (8,804 )        (113,922 )        (24,054 )

Segment net (loss) income                           $  (55,058 )      $   15,222        $ (59,502 )




Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011



Net (Loss) Income



Segment results decreased $70,280 to $(55,058) for Twelve Months 2012 compared
to $15,222 for Twelve Months 2011. This decrease is mainly due to an $80,000
release of a capital loss valuation allowance related to deferred tax assets
during Twelve Months 2011.



Total Revenues



Total revenues increased $36,313, to $106,806 for Twelve Months 2012 compared
with $70,493 for Twelve Months 2011. This increase is primarily due to a $31,773
increase in net realized gains on investments.



Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $1,475 to $170,668 for Twelve Months 2012 compared with $169,193 for Twelve Months 2011. The increase is primarily due to increased employee related benefits and new business investments for areas targeted for growth partially offset by decreased policyholder benefits incurred of $7,535 associated with discontinued businesses.

Year Ended December 31, 2011 Compared to the Year Ended December 31, 2010



Net Income (Loss)



Segment results increased $74,724 to net income of $15,222 for Twelve Months
2011 compared to a net loss of $(59,502) for Twelve Months 2010. This increase
is mainly due to an $80,000 release of a capital loss valuation allowance
related to deferred tax assets during Twelve Months 2011.



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Total Revenues




Total revenues decreased $6,389, to $70,493 for Twelve Months 2011 compared with
$76,882 for Twelve Months 2010. This decrease is primarily due to a decline of
$15,823 in net realized gains on investments partially offset by $10,055 of
increased amortization of deferred gains on disposal of businesses. During 2010
a portion of the deferred gain liability was re-established resulting from
refinements to assumptions associated with policy run-off.



Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $8,755 to $169,193 for Twelve Months 2011 compared with $160,438 for Twelve Months 2010. The increase is primarily attributable to increased claims payable accruals of $6,474 associated with discontinued businesses.



Goodwill Impairment



During 2010, the Company recorded goodwill impairments of $306,381. No goodwill
impairment was recorded during 2012 or 2011. Goodwill accounting guidance
requires that goodwill be tested at least annually for impairment or more
frequently if indicators of impairment exist. Prior to 2011, goodwill could only
be tested for impairment using a two step process. Step 1 of the test identifies
potential impairments at the reporting unit level, which for the Company is the
same as our operating segments, by comparing the estimated fair value of each
reporting unit to its net book value. If the estimated fair value of a reporting
unit exceeds its net book value, there is no impairment of goodwill and Step 2
is unnecessary. However, if the net book value exceeds the estimated fair value,
then Step 1 is failed, and Step 2 is performed to determine the amount of the
potential impairment. Step 2 utilizes acquisition accounting guidance and
requires the fair value calculation of all individual assets and liabilities of
the reporting unit (excluding goodwill, but including any unrecognized
intangible assets). The net fair value of assets less liabilities is then
compared to the reporting unit's total estimated fair value as calculated in
Step 1. The excess of fair value over the net asset value equals the implied
fair value of goodwill. The implied fair value of goodwill is then compared to
the carrying value of goodwill to determine the reporting unit's goodwill
impairment. During 2011, the FASB issued amended-guidance for goodwill and other
intangibles. This guidance provides the option 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, described above. For all reporting units in 2012 and
2010 and for the Assurant Solutions reporting unit in 2011, the Company
performed its goodwill impairment test using the two step process. During 2011,
for the Assurant Specialty Property reporting unit, the Company chose the option
to first perform the qualitative assessment. See "Item 7-Management's Discussion
and Analysis of Financial Condition and Results of Operations-Critical Factors
Affecting Results-Critical Accounting Estimates-Valuation and Recoverability of
Goodwill" and Notes 5 and 10 to the Consolidated Financial Statements contained
elsewhere in this report for more information.



Investments



The Company had total investments of $14,976,318 and $14,026,165 as of
December 31, 2012 and December 31, 2011, respectively. For more information on
our investments see Note 4 to the Consolidated Financial Statements included
elsewhere in this report.



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

As of Fixed Maturity Securities by Credit Quality (Fair Value) December 31, 2012

            December 31, 2011
Aaa / Aa / A                                               $  7,319,006        60.1 %   $  6,620,808        59.1 %
Baa                                                           4,014,606        33.0 %      3,692,709        33.0 %
Ba                                                              542,756         4.5 %        648,817         5.8 %
B and lower                                                     295,270         2.4 %        230,265         2.1 %

Total                                                      $ 12,171,638       100.0 %   $ 11,192,599       100.0 %




Major categories of net investment income were as follows:



                                                     Years Ended December 31,
                                                2012           2011           2010
   Fixed maturity securities                  $ 553,668      $ 565,486      $ 572,909
   Equity securities                             24,771         29,645         33,864

Commercial mortgage loans on real estate 79,108 80,903

   88,894
   Policy loans                                   3,204          3,102          3,248
   Short-term investments                         4,889          5,351          5,259
   Other investments                             54,581         21,326         19,019
   Cash and cash equivalents                     15,323          7,838          5,577

   Total investment income                      735,544        713,651        728,770

   Investment expenses                          (22,416 )      (24,119 )      (25,580 )

   Net investment income                      $ 713,128      $ 689,532      $ 703,190





Net investment income increased $23,596, or 3%, to $713,128 at December 31, 2012
from $689,532 at December 31, 2011. The increase is primarily due to $28,974 of
increased investment income from real estate joint venture partnerships.
Excluding the net investment income from real estate joint venture partnerships,
net investment income decreased $5,378, reflecting lower investment yields.



Net investment income decreased $13,658, or 2%, to $689,532 at December 31, 2011 from $703,190 at December 31, 2010. The decrease is due to lower overall investment yields.

The net unrealized gain position increased to $1,496,027 as of December 31, 2012, compared to $1,074,135 as of December 31, 2011 primarily due to declining U.S. Treasury yields.




As of December 31, 2012, the Company owned $235,998 of securities guaranteed by
financial guarantee insurance companies. Included in this amount was $219,239 of
municipal securities, with a credit rating of A both with and without the
guarantee.



Our states, municipalities and political subdivisions holdings are highly
diversified across the United States and Puerto Rico, with no individual state's
exposure (including both general obligation and revenue securities) exceeding
0.5% of the overall investment portfolio as of December 31, 2012 and
December 31, 2011. At December 31, 2012 and December 31, 2011, the securities
include general obligation and revenue bonds issued by states, cities, counties,
school districts and similar issuers, including $168,705 and $164,347,
respectively, of advance refunded or escrowed-to-maturity bonds (collectively
referred to as "pre-refunded bonds"), which are bonds for which an irrevocable
trust has been established to fund the remaining payments of principal and
interest. As of December 31, 2012 and December 31, 2011, revenue bonds account
for 52% and 51% of the



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holdings, respectively. Excluding pre-refunded bonds, sales tax, highway, water,
fuel sales, transit and miscellaneous (which includes bond banks, finance
authorities and appropriations) provide for 82% and 79% of the revenue sources,
as of December 31, 2012 and December 31, 2011, respectively.



The Company's investments in foreign government fixed maturity securities are
held mainly in countries and currencies where the Company has policyholder
liabilities, which allow the assets and liabilities to be more appropriately
matched. At December 31, 2012, approximately 67%, 15%, and 6% of the foreign
government securities were held in the Canadian government/provincials and the
governments of Brazil and Germany, respectively. At December 31, 2011,
approximately 63%, 13% and 7% of the foreign government securities were held in
the Canadian government/provincials and the governments of Brazil and Germany,
respectively. No other country represented more than 5% of our foreign
government securities as of December 31, 2012 and December 31, 2011.



The Company has European investment exposure in its corporate fixed maturity and
equity securities of $1,054,820 with an unrealized gain of $122,420 at
December 31, 2012 and $868,012 with an unrealized gain of $61,387 at
December 31, 2011. Approximately 28% and 31% of the corporate European exposure
are held in the financial industry at December 31, 2012 and December 31, 2011,
respectively. No European country represented more than 5% of the fair value of
our corporate securities as of December 31, 2012 and December 31, 2011.
Approximately 5% of the fair value of the corporate European securities are
pound and euro-denominated and are not hedged to U.S. dollars, but, held to
support those foreign-denominated liabilities. Our international investments are
managed as part of our overall portfolio with the same approach to risk
management and focus on diversification.



The Company has exposure to sub-prime and related mortgages within our fixed
maturity securities portfolio. At December 31, 2012, approximately 3.3% of our
residential mortgage-backed holdings had exposure to sub-prime mortgage
collateral. This represented approximately 0.2% of the total fixed income
portfolio and 1.0% of the total unrealized gain position. Of the securities with
sub-prime exposure, approximately 15.0% are rated as investment grade. All
residential mortgage-backed securities, including those with sub-prime exposure,
are reviewed as part of the ongoing other-than-temporary impairment monitoring
process.



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



• Level 1 inputs utilize quoted prices (unadjusted) in active markets for

        identical assets or liabilities that the Company can access.




    •   Level 2 inputs utilize other than quoted prices included in Level 1 that

are observable for the asset, either directly or indirectly, for

substantially the full term of the asset. Level 2 inputs include quoted

prices for similar assets in active markets, quoted prices for identical or

similar assets in markets that are not active and inputs other than quoted

prices that are observable in the marketplace for the asset. The observable

        inputs are used in valuation models to calculate the fair value for the
        asset.



• Level 3 inputs are unobservable but are significant to the fair value

measurement for the asset, and include situations where there is little, if

any, market activity for the asset. These inputs reflect management's own

assumptions about the assumptions a market participant would use in pricing

        the asset.



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

The Company's Level 2 securities are valued using various observable market inputs obtained from a pricing service. The pricing service prepares estimates of fair value measurements for our Level 2 securities using proprietary valuation models based on techniques such as matrix pricing which include observable market




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



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



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



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



  •   There are few recent transactions,




  •   Little information is released publicly,




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




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




  •   The magnitude of the bid-ask spread.



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




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



Collateralized Transactions



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



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



As of December 31, 2012 and 2011, our collateral held under securities lending,
of which its use is unrestricted, was $94,729 and $95,221, respectively, and is
included in the consolidated balance sheets under the collateral held/pledged
under securities agreements. Our liability to the borrower for collateral
received was $94,714 and $95,494, respectively, and is included in the
consolidated balance sheets under the obligation under securities agreements.
The difference between the collateral held and obligations under securities
lending is recorded as an unrealized gain (loss) and is included as part of
AOCI. All securities are in an unrealized gain position as of December 31, 2012.
All securities with unrealized losses as of December 31, 2011 had been in a
continuous loss position for twelve months or longer. The Company includes the
available-for-sale investments purchased with the cash collateral in its
evaluation of other-than-temporary impairments.



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

Liquidity and Capital Resources



Regulatory Requirements



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



It is possible that regulators or rating agencies could become more conservative
in their methodology and criteria, including increasing capital requirements for
our insurance subsidiaries which, in turn, could negatively affect our capital
resources. On February 24, 2012, Moody's Investor Services ("Moody's") affirmed
Assurant Inc.'s Senior Debt rating of Baa2, but changed the outlook on this
rating to stable from negative. In addition, Moody's affirmed the financial
strength ratings of Assurant's primary life and health insurance subsidiaries at
A3 but changed the outlook on the ratings of two of our life and health
insurance subsidiaries to stable from negative. A negative outlook remains on
the ratings of Assurant's two other rated life and health subsidiaries due to
concerns about the impact of the Affordable Care Act. On December 11, 2012,
Standard and Poor's ("S&P") revised the outlook on the financial strength
ratings of American Bankers Life Assurance Company of Florida and American
Memorial Life Insurance Company from stable to positive. 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 2013, the maximum amount of dividends
our U.S. domiciled insurance subsidiaries could pay,



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under applicable laws and regulations without prior regulatory approval, is
approximately $524,000. In total, we received dividends or returns of capital,
net of infusions, of $581,908 from our subsidiaries during 2012. We expect 2013
dividends from the operating segments to approximate their earnings subject to
the growth of the businesses, rating agency and regulatory capital requirements
and investment performance.



Liquidity



As of December 31, 2012, we had $781,754 in holding company capital. We use the
term "holding company capital" to represent cash and other liquid marketable
securities held at Assurant, Inc., out of a total of $950,826, that we are not
otherwise holding for a specific purpose as of the balance sheet date, but can
be used for stock repurchases, stockholder dividends, acquisitions, and other
corporate purposes. $250,000 of the $781,754 of holding company capital is
intended to serve as a buffer against remote risks (such as large-scale
hurricanes). Dividends or returns of capital, net of infusions, made to the
holding company from its operating companies were $581,908, $523,881 and
$832,300 for the years ended December 31, 2012, 2011 and 2010, respectively. We
use these cash inflows primarily to pay expenses, to make interest payments on
indebtedness, to make dividend payments to our stockholders, to make subsidiary
capital contributions, to fund acquisitions and to repurchase our outstanding
shares.



In addition to paying expenses and making interest payments on indebtedness, our
capital management strategy provides for several uses of the cash generated by
our subsidiaries, including without limitation, returning capital to
shareholders through share repurchases and dividends, investing in our
businesses to support growth in targeted areas, and making prudent and
opportunistic acquisitions. During 2012, 2011 and 2010 we made share repurchases
and paid dividends to our stockholders of $472,103, $600,314 and $602,568,
respectively.



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



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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 11, 2013, our Board of Directors declared a quarterly dividend of
$0.21 per common share payable on March 11, 2013 to stockholders of record as of
February 25, 2013. We paid dividends of $0.21 per common share on December 10,
2012 to stockholders of record as of November 26, 2012, $0.21 per common share
on September 11, 2012 to stockholders of record as of August 27, 2012, $0.21 per
common share on June 12, 2012 to stockholders of record as of May 29, 2012, and
$0.18 per common share on March 12, 2012 to stockholders of record as of
February 27, 2012.



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 May 14, 2012, our Board of Directors authorized the Company to repurchase up
to an additional $600,000 of its outstanding common stock, making its total
authorization $733,275 at that date. During the year ended December 31, 2012, we
repurchased 10,899,460 shares of our outstanding common stock at a cost of
$402,492, exclusive of commissions. As of December 31, 2012, $502,900 remained
under the total repurchase authorization. The timing and the amount of future
repurchases will depend on market conditions 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 sponsor a qualified pension plan, the ("Assurant Pension Plan") and various
non-qualified pension plans along with a retirement health benefits plan
covering our employees who meet specified eligibility requirements. The reported
expense and liability associated with these plans requires an extensive use of
assumptions which include, but are not limited to, the discount rate, expected
return on plan assets and rate of future compensation increases. We determine
these assumptions based upon currently available market and industry data, and
historical performance of the plan and its assets. The actuarial assumptions
used in the calculation of our aggregate projected benefit obligation vary and
include an expectation of long-term appreciation in equity markets which is not
changed by minor short-term market fluctuations, but does change when large
interim deviations occur. The assumptions we use may differ materially from
actual results due to changing market and economic conditions, higher or lower
withdrawal rates or longer or shorter life spans of the participants.



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


As of January 1, 2012, the Assurant Pension Plan's funded percentage was 126.9% on a PPA calculated basis (based on an actuarial average value of assets compared to the funding target). Therefore, benefit and

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payment restrictions did not occur during 2012. The 2012 funded measure will
also be used to determine restrictions, if any, that can occur during the first
nine months of 2012. Due to the funding status of the Assurant Pension Plan in
2012, no restrictions will exist before October 2013 (the time that the
January 1, 2013 actuarial valuation needs to be completed). Also, based on the
estimated funded status as of January 1, 2013, we do not anticipate any
restrictions on benefits for the remainder of 2013.



The Assurant Pension Plan was under-funded by $107,666 and $125,517 (based on
the fair value of the assets compared to the projected benefit obligation) on a
GAAP basis at December 31, 2012 and 2011, respectively. This equates to an 87%
and 83% funded status at December 31, 2012 and 2011, respectively. The change in
under-funded status is mainly due to favorable investment returns as well as
contributions made to the plan, partially offset by a decrease in the discount
rate used to determine the projected benefit obligation.



The Company's funding policy is to contribute amounts to the plan sufficient to
meet the minimum funding requirements in ERISA, plus such additional amounts as
the Company may determine to be appropriate from time to time up to the maximum
permitted. The funding policy considers several factors to determine such
additional amounts including items such as the amount of service cost plus 15%
of the Assurant Pension Plan deficit and the capital position of the Company.
During 2012, we contributed $50,000 in cash to the Assurant Pension Plan. We
expect to contribute $50,000 in cash to the Assurant Pension Plan over the
course of 2013. See Note 20 to the Consolidated Financial Statements included
elsewhere in this report for the components of the net periodic benefit cost.



The impact of a 25 basis point change in the discount rate on the 2013 projected
benefit expense would result in a change of $2,900 for the Assurant Pension Plan
and the various non-qualified pension plans and $50 for the retirement health
benefit plan. The impact of a 25 basis point change in the expected return on
assets assumption on the 2013 projected benefit expense would result in a change
of $1,600 for the Assurant Pension Plan and the various non-qualified pension
plans and $100 for the retirement health benefits plan.



Commercial Paper Program



Our commercial paper program requires us to maintain liquidity facilities either
in an available amount equal to any outstanding notes from the program or in an
amount sufficient to maintain the ratings assigned to the notes issued from the
program. Our commercial paper is rated AMB-2 by A.M. Best, P-2 by Moody's and
A-2 by S&P. Our subsidiaries do not maintain commercial paper or other borrowing
facilities. This program is currently backed up by a $350,000 senior revolving
credit facility, of which $330,240 was available at December 31, 2012, due to
outstanding letters of credit.



On September 21, 2011, we entered into a four-year unsecured $350,000 revolving
credit agreement ("2011 Credit Facility") with a syndicate of banks arranged by
JP Morgan Chase Bank, N.A. and Bank of America, N.A. The 2011 Credit Facility
replaced the Company's prior three-year $350,000 revolving credit facility
("2009 Credit Facility"), which was entered into on December 18, 2009 and was
scheduled to expire in December 2012. The 2009 Credit Facility terminated upon
the effective date of the 2011 Credit Facility. Due to the termination, the
Company wrote off $1,407 of unamortized upfront arrangement fees. The 2011
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 $350,000 and is available until September 2015,
provided we are in compliance with all covenants. The 2011 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 2011 Credit Facility to $525,000 subject to certain conditions. No bank is
obligated to provide commitments above their current share of the $350,000
facility.



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We did not use the commercial paper program during the twelve months ended December 31, 2012 and 2011 and there were no amounts relating to the commercial paper program outstanding at December 31, 2012 and December 31, 2011. The Company made no borrowings using the 2011 Credit Facility and no loans were outstanding at December 31, 2012. We had $19,760 of letters of credit outstanding under the 2011 Credit Facility as of December 31, 2012.

The 2011 Credit Facility contains restrictive covenants, all of which were met as of December 31, 2011. 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

$3,146,292 plus (b) 50% of consolidated net income for each fiscal

quarter (if positive) ending after June 30, 2011, plus (c) 50% of the net

proceeds of any issuance of Capital Stock or Hybrid Securities received

         after June 30, 2011.



At December 31, 2012, our ratio of debt to total capitalization was 18%, the consolidated Minimum Amount described in (ii) above was $3,512,436 and our actual consolidated adjusted net worth as calculated under the covenant was $4,507,949.

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



Senior Notes



We have two series of senior notes outstanding in an aggregate principal amount
of $975,000. The first series is $500,000 in principal amount, bears interest at
5.63% per year and is due February 15, 2014. The second series is $475,000 in
principal amount, bears interest at 6.75% per year and is due February 15, 2034.



Interest on our Senior Notes is payable semi-annually on February 15 and August 15 of each year. The interest expense incurred related to the Senior Notes was $60,306, $60,360 and $60,646 for the years ended December 31, 2012, 2011 and 2010, respectively. There was $22,570 of accrued interested at December 31, 2012 and 2011, respectively. The Senior Notes are unsecured obligations and rank equally with all of our other senior unsecured indebtedness. The 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.

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The table below shows our recent net cash flows:



                                              For the Years Ended December 31,
                                            2012            2011            2010
       Net cash provided by (used in):
       Operating activities (1)          $  673,215      $  849,633      $  540,313
       Investing activities                (449,883 )      (196,588 )        (8,876 )
       Financing activities                (480,641 )      (636,848 )      (699,473 )

       Net change in cash                $ (257,309 )    $   16,197      $ (168,036 )




(1) Includes effect of exchange rates changes on cash and cash equivalents.

Cash Flows for the Years Ended December 31, 2012, 2011 and 2010.



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 $673,215 and $849,633 for the
years ended December 31, 2012 and 2011, respectively. The decreased operating
activity cash flow is primarily due to increased catastrophe loss payments,
changes in the timing of payments, including commissions and the Company's
defined contribution match, partially offset by increased net written premiums
in our Assurant Solutions and Assurant Specialty Property segments.



Net cash provided by operating activities was $849,633 and $540,313 for the
years ended December 31, 2011 and 2010, respectively. The increased operating
activity cash flow was primarily due to an increase in net written premiums in
our Assurant Solutions and Assurant Specialty Property segments.



Investing Activities:



Net cash used in investing activities was $449,883 and $196,588 for the years
ended December 31, 2012 and 2011, respectively. The increase in cash used in
investing activities is primarily due to increased purchases of fixed maturity
and equity securities.



Net cash used in investing activities was $196,588 and $8,876 for the years
ended December 31, 2011 and 2010, respectively. The increase in cash used in
investing activities is primarily due to the acquisition of SureDeposit during
the second quarter of 2011 and changes in our short-term investments and
commercial mortgage loans on real estate.



Financing Activities:



Net cash used in financing activities was $480,641 and $636,848 for the years
ended December 31, 2012 and 2011, respectively. The decrease in cash used in
financing activities is primarily due to a decrease in the acquisition of common
stock.



Net cash used in financing activities was $636,848 and $699,473 for the years
ended December 31, 2011 and 2010, respectively. The decrease in cash used in
financing activities is primarily due to changes in the tax benefit from
share-based payment arrangements and the change in obligation under securities
lending.



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



                                                            For the Years Ended December 31,
                                                           2012             2011          2010
Security
Interest paid on mandatory redeemable preferred stock
and debt                                                $    60,188       $  60,244     $  60,539
Common stock dividends                                       69,393          67,385        69,618

Total                                                   $   129,581       $ 127,629     $ 130,157





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, 2012, are detailed in the table below by maturity date as of the dates indicated:




                                                             As of December 31, 2012
                                                 Less than  1           1-3              3-5          More than  5
                                 Total               Year              Years            Years             Years
Contractual obligations :
Insurance liabilities (1)     $ 19,906,787      $    2,355,437      $ 1,700,600      $ 1,586,273      $  14,264,477
Debt and related interest        1,676,438              60,188          564,125           64,125            988,000
Operating leases                   111,696              26,184           43,792           23,311             18,409
Pension obligations and
postretirement benefit             632,639              43,742          118,264          112,842            357,791
Commitments:
Investment purchases
outstanding:
Commercial mortgage loans
on real estate                       9,900               9,900                0                0                  0
Liability for unrecognized
tax benefit                         11,446               6,553            4,440              453                  0

Total obligations and
commitments                   $ 22,348,906      $    2,502,004      $ 2,431,221      $ 1,787,004      $  15,628,677




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

    policyholders.




Liabilities for future policy benefits and expenses of $8,513,505 and claims and
benefits payable of $3,960,590 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 approximately $19,760 and $24,946 of letters of credit outstanding as of December 31, 2012 and December 31, 2011, 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.

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