Assurant 10K 2004 Annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ended December 31, 2004

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to

Commission file number 001-31978

Assurant, Inc.

(Exact name of registrant as specified in its charter)


Delaware		39-1126612
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

One Chase Manhattan Plaza, 41st Floor New York, New York (Address of Principal Executive Offices)		10005 (Zip Code)

Registrant’s telephone number, including area code:

(212) 859-7000

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class		Name of Each Exchange on Which Registered

Common Stock, $0.01 Par Value		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o No þ

The aggregate market value of the Common Stock held by non-affiliates of the registrant was $2,420 million at June 30, 2004 based on the closing sale price of $26.38 per share for the common stock on such date as traded on the New York Stock Exchange.

The number of shares of the registrant’s Common Stock outstanding at March 4, 2005 was 139,923,659.

Documents Incorporated by Reference

Certain information contained in the definitive proxy statement for the annual meeting of stockholders to be held on June 2, 2005 (2005 Proxy Statement) is incorporated by reference into Part III hereof.

ASSURANT, INC.

ANNUAL REPORT ON FORM 10-K

For the Fiscal Year Ended December 31, 2004

TABLE OF CONTENTS


Item		Page
Number		Number

PART I
1.	Business		3
2.	Properties		45
3.	Legal Proceedings		45
4.	Submission of Matters to a Vote of Security Holders		46
PART II
5.	Market for Registrant’s Common Equity and Related Stockholder Matters		46
6.	Selected Financial Data		48
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		50
7A.	Quantitative and Qualitative Disclosures About Market Risk		110
8.	Financial Statements and Supplementary Data		113
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		113
9A.	Controls and Procedures		113
9B.	Other Information		113
PART III
10.	Directors and Executive Officers of the Registrant		113
11.	Executive Compensation		114
12.	Security Ownership of Certain Beneficial Owners and Management		114
13.	Certain Relationships and Related Transactions		114
14.	Principal Accountant Fees and Services		114
PART IV
15.	Exhibits and Financial Statement Schedules		114
Signatures			119
EX-10.17: ASSURANT DEFERRED COMPENSATION PLAN
EX-23.1: CONSENT OF PRICEWATERHOUSECOOPERS LLP
EX-24.1: POWER OF ATTORNEY
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION

FORWARD-LOOKING STATEMENTS

Some of the statements under “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report may contain forward-looking statements which reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this report are based upon our historical performance and on current plans, estimates and expectations. The inclusion of this forward looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in this report. We believe that these factors include but are not limited to those described under the subsection entitled “Risk Factors” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any forward-looking statements you read in this report reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, financial condition, growth strategy and liquidity.

PART I


Item 1.	*Business*

Assurant, Inc. (Assurant) is a Delaware corporation, formed in connection with the Initial Public Offering (“IPO”) of its Common Stock, which began trading on the New York Stock Exchange (“NYSE”) on February 5, 2004. Prior to that initial trading date, Fortis, Inc., a Nevada corporation, had formed Assurant and merged into it on February 4, 2004. The merger was executed in order to redomesticate Fortis, Inc. from Nevada to Delaware and to change its name. As a result of the merger, Assurant is the successor to the business operations and obligations of Fortis, Inc.

Prior to the IPO, 100% of the outstanding common stock of Fortis, Inc. was owned indirectly by Fortis N.V., a public company with limited liability incorporated as naamloze vennootschap under Dutch law, and Fortis SA/ NV, a public company with limited liability incorporated as société anonyme/naamloze vennootschap under Belgian law. Following the IPO, Fortis N.V. and Fortis SA/ NV, through a wholly owned subsidiary Fortis Insurance N.V., owned approximately 35% (50,199,130 shares) of the outstanding common stock of Assurant.

On January 21, 2005, Fortis N.V. and Fortis SA/ NV, through a wholly owned subsidiary Fortis Insurance N.V. owned approximately 36% (50,199,130 shares) of the outstanding common stock of Assurant based on the number of shares outstanding that day and sold 27,200,000 of those shares in a secondary offering to the public. Assurant did not receive any of the proceeds from the sale of shares of common stock. Fortis N.V. received all net proceeds from the sale and concurrently sold exchangeable bonds, due January 26, 2008, that are mandatorily exchangeable for their remaining 22,999,130 shares of Assurant. The exchangeable bonds and the shares of Assurant’s common stock into which they are exchangeable have not been and will not be registered under the Securities Act of 1933 (“Securities Act”) and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

In this report, references to the “Company,” “Assurant,” “we,” “us” or “our” refer to (1) Fortis, Inc. and its subsidiaries, and (2) Assurant, Inc. and its subsidiaries after the consummation of the merger described above. References to “Fortis” refer collectively to Fortis N.V. and Fortis SA/ NV. References to our “separation” from Fortis refer to the fact that Fortis reduced its ownership of our common stock in connection with the secondary offering.

Overview

We pursue a differentiated strategy of building leading positions in specialized market segments for insurance products and related services in North America and selected international markets. We provide creditor-placed homeowners insurance, manufactured housing homeowners insurance, debt protection administration, credit insurance, warranties and extended service contracts, individual health and small employer group health insurance, group dental insurance, group disability insurance, group life insurance and pre-funded funeral insurance.

The markets we target are generally complex, have a relatively limited number of competitors and, we believe, offer attractive profit opportunities. In these markets, we leverage the experience of our management team and apply our expertise in risk management, underwriting and business-to-business management, as well as our technological capabilities in complex administration and systems. Through these activities, we seek to generate above-average returns by building on specialized market knowledge, well-established distribution relationships and economies of scale.

As a result of our strategy, we are a leader in many of our chosen markets and products. In our Assurant Solutions business, we have leadership positions or are aligned with clients who are leaders in creditor-placed homeowners insurance based on servicing volume, manufactured housing homeowners insurance based on number of homes built and debt protection administration based on credit card balances outstanding. In our Assurant Health business we were among one of the first companies to offer Medical Savings Accounts (“MSA”) and Health Savings Accounts (“HSA”). In our Assurant Employee Benefits business, we are a

leading writer of group dental plans sponsored by employers based on the number of subscribers and based on the number of master contracts in force. A master contract refers to a single contract issued to an employer that provides coverage on a group basis; group members receive certificates, which summarize benefits provided and serve as evidence of membership. In our Assurant PreNeed business, we are the largest writer of pre-funded funeral insurance measured by face amount of new policies sold. We believe that our leadership positions give us a sustainable competitive advantage in our chosen markets.

We currently have four decentralized operating business segments to ensure focus on critical activities close to our target markets and customers, while simultaneously providing centralized support in key functions. Each operating business segment has its own experienced management team with the autonomy to make decisions on key operating matters. These managers are eligible to receive incentive-based compensation based in part on operating business segment performance and in part on company-wide performance, thereby encouraging strong business performance and cooperation across all our businesses. At the operating business segment level, we stress disciplined underwriting, careful analysis and constant improvement and product redesign. At the corporate level, we provide support services, including investment, asset/liability matching and capital management, leadership development, information technology support and other administrative and finance functions, enabling the operating business segments to focus on their target markets and distribution relationships while enjoying the economies of scale realized by operating these businesses together. Also, our overall strategy and financial objectives are set and continuously monitored at the corporate level to ensure that our capital resources are being properly allocated.

We organize and manage our specialized businesses through four operating business segments:


Operating Business	Principal Products		For the Year Ended
Segment	and Services	Principal Distribution Channels	December 31, 2004

Assurant Solutions			• Total revenues: $2,770 million
Specialty Property	• Creditor-placed homeowners insurance (including tracking services)	• Mortgage lenders and services	• Segment income before income tax: $183 million
	• Manufactured housing homeowners insurance	• Manufactured housing lenders, dealers and vertically integrated builders
Consumer Protection	• Debt protection administration • Credit insurance	• Financial institutions (including credit card issuers) and retailers
	• Warranties and extended service contracts	• Consumer electronics and appliance retailers • Vehicle dealerships
	• Appliances • Automobiles and recreational vehicles • Consumer electronics • Wireless devices


Operating Business	Principal Products		For the Year Ended
Segment	and Services	Principal Distribution Channels	December 31, 2004

Assurant Health			• Total revenues: $2,338 million
Individual Health	• Preferred Provider Organizations (PPO) • Short-term medical insurance • Student medical insurance	• Independent agents • National accounts • Internet	• Segment income before income tax: $240 million
Small Employer Group Health	• PPO	• Independent agents
Assurant Employee Benefits	• Group dental insurance • Employer-paid • Employee-paid • Group disability insurance • Group term life insurance	• Employee benefit advisors • Brokers • DRMS(1)	• Total revenues: $1,456 million • Segment income before income tax: $96 million
Assurant PreNeed	• Pre-funded funeral insurance	• Service Corporation International (SCI) • Independent funeral homes	• Total revenues: $739 million • Segment income before income tax: $51 million


(1)	DRMS refers to Disability Reinsurance Management Services, Inc., one of our wholly owned subsidiaries that provides a turnkey facility to other insurers to write principally group disability insurance.

We also have a Corporate and Other segment, which includes activities of the holding company, financing expenses, net realized gains (losses) on investments, interest income earned from short-term investments held and, prior to 2004, interest income from excess surplus of insurance subsidiaries not allocated to other segments. The Corporate and Other segment also includes the amortization of deferred gains associated with the portions of the sales of Fortis Financial Group (“FFG”) and Long Term Care (“LTC”) sold through reinsurance agreements. See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Corporate and Other.”

Recent Accomplishments

Our business has exhibited strong performance in 2004, which we believe demonstrates the strength of our diversified specialty insurance operating model. We generated higher net income in 2004 than during the comparable period in 2003 and our stockholders’ equity increased by 8% from December 31, 2003 through December 31, 2004 (pro forma to include in the December 31, 2003 stockholders’ equity the $725.5 million capital contribution we received from Fortis in February 2004 in conjunction with our IPO). For the year ended December 31, 2004, we generated total revenues of $7,404 million and net income of $351 million. This was achieved in a period of unprecedented hurricane activity where we incurred substantial claims associated with these storms.

We continued to focus on deploying our capital in an efficient manner. Using cash flow generated from operations as well as capital released as a result of our ongoing effort to consolidate legal entities, we returned capital to our stockholders through both quarterly cash dividends of $0.07 per share and the repurchase of 2.4 million outstanding shares of common stock through December 31, 2004.

We also executed on our strategy of strengthening our existing distribution relationships and adding new partners. For example, we renewed our exclusive health insurance distribution agreement with State Farm,

and expanded our agreement with General Electric signed in 2003 to provide extended service contracts on home appliances.

Our operating segments continue to build their positions in their specialty market niches. In Assurant Solutions, we have seen top-line growth in specialty property, resulting in improved operating results due to improved loss experience when hurricane losses are excluded. Our consumer protection revenues have also grown. Extended service contract revenues in both domestic and international markets as well as international credit insurance revenues have grown as well. This growth has helped to offset the continued run-off of our U.S. credit insurance business. In Assurant Health, individual medical insurance premiums have grown significantly in 2004. Our underwriting strength and pricing discipline, combined with favorable claims development, drove combined ratios in Assurant Health to historical lows in 2004. Additionally, we have seen an increasing percentage of our individual health insurance sales sold in conjunction with HSAs. In Assurant Employee Benefits, we have continued to focus on the attractive employee-paid, or voluntary, market segment. In Assurant PreNeed, we instituted several expense management initiatives to help offset the negative impact of continued low interest rates.

For the year ended December 31, 2004, Assurant Solutions generated total revenues of $2,770 million, versus $2,678 million for the year ended December 31, 2003. Assurant Health generated $2,338 million of total revenues for the year ended December 31, 2004, versus $2,091 million for the year ended December 31, 2003. Assurant Employee Benefits generated $1,456 million of total revenues for the year ended December 31, 2004, versus $1,450 million for the year ended December 31, 2003. Assurant PreNeed generated $739 million in total revenues for the year ended December 31, 2004, versus $723 million for the year ended December 31, 2003.

Competitive Strengths

We believe our competitive strengths include:


	•	Leadership Positions in Specialized Markets;

	•	Strong Relationships with Key Clients and Distributors;

	•	History of Product Innovation and Ability to Adapt to Changing Market Conditions;

	•	Disciplined Approach to Underwriting and Risk Management;

	•	Prudent Capital Management;

	•	Diverse Business Mix and Excellent Financial Strength; and

	•	Experienced Management Team with Proven Track Record and Entrepreneurial Culture.

Leadership Positions in Specialized Markets. We are a market leader in many of our chosen markets. We hold a leading position or are aligned with clients who are leaders in creditor-placed homeowners insurance based on servicing volume, manufactured housing homeowners insurance based on number of homes built and credit insurance and debt protection administration based on credit card balances outstanding. In addition, we are market leaders in group dental plans sponsored by employers based on the number of subscribers and based on the number of master contracts in force, as well as a market leader in pre-funded funeral insurance based on face amount of new policies sold. We seek to participate in markets in which there are a limited number of competitors and that allow us to achieve a market leading position by capitalizing on our market expertise and capabilities in complex administration and systems, as well as on our established distribution relationships. We believe that our leadership positions provide us with the opportunity to generate high returns in these niche markets.

Strong Relationships with Key Clients and Distributors. As a result of our expertise in business-to-business management, we have created strong relationships with our distributors and clients in each of the niche markets we serve. In our Assurant Solutions segment, we have strong long-term relationships in the United States with six out of the ten largest mortgage lenders and servicers based on servicing volume, three out of the six largest manufactured housing builders based on number of homes built, eight out of the ten

largest general purpose credit card issuers based on credit card balances outstanding, and five out of the ten largest consumer electronics and appliances retailers based on combined product sales. Assurant Solutions’ relationships with these distributors and clients average more than ten years. In our Assurant Health segment, we have exclusive distribution relationships with leading insurance companies based on total assets, as well as relationships with independent brokers. Through exclusive distribution relationships with companies such as Insurance Placement Service, Inc. (“IPSI”), a wholly owned subsidiary of State Farm, and United Services Automobile Association (“USAA”), we gain access to a broad distribution network and a significant number of potential customers. In our Assurant PreNeed segment, we distribute our pre-funded funeral insurance products through two distribution channels: the independent channel, which distributes through approximately 2,000 funeral homes and selected third-party general agencies, and our American Memorial Life Insurance Company (“AMLIC”) channel, which distributes through an exclusive relationship with SCI in North America. Our policies are sold by licensed insurance agents or enrollers who in some cases may also be a funeral director. We believe that the strength of our distribution relationships enables us to market our products and services to our customers in an effective and efficient manner that would be difficult for our competitors to replicate.

History of Product Innovation and Ability to Adapt to Changing Market Conditions. We are able to adapt quickly to changing market conditions by tailoring our product and service offerings to the specific needs of our clients. This flexibility has developed, in part, as a result of our entrepreneurial focus and the encouragement of management autonomy at each business segment. By understanding the dynamics of our core markets, we design innovative products and services to seek to sustain profitable growth and market leading positions. For instance, we believe we were one of the first providers of credit insurance to migrate towards fee-based debt protection solutions for our financial institution clients. This has allowed us to meet the evolving needs of our clients. It also has allowed us to continue generating profitable business despite a significant regulatory change that permitted financial institutions to offer debt protection products similar to credit insurance as part of their basic loan agreements with customers without being subject to insurance regulations. Other examples of our innovative products include: warranty products in our property business designed specifically for vertically integrated manufacturers of manufactured homes; specialty products, such as short-term health insurance, to address specific developments in the health insurance market and HSA features in our individual health products, which we were one of the first companies to offer. In addition, we developed our creditor-placed homeowners insurance business when we identified a niche market opportunity.

Disciplined Approach to Underwriting and Risk Management. Our businesses share best practices of disciplined underwriting and risk management. We focus on generating profitability through careful analysis of risks and draw on our experience in core specialized markets. Examples of tools we use to manage our risk include our tele-underwriting program, which enables our trained underwriters to interview individual health insurance applicants over the telephone, as well as our electronic billing service in Assurant Employee Benefits, which enables us to collect more accurate data regarding eligibility of insureds. Also, at Assurant Solutions, in order to align our clients’ interests with ours and to help us to better manage risk exposure, a significant portion of Assurant Solutions’ consumer protection solutions contracts are written on a retrospective commission basis, which permits Assurant Solutions to adjust commissions based on claims experience. Under this commission arrangement, as permitted by law, compensation to the financial institutions and other agents distributing our products is predicated upon the actual losses incurred compared to premiums earned after a specific net allowance to Assurant Solutions. We also continually seek to improve and redesign our product offerings based on our underwriting experience. In addition, we closely monitor regulatory and market developments and adapt our approach as we deem necessary to achieve our underwriting and risk management goals. In Assurant Health, for example, we have exited states in which we were not achieving acceptable profitability and have re-entered states where the insurance environments have become more favorable. We are focused on loss containment, and we purchase reinsurance as a risk management tool to diversify risk and protect against unexpected events, such as catastrophes. We believe that our disciplined underwriting and risk management philosophy have enabled us to realize above average financial returns while focusing on our strategic objectives.

Prudent Capital Management. We focus on generating above-average returns on a risk-adjusted basis from our operating activities. We invest capital in our operating business segments when we identify attractive profit opportunities in our target markets. To the extent that we believe we can achieve, maintain or improve on leadership positions in these markets by deploying our capital and leveraging our expertise and other competitive advantages, we have done so with the expectation of generating high returns. When expected returns have justified continued investment, we have reinvested cash from operations into enhancing and growing our operating business segments through the development of new products and services, additional distribution relationships and other operational improvements. In addition, when we have identified external opportunities that are consistent with these objectives, we have acquired businesses, portfolios, distribution relationships, personnel or other resources. For example, we acquired Protective Life Corporation’s Dental Benefits Division (“DBD”) in December 2001. Finally, our management has consistently taken a disciplined approach towards withdrawing capital when businesses are no longer anticipated to meet our expectations. For example, we have exited or divested a number of operations including our LTC division, which was sold to John Hancock in 2000 and our FFG division, which was sold to The Hartford Financial Service Group Inc. (“The Hartford”) in 2001. We believe we have benefited from having the discipline and flexibility to deploy capital opportunistically and prudently to maximize returns to our stockholders.

Diverse Business Mix and Excellent Financial Strength. We have four operating business segments across distinct areas of the insurance market. These businesses are generally not affected in the same way by economic and operating trends, which we believe allows us to maintain a greater level of financial stability than many of our competitors across business and economic cycles. In addition, as of December 31, 2004, we had $24,504 million of total assets, including separate accounts, and $3,635 million of stockholders’ equity. Our domestic rated operating insurance subsidiaries have financial strength ratings of A (“Excellent”) or A- (“Excellent”) from A.M. Best, six of our domestic operating insurance subsidiaries have financial strength ratings of A2 (“Good”) or A3 (“Good”) from Moody’s and seven of our domestic operating insurance subsidiaries have financial strength ratings of A (“Strong”) or A- (“Strong”) from Standard and Poors (“S&P”). We employ a conservative investment policy and our portfolio primarily consists of high grade fixed income securities. As of December 31, 2004, we had $12,148 million of investments, consisting primarily of investment grade bonds with an average rating of “A”. We believe our solid capital base and overall financial strength allow us to distinguish ourselves from our competitors and continue to enable us to attract clients that are seeking long-term financial stability.

Experienced Management Team with Proven Track Record and Entrepreneurial Culture. We have a talented and experienced management team both at the corporate level and at each of our business segments.

Our management team is led by our President and Chief Executive Officer, J. Kerry Clayton, who has been with our Company or its predecessors for 34 years. Our senior officers have an average tenure of approximately 21 years with our Company and close to 26 years in the insurance and related risk management business. Our management team has successfully managed our business and executed on our specialized niche strategy through numerous business cycles and political and regulatory challenges. Our management team also shares a set of corporate values and promotes a common corporate culture that we believe enables us to leverage business ideas, risk management expertise and focus on regulatory compliance across our businesses. At the same time, we reward and encourage entrepreneurship at each business segment, accomplished in part by our long history of utilizing performance-based compensation systems.

Growth Strategy

Our objective is to achieve superior financial performance by enhancing our leading positions in our specialized niche insurance and related businesses. We intend to achieve this objective by continuing to execute the following strategies in pursuit of profitable growth:


	•	Enhance Market Position in Our Business Lines;

	•	Develop New Distribution Channels and Strategic Alliances;


	•	Deploy Capital and Resources to Maintain Flexibility and Establish or Enhance Market Leading Positions;

	•	Maintain Disciplined Pricing Approach; and

	•	Continue to Manage Capital Prudently.

Enhance Market Position in Our Business Lines. We have leading market positions in several of our business lines. We have been selective in developing our product and service offerings and will continue to focus on providing products and services to those markets that we believe offer attractive growth opportunities. We will also seek to continue penetrating our target markets and expand our market positions by developing and introducing new products and services that are tailored to the specific needs of our clients. For example, we are developing products that are targeted to purchasers of recreational vehicles, cell phones and other consumer products. In addition, we will continue to market our products to our existing client base and seek to identify clients in new target markets such as Brazil, Mexico, Argentina, Germany and other countries with emerging middle class populations.

Develop New Distribution Channels and Strategic Alliances. We have a strong, multi-channel distribution network already in place with leading market participants. These relationships have been critical to our market penetration and growth. We will continue to be selective in developing new distribution channels as we seek to expand our market share, enter new geographic markets and develop new niche businesses. For example, we have entered into a strategic alliance with GE Consumer Products, which has enabled us to sell and administer extended service contracts for consumer electronics, major appliances and other consumer goods to General Electric’s customers.

Deploy Capital and Resources to Maintain Flexibility and Establish or Enhance Market Leading Positions. We seek to deploy our capital and resources in a manner that provides us with the flexibility to grow internally through product development, new distribution relationships and investments in technology, as well as to pursue acquisitions. As we expand through internal growth and acquisitions, we intend to leverage our expertise in risk management, underwriting and business-to-business management, as well as our technological capabilities in running complex administration systems and support services.

Maintain Disciplined Pricing Approach. We intend to maintain our disciplined pricing approach by seeking to focus on profitable products and markets and by pursuing a flexible approach to product design. We continuously evaluate the profitability of our products, and we will continue to pursue pricing strategies and adjust our mix of businesses by geography and by product so that we can maintain attractive pricing and margins. We seek to price our products at levels in order to achieve our target profit objectives.

Continue to Manage Capital Prudently. We intend to manage our capital prudently relative to our risk exposure to maximize profitability and long-term growth in stockholder value. Our capital management strategy is to maintain financial strength through conservative and disciplined risk management practices. We do this through product design, strong underwriting and risk selection and prudent claims management and pricing. In addition, we will maintain our conservative investment portfolio management philosophy and properly manage our invested assets in order to match the duration of our insurance product liabilities. We will continue to manage our business segments with the appropriate level of capital required to obtain the ratings necessary to operate in their markets and to satisfy various regulatory requirements. We will also continue to evaluate ways to reduce costs in each of our business lines, including by streamlining the number of legal entities through which we operate.

Operating Business Segments

Our business is comprised of four operating business segments: Assurant Solutions; Assurant Health; Assurant Employee Benefits; and Assurant PreNeed. We also have a Corporate and Other segment. Our

business segments and the related net earned premiums and other considerations and fees and other income and segment income before income tax generated by those segments are as follows for the periods indicated:

Net Earned Premiums and Other Considerations and

Fees and Other Income by Business Segment


			For the Year Ended					For the Year Ended
			December 31, 2004					December 31, 2003

					Percentage					Percentage
			$ (In Millions)		of Total			$ (In Millions)		of Total

Assurant Solutions:
	Specialty Property		$	809		12	%	$	765		12	%
	Consumer Protection			1,776		27			1,726		27

		Total Assurant Solutions		2,585		39			2,491		39
Assurant Health:
	Individual			1,243		19			1,060		17
	Small Employer Group			1,027		15			982		15

		Total Assurant Health		2,270		34			2,042		32
Assurant Employee Benefits				1,306		19			1,310		21
Assurant PreNeed				533		8			535		8
Corporate and Other				2		—			11		—

	Total Business Segments		$	6,696		100	%	$	6,389		100	%

Segment Income (Loss) Before Income Tax by Business Segment


		For the Year Ended						For the Year Ended
		December 31, 2004						December 31, 2003

					Percentage						Percentage
		$ (In Millions)			of Total			$ (In Millions)			of Total

Assurant Solutions		$	183			34	%	$	189			73	%
Assurant Health			240			45			185			71
Assurant Employee Benefits			96			18			96			37
Assurant PreNeed			51			10			55			21
Corporate and Other			(34	)		(7	)		(265	)		(102	)

	Total Business Segments	$	536			100	%	$	260			100	%

The amount of our total revenues, segment income before and after income tax and total assets by segment and the amount of our revenues and long-lived assets by geographic region is set forth in Note 21 to our consolidated financial statements.


	*Assurant Solutions*

Assurant Solutions, which we began operating with the acquisition of American Security Group in 1980, has leadership positions or is aligned with clients who are leaders in creditor-placed homeowners insurance and related mortgage tracking services based on servicing volume, manufactured housing homeowners insurance based on number of homes built and debt protection administration based on credit card balances outstanding. We develop, underwrite and market our specialty insurance products and services through collaborative relationships with our clients (financial institutions, mortgage lenders and servicers, retailers, manufactured housing and automobile dealers, utilities and other entities) to their customers. We serve our clients throughout North America, the Caribbean and selected countries in South America and Europe.

Our principal business lines within our Assurant Solutions segment have experienced growth in varying degrees. Growth in premiums in the homeowners market has been driven by increased home purchase activity

due to the low interest rate environment, appreciation in home values, an increasing percentage of the population purchasing homes and mortgage industry consolidation. We have also experienced growth in our extended service contract and international businesses due to the acquisition of new clients as well as the expansion of our relationships with our existing clients. The manufactured housing market has been more challenging because of a more restrictive lending environment with fewer lenders extending credit and increasingly strict underwriting standards being applied since the late 1990’s. Finally, the domestic consumer credit insurance market has been contracting due to an adverse regulatory environment; however, this decline has been offset somewhat by growth in the debt protection market. This adverse regulatory environment has included, in the last few years, many state regulatory interpretations that impose rigorous agent licensing requirements for employees of lenders who offer credit insurance products as well as federal legislation which dissuades, and various state laws that either dissuade or prohibit, financial institutions from financing single premium credit or other credit insurance on consumer or home loans secured by real estate.

In Assurant Solutions, we provide specialty property and consumer protection products and services. In our specialty property solutions division, our strategy is to further develop our creditor-placed homeowners and manufactured housing homeowners insurance products and related services in order to maintain our leadership position or relationships with clients who are leaders and to gain market share in the mortgage and manufactured housing industries, as well as to develop our renters’ insurance product line. Renters’ insurance generally provides coverage for the contents of a renter’s home or apartment and for liability. In our consumer protection solutions division, we intend to continue to focus on being a low-cost provider of debt protection administration services, to leverage our administrative infrastructure with our large customer base clients and to manage the switch from credit insurance programs to debt protection programs in the United States. In addition, our consumer protection solutions division offers a variety of warranties and extended service contracts on consumer electronics, personal computers, appliances and vehicles.

The following table provides net earned premiums and other considerations and fees and other income for Assurant Solutions for the periods indicated:


				For the Year Ended
				December 31,

				2004		2003		2002

				(In millions)
Net earned premiums and other considerations:
	Specialty Property			$	769	$	733	$	552
	Consumer Protection				1,680		1,629		1,525

		Total			2,449		2,362		2,077
Fees and other income					136		129		119

			Total	$	2,585	$	2,491	$	2,196


	Products and Services

Specialty Property Solutions. We underwrite a variety of creditor-placed and voluntary homeowners insurance as well as property coverages on manufactured housing, specialty automobiles, including antique automobiles, recreational vehicles, including motorcycles and watercraft, and leased and financed equipment. We also offer complementary programs such as flood insurance, renters’ insurance and various other property coverages. We are a leading provider of creditor-placed and other collateral protection insurance programs based on number of loans serviced. These other collateral protection insurance programs may include those that protect a lender’s interest in homes, manufactured homes and automobiles. We also offer administration services for some of the largest mortgage lenders and servicers, manufactured housing lenders, dealers and vertically integrated builders and equipment leasing institutions in the United States. Many of our products and services are sold in conjunction with the sale or lease of the underlying property, vehicle or equipment by our clients. Our market strategy is to establish relationships with institutions who are leaders in their chosen

markets and therefore can effectively and efficiently distribute our products and services to large customer bases.

The homeowners insurance product line is our largest line in the specialty property solutions division and accounted for approximately 17.1% of Assurant Solutions’ net earned premiums and other considerations for the year ended December 31, 2004. The primary program within this line is our creditor-placed homeowners insurance. Creditor-placed homeowners insurance generally consists of fire and dwelling insurance that we provide to ensure collateral protection to a mortgage lender in the event that a homeowner fails to purchase or renew homeowners insurance on a mortgaged dwelling. In our typical arrangements with our mortgage lender and servicer clients, we agree that we will monitor the client’s mortgage loan portfolio over time to verify the existence of homeowners insurance protecting the lender’s interest in the underlying properties. We have developed a proprietary insurance tracking and administration process to verify the existence of insurance on a mortgaged property. In situations where such mortgaged property does not have appropriate insurance and after notification to the mortgage holder of the failure to have such insurance, we issue creditor-placed insurance policies to ensure the mortgaged property is protected.

We also provide fee-based services to our mortgage lender and servicer clients in the creditor-placed homeowners insurance administration area, which services are complementary to our insurance products. Our ability to offer these services is a critical factor in establishing relationships with our clients. The vast majority of our mortgage lender and servicer clients outsource their insurance processing to us. These fee-based services include receipt of the insurance-related mail, matching of insurance information to specific loans, payment of insurance premiums on escrowed accounts, insurance-related customer service, loss draft administration and other related services. Loss drafts refers to the payment of insurance proceeds for a claim resulting from a loss to insured mortgage property.

The second largest specialty property line in the specialty property solutions division is homeowners insurance for owners of manufactured homes, which accounted for approximately 8.6% of Assurant Solutions’ net earned premiums and other considerations for the year ended December 31, 2004. We primarily distribute our manufactured housing insurance programs utilizing three marketing channels. Our primary channel is the nation’s leading manufactured housing retailers based on number of homes built. Through our proprietary premium rating technology, which is integrated with our clients’ sales process, we are able to offer our property coverages at the time the home is being sold, thus enhancing our ability to penetrate the new home point-of-sale market place. We also offer our programs to independent specialty agents who distribute our products to individuals subsequent to new home purchases. Finally, we perform the collateral tracking, homeowners insurance placement and administration services for these leading manufactured housing lending organizations. Through these collaborative relationships, we place our homeowners coverage on the manufactured home in the event that the homeowner fails to obtain or renew homeowners coverage on the home. In a typical arrangement with a manufactured housing lending organization, we agree to monitor the organization’s portfolio of loans over time to verify the existence of homeowners insurance protecting the organization’s interest in the underlying manufactured homes.

We also provide voluntary homeowners insurance and voluntary manufactured housing homeowners insurance, which generally provide comprehensive coverage for the structure, contents and liability, as well as coverage for floods.

Consumer Protection Solutions. We offer a broad array of credit insurance programs, debt protection services and product warranties and extended service contracts, all of which are consumer-related, both domestically and in selected international markets. Consumer protection products and services accounted for approximately 68.6% of Assurant Solutions’ net earned premiums and other considerations for the year ended December 31, 2004. Credit insurance and debt protection programs generally offer a consumer a convenient option to protect a credit card or installment loan in the event of a disability, unemployment or death so that the amount of coverage purchased equals the amount of outstanding debt. Under the credit insurance program, the loan or credit card balance is paid off in the case of death and, in the case of unemployment or disability, payments are made on a loan until the covered holder is employed again or medically able to return to work. Under the terms and conditions of a debt protection agreement, the monthly interest due from a

customer may be waived or the monthly payments may be paid for a covered life event, such as disability, unemployment or family leave. Most often in the case of the death of a covered account holder, the debt is extinguished under the debt protection program. Coverage is generally available to all consumers without the underwriting restrictions that apply to term life insurance. Term life insurance is life insurance written for a specified period and under which no cash value is generally available on surrender, such as medical examinations and medical history reports. We are the exclusive provider of debt protection administration services and credit insurance for eight of the ten largest general purpose credit card issuers based on credit card balances outstanding.

Almost all of the largest credit card issuing institutions in the United States have switched from offering credit insurance to their credit card customers to offering their own banking-approved debt protection programs. Assurant Solutions has been able to maintain all of its major credit card clients as they switched from our credit insurance programs to their debt protection programs. We earn fee income rather than net earned premiums from our debt protection administration services. In addition, margins are lower in debt protection administration than in traditional credit insurance programs. However, because debt protection is not an insurance product, certain costs, such as regulatory costs and costs of capital, are expected to be eliminated as the transition from credit insurance to debt protection administration services continues. The fees from debt protection administration do not fully compensate for the decrease in credit insurance premiums. In addition, we continue to provide credit insurance programs for many leading retailers, consumer finance companies and other institutions who are involved in consumer lending transactions. For the year ended December 31, 2004 compared to the year ended December 31, 2003, our net earned premiums in the U.S. credit insurance business decreased by approximately $56.7 million while debt protection fee income increased by $5.1 million. However, the decrease in credit insurance net earned premiums is not analogous to the increase in debt protection fee income because in the credit insurance business we bear insurance risk and pay claims, whereas in the debt protection business we bear no insurance risk and we collect fees for the administrative services we render.

We also underwrite, and provide administration services on, warranties and extended service contracts on appliances, consumer electronics, including personal computers, cellular phones and other wireless devices, and vehicles, including automobiles, recreational vehicles and boats. Our strategy is to provide our clients with all aspects of the warranty or extended service contract, including: program design, marketing strategy, technologically advanced administration, claims handling and customer service. We believe that we maintain a differentiated position in the marketplace as a provider of both the required administrative infrastructure and insurance underwriting capabilities.

On September 26, 2003, Assurant Solutions entered into an agreement with General Electric to become the obligor and insurer of all extended service contracts issued directly by entities of GE Consumer Products and their clients. In addition, Assurant Solutions has become the administrator of service contracts covering personal computer products as well as a variety of lawn and garden products.


	Marketing and Distribution

Assurant Solutions markets its insurance programs and administration services directly to large financial institutions, mortgage lenders and servicers, credit card issuers, finance companies, automobile retailers, consumer electronics retailers, manufactured housing lenders, dealers and vertically integrated builders and other institutions.

Assurant Solutions enters into exclusive and other distribution agreements, typically with terms of one to five years, and develops interdependent systems with its clients that permit Assurant Solutions’ information systems to interface with its clients’ systems in order to exchange information in a seamless and integrated manner. Through its long-standing relationships, Assurant Solutions has access to numerous potential policyholders and, in collaboration with its clients can tailor its products to suit various market segments. Assurant Solutions maintains a dedicated sales force that establishes and maintains relationships with its clients. Assurant Solutions has a multiple step business development process that is employed by its direct sales force. This multiple step business development process is a sales methodology for contacting, negotiating

and consummating business relationships with new clients and enhancing business relationships with existing clients. Assurant Solutions maintains a specialized consumer acquisition marketing services group that manages its direct marketing efforts on behalf of its clients.

In the United States, we have strong distribution relationships with six out of the ten largest mortgage lenders and servicers based on servicing volume, four out of the seven largest manufactured housing builders based on number of homes built, eight out of the ten largest general purpose credit card issuers based on credit card balances outstanding and five out of the ten largest consumer electronics and appliances retailers based on combined product sales, with an average relationship of at least ten years.


	Underwriting and Risk Management

We, along with Assurant Solutions’ predecessors, have over 50 years of experience in providing specialty insurance programs and therefore maintain extensive proprietary actuarial databases and catastrophe models. We believe these databases and catastrophe models enable us to better identify and quantify the expected loss experience of particular products and are employed in the design of our products and the establishment of rates.

We have a disciplined approach to the management of our property product lines. We monitor pricing adequacy on a product by region, state, risk and producer. Subject to regulatory considerations, we seek to make timely commission, premium and coverage modifications where we determine them to be appropriate. In addition, we maintain a segregated risk management area for property exposures whose emphasis includes catastrophic exposure management, reinsurance purchasing and analytical review of profitability based on various catastrophe models. We do not underwrite in our creditor-placed homeowners insurance line, as our contracts with our clients require that we automatically issue these policies, after notice, when a policyholder’s homeowners policy lapses or is terminated.

A distinct characteristic of our credit insurance programs is that the majority of these products have relatively low exposures. This is because policy size is equal to the size of the installment loan or credit card balance. Thus, loss severity for most of this business is low relative to other insurance companies writing more traditional lines of insurance. For those product lines where there is exposure to catastrophes (for example, our homeowners policies), we monitor and manage our aggregate risk exposure by geographic area and have entered into reinsurance treaties to manage our exposure to these types of events.

Also, a significant portion of Assurant Solutions’ consumer protection solutions contracts are written on a retrospective commission basis, which permits Assurant Solutions to adjust commissions based on claims experience. Under this commission arrangement, as permitted by law, compensation to the financial institutions and other clients is predicated upon the actual losses incurred compared to premiums earned after a specific net allowance to Assurant Solutions, which we believe aligns our clients’ interests with ours and helps us to better manage risk exposure.

In Assurant Solutions, our claims processing is automated and combines the efficiency of centralized claims handling, customer service centers and the flexibility of field representatives. This flexibility adds savings and efficiencies to the claims-handling process. Our claims department also provides automated feedback to help with risk assessment and pricing. In our specialty property solutions division, we complement our automated claims processing with field representatives who manage the claims process on the ground where and when needed.


	*Assurant Health*

Assurant Health, which we began operating in 1978, is a writer of individual and short-term major medical health insurance. We also provide small employer group health insurance to employer groups primarily of two to 50 employees in size, and health insurance plans to full-time college students. We serve more than 1.1 million people throughout the United States. We were one of the first companies to offer the MSA feature as part of our individual health products and, due to the enactment of the Medicare Prescription and Modernization Act (“The Act”), effective January 1, 2004, we began to offer an HSA feature instead of

the MSA feature. HSAs are tax-sheltered savings accounts earmarked for medical expenses and are established in conjunction with one of our qualified high deductible health plans.

We expect growth in the health insurance market to be driven by inflation and increases in the cost of providing medical care as well as growth in demand for individual and small group medical products. We generally expect medical cost inflation to be a principal driver of growth in this market; however, reduced funding of health insurance by employers and the increasing attractiveness and flexibility of MSAs could create opportunities for the individual medical insurance market to expand. We believe that the number of persons covered by individually purchased health insurance as well as the number of small employer groups in the United States will increase primarily as a result of the recently passed The Act, which includes a provision for HSAs that we believe will increase health insurance options available to consumers and make health insurance more affordable.

At Assurant Health, we intend to continue to concentrate on developing our product capabilities in the individual health insurance market. From 2000 through 2004, we increased the relative percentage of individual health insurance products to our total health insurance products from approximately 30% of premium dollars to approximately 55% of premium dollars. We have a variety of distribution relationships focused on the individual health insurance market. We seek to maintain the lowest combined ratio of any of our major competitors serving the health care financing needs of individuals, families and small employer groups. We have made progress in achieving this goal and believe we currently have one of the lowest combined ratios in our industry based on the reported results of publicly-traded managed care and health insurance companies as of September 30, 2004.

The following table provides net earned premiums and other considerations, fees and other income and other operating data for Assurant Health for the periods and as of the dates indicated:


				For the Year Ended December 31,

				2004			2003			2002

				(In millions except membership data)
Net earned premiums and other considerations:											��
	Individual			$	1,215		$	1,036		$	880
	Small employer group				1,016			973			954

		Total			2,231			2,009			1,834
	Fees and other income				39			33			23

			Total	$	2,270		$	2,042		$	1,857

Operating statistics:
	Loss ratio(1)				63.8	%		65.6	%		66.6	%
	Expense ratio(2)				29.7	%		28.9	%		29.4	%
	Combined ratio(3)				92.4	%		93.3	%		95.2	%
Membership by product line (in thousands):
	Individual				782			761			670
	Small employer group				333			376			355

		Total membership			1,115			1,137			1,025


(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.


	Products and Services

Individual Health Insurance Products. Assurant Health’s individual health insurance products are sold to individuals, primarily between the ages of 18 and 64 years, and their families who do not have employer-sponsored coverage. Due to increasingly stringent federal and state restrictions relating to insurance policies sold directly to individuals, we emphasize the sale of individual products through associations and trusts that act as the master policyholder for such products. Our association and trust products offer greater flexibility in pricing, underwriting and product design compared to products sold directly to individuals on a true individual policy basis.

Substantially all of the individual health insurance products we sell are PPO plans, which offer the member the ability to select any health care provider, with benefits reimbursed at a higher level when care is received from a participating network provider. Coverage is typically subject to co-payments or deductibles and coinsurance, with member cost sharing for covered services limited by lifetime policy maximums of $2 million or $3 million, with options to purchase between $6 million and $8 million. Product features often included in these plans are inpatient pre-certification and benefits for preventative services. These products are individually underwritten taking into account the member’s medical history and other factors, and consist primarily of major medical insurance that renews on an annual basis. The remaining products we sell are indemnity, or fee-for-service, plans. Indemnity plans offer the member the ability to select any health care provider for covered services.

At December 31, 2004 and December 31, 2003, we had total in force medical policies of 322,300 and 306,400, respectively, covering approximately 649,000 and 613,000 individuals, respectively. Approximately 21% of the members covered by individual health insurance policies we sold in 2003 included an MSA and approximately 37% of the members covered by individual health insurance policies we sold in the year ended December 31, 2004 were sold in conjunction with an HSA.

Assurant Health markets additional products to the individual market: short-term medical insurance and student health coverage plans. The short-term medical insurance product is designed for individuals who are between jobs or seeking interim coverage before their major medical coverage becomes effective. Short-term medical insurance products are generally sold to individuals with gaps in coverage for six months or less. Student health coverage plans are medical insurance plans sold to full-time college students who are not covered by their parents’ health insurance, are no longer eligible for dependant coverage or are seeking a more comprehensive alternative to a college-sponsored plan.

Small Employer Health Insurance Products. Our small employer market primarily includes companies with two to 50 employees, although larger employer coverage is available. Our average group size, as of December 31, 2004, was approximately five employees.

Substantially all of the small employer health insurance products that we sold in 2004 and 2003 were PPO products. At December 31, 2004 and December 31, 2003, we had total in force medical certificates of 182,500 and 204,000, respectively, covering approximately 333,000 and 376,000 individuals, respectively. The number of small employer groups as of December 31, 2004 and December 31, 2003 was approximately 33,900 and 37,700, respectively.

We offer Health Reimbursement Accounts, which are employer-funded accounts provided to employees for reimbursement of qualifying medical expenses. We also offer certain ancillary products to meet the demands of small employers for life insurance, short-term disability insurance and dental insurance. In addition, beginning in January 2004, we began offering HSA products to individuals and small employer groups.


	Marketing and Distribution

Our health insurance products are principally marketed to an extensive network of independent agents by Assurant Health distributors. Approximately 165,000 agents had access to Assurant Health products during 2004. We also market our products to individuals through a variety of exclusive and non-exclusive national account relationships and direct distribution channels. In addition, we market our products through NorthStar

Marketing, a wholly owned affiliate that proactively seeks business directly from independent agents. Since 2000, Assurant Health has had an exclusive national marketing agreement with IPSI, a wholly owned subsidiary of State Farm, pursuant to which IPSI captive agents market Assurant Health’s individual health products. Captive agents are representatives of a single insurer or group of insurers who are obligated to submit business only to that insurer, or at a minimum, give that insurer first refusal rights on a sale. The term of this agreement with IPSI will expire in June 2008, but may be extended if agreed to by both parties. In addition, Assurant Health has an exclusive distribution relationship with USAA to market Assurant Health’s individual health products. The agreement that provides for our arrangement with USAA terminates in July 2005, but may be extended for a one-year period if agreed to by both parties. All of these arrangements have four-year terms from their commencement dates and are generally terminable upon bankruptcy or similar proceeding or a breach of a material provision by either party. Additionally, some of these arrangements permit termination after a specified notice period. We also have a solid relationship with Health Advocates Alliance (“HAA”), the association through which we provide many of our individual health insurance products through Assurant Health’s agreement with HAA’s administrator National Administration Company (“NAC”), Inc. The term of this agreement with NAC will expire in September 2006, but will be automatically extended for an additional two-year term unless prior notice of a party’s intent to terminate is given to the other party. Assurant Health also has had a long-term relationship with Rogers Benefit Group, a national marketing organization through which we offer our products through 60 of their offices. Short-term medical insurance and student health coverage plans are also sold through the Internet by Assurant Health and numerous direct writing agents.


	Underwriting and Risk Management

Assurant Health’s underwriting and risk management capabilities include pricing discipline, policy underwriting, renewal optimization, development and retention of provider networks and claims processing.

In establishing premium rates for our health care plans, we use underwriting criteria based upon our accumulated actuarial data, with adjustments for factors such as claims experience and member demographics to evaluate anticipated health care costs. Our pricing considers the expected frequency and severity of claims and the costs of providing the necessary coverage, including the cost of administering policy benefits, sales and other administrative costs. State rate regulation significantly affects pricing. Our health insurance operations are subject to a variety of legislative and regulatory requirements and restrictions covering a range of trade and claim settlement practices. State insurance regulatory authorities have broad discretion in approving a health insurer’s proposed rates. In addition, Health Insurance Protability and Accountability Act of 1996 (“HIPAA”) requires certain guaranteed issuance and renewability of health insurance coverage for individuals and small employer groups and limits exclusions based on existing conditions.

In our individual health insurance business, we medically underwrite our applicants and have implemented programs to improve our underwriting process. These include our tele-underwriting program, which enables individual insurance applicants to be interviewed over the telephone by trained underwriters. Gathering information directly from prospective clients over the telephone greatly reduces the need for costly and time-consuming medical exams and physician reports. We believe this approach leads to lower costs, improved productivity, faster application processing times and improved underwriting information. Our individual underwriting considers not only an applicant’s medical history, but also lifestyle factors such as avocations and alcohol and drug and tobacco use. Our individual health insurance products generally permit us to rescind coverage if an insured has falsified his or her application.

Assurant Health offers a broad choice of PPO network options in each of its markets and enrolls members in the network that Assurant Health believes reduces our price paid for health care services while providing high quality care. Assurant Health enrolls indemnity customers in selected PPO networks to obtain discounts on provider services that would otherwise not be available. In situations where a customer does not obtain services from a contracted provider, Assurant Health applies various usual and customary fees, which limit the amount paid to providers within specific geographic areas.

Provider network contracts are a critical dimension in controlling medical costs since there is often a significant difference between a network negotiated rate and the non-discounted rate. To this end, we retain provider networks through a variety of relationships, which include leased networks that contract directly with individual health care providers, proprietary contracts and Private Health Care Systems, Inc. (PHCS). PHCS is a national private company that maintains a provider network, which consisted of approximately 4,200 hospitals and approximately 450,000 physicians as of December 31, 2004. Assurant Health was a co-founder of PHCS, and as of December 31, 2004 we owned approximately 38% of the company. PHCS has a staff solely dedicated to provider relations.

We seek to manage claim costs in our PPO plans by selecting provider networks that have negotiated favorable arrangements with physicians, hospitals and other health care professionals and requiring participation in our various medical management programs. In addition, we manage costs through extensive underwriting, pricing and product design decisions intended to influence the behavior of our insureds. We provide case management programs and have doctors, nurses and pharmacists on staff who endeavor to manage risks related to medical claims and prescription costs.

We utilize a broad range of focused traditional cost containment and care management processes across our various product lines to manage risk and to lower costs. These include case management, disease management and pharmacy benefits management programs. Our case management philosophy is built on helping our insureds confront a complex care system to find the appropriate care in a timely and cost effective manner. We believe this approach builds positive relationships with our providers and insureds and helps us achieve cost savings.

Effective July 1, 2003, Assurant Health transitioned its pharmacy benefits management function to Medco Health Solutions, formerly known as Merck-Medco. Medco Health Solutions has established itself as a leader in its industry with more than 60,000 participating pharmacies nationwide. Through Medco Health Solutions’ advanced technology platforms, Assurant Health is able to access information about customer utilization patterns on a more timely basis to improve its risk management capabilities. In addition to the technology-based advantages, Medco Health Solutions allows us to purchase our pharmacy benefits at competitive prices. Our agreement with Medco Health Solutions expires June 30, 2007. Assurant Health also utilizes co-payments and deductibles to reduce prescription drug costs.

We employ approximately 525 claims employees in locations throughout the United States dedicated to Assurant Health. We have an appeals process pursuant to which policyholders can appeal claims decisions made.


	*Assurant Employee Benefits*

Assurant Employee Benefits, which we began operating with the acquisition of Mutual Benefit Life Group Division (now Fortis Benefits Insurance Company) in 1991, is a market leader in group dental benefit plans sponsored by employers and funded through payroll deductions based on the number of master contracts in force. We are also a leading provider of disability and term life insurance products and related services to small and medium-sized employers based on number of master contracts in force.

In our core benefits business, we focus on employer-sponsored programs for employers with typically between 20 and 1,000 employees. We are willing to write programs for employers with more than 1,000 covered employees when they meet our risk profile. At December 31, 2004, substantially all of our coverages in force and 77% of our annualized premiums in force were for employers with less than 1,000 employees. We have a particularly strong emphasis on employers with under 250 employees, which represented approximately 97% and 60% of our in force coverages and premiums, respectively, as of December 31, 2004. Our average in force case size was 58 enrolled employees as of December 31, 2004.

We believe that the small employer market is growing, and that there is no dominant player in the small group market. We believe that growth in our Assurant Employee Benefits segment will be principally driven by increases in the numbers of employees enrolled in our plans, inflation and increases in the cost of providing dental care and, for our group disability and term life business, increases in salaries. We believe that increased

penetration of our target employer base could generate growth for this segment. According to the 2004 National Compensation Survey conducted by the Bureau of Labor Statistics, U.S. Department of Labor, in March 2004, 40% of full-time non-agricultural private industry employees lack employer provided or sponsored life insurance coverage, 54% lack short-term disability coverage, 64% lack long-term disability coverage and 54% lack dental coverage. During 2003, according to National Association of Dental Plans and Life Insurance Marketing Research Association studies, approximately $7.5 billion in annualized premiums of group dental, disability and life insurance was sold in the United States. Exclusive of group dental, for which historical data from these sources is not available, the average annual growth rate in sales of the remaining group products for 2000 through 2003 was 4.1% per year. We believe that our broad product and distribution coverage and our expertise in small case underwriting will position us favorably as these markets continue to grow.

Trends in the U.S. employment market and, in particular, in the cost of the medical benefits component of total compensation, are leading an increasing number of employers to offer new benefits on a voluntary basis. That is, after originally vetting the insurer and typically selecting the particular plan features to be offered, the employer offers the new benefits to employees at their election and at their cost, administered through payroll deduction. Because these products can be economically distributed on this group basis and are convenient to purchase and maintain, they are appealing to employees who might have little opportunity or inclination to purchase similar coverage on an individual basis.

We believe that voluntary products represent a sizeable growth opportunity. Soliciting employees to enroll in employer-sponsored health plans requires effective communication and interaction with the target employee. We have reorganized our home office and sales operations to reflect the strategic importance of this area. As part of this reorganization, we have divided our sales force into those who sell voluntary products and those who sell “true group” products with each division collaborating with the other to help meet the needs of shared brokers and clients. True group products are group insurance products in which the employer or other group policyholder pays all or part of the premium on behalf of the insured members. We are also investing resources in enhanced enrollment and specialized administrative capabilities for the voluntary market.

The following table provides net earned premiums and other considerations, fees and other income and other operating data for Assurant Employee Benefits for the periods and as of the dates indicated:


				For the Year Ended December 31,

				2004			2003			2002

				(In millions, except master contract data)
Net earned premiums and other considerations:
	Group dental			$	521		$	539		$	554
	Group disability				506			461			400
	Group life				250			256			279

		Total			1,277			1,256			1,233
Fees and other income					29			54			74

			Total	$	1,306		$	1,310		$	1,307

Operating statistics:
	Loss ratio(1)				74.4	%		73.3	%		76.6	%
	Expense ratio(2)				31.4	%		33.1	%		32.3	%
	Premium persistency ratio(3)				81.1	%		79.9	%		79.9	%
Number of direct master contracts (rounded to the nearest 100):
	Group dental				25,100			29,300			30,300
	Group disability				24,200			25,400			27,300
	Group life				25,300			25,200			25,600

		Total			74,600			79,900			83,200


(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 premium persistency ratio is equal to the rate at which existing business for all issue years at the beginning of the period remains in force at the end of the period. The calculation for the year ended December 31, 2002 excludes the DBD of Protective Life Corporation.


	Products and Services

Group Dental. Dental benefit plans provide for the funding of necessary or elective dental care. We provide both employee-paid and employer-paid plans. Plans may involve a traditional indemnity arrangement, a PPO arrangement, a “prepaid” arrangement, or some combination of these programs with employee choice. In a PPO plan, insureds may select any dental provider, but benefits are reimbursed at a higher level when they visit a provider who participates in the PPO. Coverage is subject to deductibles, coinsurance and annual or lifetime maximums. In a prepaid plan, members must go to participating dentists in order to receive benefits. Depending upon the procedure, dental benefits are provided by participating dentists at either no cost or a nominal co-payment.

Success in the group dental business requires strong provider network development and management skills, a focus on expense management and a claim system capable of efficiently and accurately adjudicating high volumes of transactions. We have developed local managed care networks in 25 states.

In addition to fully insured dental benefits, we also offer Administrative Services Only (“ASO”) for self-funded dental plans. Under these arrangements, the employers or plan sponsors pay Assurant Employee Benefits a fee for providing these services. As of December 31, 2004, our block of this business consisted of approximately 200 groups and approximately 83,000 covered employees and, for the year ended December 31, 2004, generated $4.3 million of fee revenue.

As of December 31, 2004 and December 31, 2003, we had approximately 25,100 and 29,300 group dental plans insured or administered through this segment, respectively, covering or involving approximately 1.3 million and 1.4 million members, respectively.

Group Disability Insurance. Group disability insurance provides partial replacement of lost earnings for insured employees who become disabled and otherwise qualify for benefits. Our group disability products include both short-term and long-term disability insurance. Group long-term disability insurance provides employees with insurance coverage for loss of income in the event of extended work absences due to sickness or injury. Most policies begin providing benefits following 90 or 180 day waiting periods, and benefits are limited to specified maximums as a percentage of income. Group short-term disability insurance provides coverage for temporary loss of income due to injury or sickness, often effective immediately for accidents and after one week for sickness, also limited to specified maximums as a percentage of income.

DRMS, our wholly owned subsidiary, provides insurance carriers that wish to supplement their core product offerings a turnkey facility with which to write group disability insurance. Services we provide to the insurers for a fee include product development, state insurance regulatory filings, underwriting, claims management or any of the other functions typically performed by an insurer’s back office. The risks written by DRMS’ various clients are reinsured into a pool, with the clients generally retaining shares ranging from 0% to 50% of the risks they write. As the largest reinsurer in the pools, our licensed insurance subsidiaries reinsure a substantial majority of the insurance risk that is ceded by the client. Since DRMS clients operate in niches not often reached through our traditional distribution, our participation in the pools enables us, through a form of alternate distribution, to reach customers to whom we would not otherwise have access.

As of December 31, 2004 and 2003, we had approximately 37,300 and 37,500 group disability plans in force, reinsured or administered on an ASO basis, covering approximately 2.8 million and 2.7 million enrolled employees, respectively.

Group Term Life Insurance. Group term life insurance is one of the principal means by which working people in the United States provide for their families against the risk of premature death and often the means

whereby they obtain lesser amounts of coverage for their spouses, children or domestic partners. Group term life insurance consists primarily of renewable term life insurance, which is term life coverage that is renewable at the option of the insured who is not required to take a medical examination in order to renew existing amounts of coverage, with the amount of coverage as a flat amount, an amount linked to the employees’ earnings, or a combination of the two. Employers generally provide a base or foundation level of coverage for their employees and offer the opportunity for employees to increase their coverage to meet specific needs. Also, basic term life insurance is often supplemented with an accidental death or dismemberment policy or rider, which provides additional benefits in the indicated events. Because there are few ways to differentiate an insurer in the area of traditional group term life insurance, we often sell this product line as a complement to our other core employee benefit insurance products.

As of December 31, 2004 and 2003, we had approximately 25,300 and 25,200 group life plans in force, respectively, covering approximately 1.7 million enrolled employees in each year.


	Marketing and Distribution

We distribute the products of Assurant Employee Benefits primarily through approximately 173 group sales representatives, located in 37 offices in or near major U.S. metropolitan areas. These representatives work through independent employee benefits advisors, including brokers and other intermediaries, to reach our customers, who are primarily small to medium-sized employers. DRMS employs an independent distribution arm tailored to its needs. Our marketing efforts concentrate on the identification of the employee benefit needs of our targeted customers, the development of tailored products and services designed to meet those needs, the alignment of our Company with select brokers and other intermediaries who value our approach to the market, and the promotion of our Company’s brand.

To compete effectively in the small to medium-sized employer marketplace requires a large and broadly distributed sales force with relationships with the brokers and other intermediaries who act as advisors to those employers in connection with their benefits programs. In many cases, these employers and their advisors rely on us for expertise in matching their needs to the collection of solutions available through group benefit programs. Competing effectively also requires systems and work practices suited to a high transaction volume business and the ability to provide a high level of customer service to a large number of clients operating in almost all industries found in the U.S. economy.


	Underwriting and Risk Management

True group products are normally offered to employees on a guaranteed issue basis, meaning that if the group is an acceptable risk, the insurer generally foregoes individual medical underwriting and agrees in advance to accept all applications for insurance from members of the eligible class up to a formula-determined limit. Individual medical underwriting is required on applications for amounts in excess of this limit, or in connection with untimely applications. Our sales representatives and underwriters evaluate the risk characteristics of each prospective insured group and design appropriate plans of insurance. They utilize various techniques such as deductibles, co-payments, guarantee issue limits and waiting periods to control the risk we assume. Voluntary products introduce additional risks due to the fact that employees have some awareness of the risk of loss they personally face, and those employees who believe themselves to be more at risk will be more likely to elect coverage. In order to manage these risks, we customize our plan designs to seek to mitigate adverse selection problems. We also require that a minimum percentage of eligible employees elect a voluntary coverage.

We base the pricing of our products on the expected pay-out of benefits that we calculate using assumptions for mortality, morbidity, interest, expenses and persistency, depending upon the specific product features. Group underwriting takes into account demographic factors such as age, gender and occupation of members of the group as well as the geographic location and concentration of the group. Our disability policies often limit the payment of benefits for certain kinds of conditions, such as pre-existing conditions or disabilities arising from specifically listed medical conditions, in each case as defined in the policies.

Generally, we are not obligated to accept any risk or group of risks from, or to issue a policy or group of policies to, any employer or intermediary. Requests for coverage are reviewed on their merits and generally a policy is not issued unless the particular risk or group has been examined and approved by our underwriters. Group products are typically written with an initial rate guarantee of two years for disability and life insurance and one year for other group products. They are also written on a guaranteed renewable basis, meaning that they are renewable at the option of the policyholder for a specified number of years, with the right, upon expiration of the guarantee, to re-price to reflect the aggregate experience of our block of business and, where credible, the experience of the group. Credibility in this context means the assessment of the likelihood that the past history of the group is predictive of the future experience of the group. Credibility generally increases with group size or with the quantity of claims filed.

The business underwritten by our Assurant Employee Benefits segment is widely dispersed across geographic areas as well as the industries insured. At December 31, 2004, our top ten states measured by percentage of in force annual premiums contributed approximately 54.6% of our total annualized premiums in force, with our largest geographic area, California, contributing 10.5%.

Similarly, at December 31, 2004, our top ten industry segments measured by percentage of in force annual premiums, as aggregated by the first two digits of their Standard Industry Code (“SIC”), contributed approximately 49.8% of our total annualized premiums in force, with the largest contributor, health services, accounting for 9.1%.

Our efforts are focused on facilitating claimants’ return to work through a variety of means, including physical therapy, vocational rehabilitation and retraining and workplace accommodation to assist the insured. In support of this effort, we also employ or contract with a staff of doctors, nurses and vocational rehabilitation specialists. We also utilize a broad range of outside medical and vocational experts for independent evaluations and local vocational services. Finally, we have an investigations unit focused on individuals who have or may be capable of returning to work but continue to claim benefits. Our dental business utilizes a highly automated claims system focused on rapid handling of claims, with 68% of claims adjudicated within seven calendar days for claims received from January 1, 2004 to and including December 31, 2004.

We employ approximately 630 claims employees in locations throughout the United States dedicated to the Assurant Employee Benefits segment. We have a claims review process, including an appeals process pursuant to which policyholders can appeal claims decisions made.


	*Assurant PreNeed*

Assurant PreNeed, which we began operating with the acquisition of United Family Life Insurance Company in 1980, is the market leader in the United States in pre-funded funeral insurance based on face amount of new policies sold. Pre-funded funeral insurance provides whole life insurance death benefits or annuity benefits used to fund costs incurred in connection with pre-arranged funerals. An annuity is a contract that provides for periodic payments to an annuitant for a specified period of time. In the case of annuities sold by Assurant PreNeed, all the benefits under the contract are generally paid out at the death of the purchaser of the annuity. We distribute our pre-funded funeral insurance products through two separate channels, our independent channel and our AMLIC channel. Our pre-funded funeral insurance products provide benefits to cover the costs incurred in connection with pre-arranged funeral contracts and are distributed primarily through funeral homes and sold mainly to consumers over the age of 65, with an average issue age of 72. Our pre-funded funeral insurance products are typically structured as whole life insurance policies in the United States and as annuity products in Canada. Our independent channel’s target market is comprised of the 23,000 funeral firms in the United States and Canada, of which approximately 2,000 are active customers.

With our acquisition of AMLIC in 2000, we have become the market leader in the area of pre-funded funeral insurance based on face amount of policies sold. Through our AMLIC channel, we provide the insurance products and support services for the pre-need activities of SCI, the largest funeral provider in North America based on total revenues. As of December 31, 2004, SCI operated approximately 1,200 funeral service locations, cemeteries and crematoria in North America. This commission-based arrangement is anchored by an exclusive ten-year marketing agreement, which commenced on October 1, 2000.

Growth in pre-need sales has been traditionally driven by distribution with a high correlation between new sales of pre-funded funeral insurance and the number of pre-need counselors marketing the product and expansion in sales and marketing capabilities. In addition, as alternative distribution channels are identified, such as targeting affinity groups and employers, we believe growth in this market could accelerate. We believe that the pre-need market is characterized by an aging population combined with low penetration of the over-65 market.

In Assurant PreNeed, our strategy in our independent channel is to increase sales potential by strengthening our distribution relationships. We offer marketing support and programs to our funeral firm clients to increase their local market share, providing training for their sales counselors and assisting them in developing direct-to-consumer marketing programs and lead generation and management tools. Through our AMLIC channel our strategy is to reduce SCI’s cost to sell and manage its pre-need operation. We integrate our processes for managing SCI’s insurance production into its process for managing its pre-need business. Additionally, in keeping with our goal of aligning SCI’s interest with ours, our arrangement with SCI is commission-based; however, we compensate SCI with an escalating production-based commission, with a defined maximum.

The following table provides net earned premiums and other considerations, fees and other income and other operating data for Assurant PreNeed for the periods and as of the dates indicated:


			For the Year Ended
			December 31,

			2004		2003		2002

			(In millions)
Net earned premiums and other considerations:
	AMLIC		$	273	$	283	$	293
	Independent			253		246		245

	Total			526		529		538
Fees and other income				7		5		5

		Total	$	533	$	534	$	543

New face sales (life and annuity) net of reinsurance:
	AMLIC		$	300	$	308	$	392
	Independent and other			309		312		319

		Total	$	609	$	620	$	711

Policies in force				1.71		1.71		1.69
Policyholder liabilities			$	3,214	$	2,996	$	2,717


	Products

Pre-Funded Funeral Insurance Policies. Pre-funded funeral insurance provides whole life insurance death benefits or annuity benefits to fund the costs incurred in connection with pre-arranged funeral contracts, or, in a minority of situations, pre-arranged funerals without a pre-arranged funeral contract, which costs typically include funeral firm merchandise and services. Our pre-funded funeral insurance products are typically structured as whole life insurance policies in the United States. In Canada, our pre-funded funeral insurance products are typically structured as annuity contracts for newly issued business. A pre-arranged funeral contract is an arrangement between a funeral firm and an individual whereby the funeral firm agrees to perform the selected funeral upon the individual’s death. The consumer then purchases an insurance policy intended to cover the cost of the pre-arranged funeral, and the funeral home generally becomes the irrevocable assignee, or, in certain cases, the beneficiary, of the insurance policy proceeds. However, the insured may name a beneficiary other than the funeral home. The funeral home agrees to provide the selected funeral at death in exchange for the policy proceeds. Because the death benefit under many of our policies is designed to grow over time, the funeral firm that is the assignee of such a policy has managed some or all of its funeral

inflation risk. Consumers have the choice of making their policy payments as a single lump-sum payment or through multi-payment plans that spread payments out over a period of three to ten years. We do not provide any funeral goods and services in connection with our pre-funded funeral insurance policies; these policies pay death benefits in cash only.


	Marketing and Distribution

We distribute our pre-funded funeral insurance products through two distribution channels: the independent channel, which distributes through approximately 2,000 funeral homes and selected third-party general agencies, and our AMLIC channel, which distributes through an exclusive relationship with SCI in North America. Our policies are sold by licensed insurance agents or enrollers who in some cases may also be a funeral director. As of December 31, 2004 and 2003, the face amount of our contracts sold through our AMLIC channel represented approximately 49% and 50%, respectively, of our total new life and annuity face sales in Assurant PreNeed.


	Risk Management

Assurant PreNeed generally writes whole life insurance policies with increasing death benefits and obtains the majority of its profits through interest rate spreads. Interest rate spreads refer to the difference between the death benefit growth rates on pre-funded funeral insurance policies and the investment returns generated on the assets we hold related to those policies. To manage these spreads, we monitor weekly the movement in new money yields and monthly evaluate our actual net new achievable yields. This information is used to evaluate rates to be credited on applicable new and in force pre-funded funeral insurance policies and annuities. In addition, we review asset benchmarks and perform asset/liability matching studies to develop the optimum portfolio to maximize yield and reduce risk.

In Assurant PreNeed, we utilize underwriting to select and price insurance risks. We regularly monitor mortality assumptions to determine if experience remains consistent with these assumptions and to ensure that our product pricing remains appropriate. We periodically review our underwriting, agent and policy contract provisions and pricing guidelines so that our policies remain competitive and supportive of our marketing strategies and profitability goals.

Many of our pre-funded whole-life funeral insurance policies have increasing death benefits. As of December 31, 2004, approximately 83% of Assurant PreNeed’s in force insurance policy reserves relate to policies that provide for death benefit growth, some of which provide for minimum death benefit growth pegged to changes in the Consumer Price Index (“CPI”). Policies that have rates guaranteed to change with the CPI represented approximately 12% of Assurant PreNeed’s reserves as of December 31, 2004. We have employed risk mitigation strategies to seek to minimize our exposure to a rapid increase in inflation.

In our independent channel, we outsource all of the servicing and administration of our policies.


	*Ceded Reinsurance*

Our operating business segments utilize ceded reinsurance for three major business purposes:


	•	Loss Protection and Capital Management. As part of our overall risk and capacity management strategy, we purchase reinsurance for certain risks underwritten by our various operating business segments, including significant individual or catastrophic claims, and to free up capital to enable us to write additional business.

	•	Business Dispositions. We have used reinsurance to exit certain businesses, such as our FFG division in 2001 and our LTC business in 2000. Reinsurance was used in these cases to facilitate the transactions because the businesses shared legal entities with business segments that we retained.

	•	Assurant Solutions’ Client Risk and Profit Sharing. Assurant Solutions writes business produced by its clients, such as mortgage lenders and servicers and financial institutions, and reinsures all or a


		portion of such business to insurance subsidiaries of the clients. Such arrangements allow significant flexibility in structuring the sharing of risks and profits on the underlying business.


	*Loss Protection and Capital Management*

In a traditional indemnity reinsurance transaction, a reinsurer agrees to indemnify another insurer for part or all of its liability under a policy or policies it has issued for an agreed upon premium. These agreements provide for recovery of a portion of losses and associated loss expenses from reinsurers. The terms of these agreements, which are typical for agreements of this type, generally provide, among other things, for the automatic acceptance by the reinsurer of ceded risks in excess of our retention limits (i.e. the amount of loss per individual risk that we are willing to absorb). For excess of loss coverage, we pay premiums to the reinsurers based on rates negotiated and stated in the treaties. For pro rata reinsurance, we pay premiums to the reinsurers based upon percentages of premiums received by us on the business reinsured. These agreements are generally terminable as to new risks by us or by the reinsurer on appropriate notice; however, termination does not affect risks ceded during the term of the agreement, which generally remain with the reinsurer.

We work with our business segments to develop effective reinsurance arrangements that are consistent with their pricing and operational goals. For example, Assurant Employee Benefits cedes 100% of monthly disability claims in excess of $10,000 per individual insured. For our group term life business, the maximum amount retained on any one life is $800,000 of life insurance including accidental death, limited to $500,000 in life insurance and $300,000 in accidental death and dismemberment insurance. Amounts in excess of these figures are reinsured with other life insurance companies on a yearly renewable term basis. Assurant Solutions purchases property reinsurance for flood risk, with per property limits of $925,000 in excess of $75,000 per individual loss. This treaty has a per occurrence cap of $2,775,000.

For those product lines where there is exposure to catastrophes (for example, homeowners’ policies written by Assurant Solutions), we closely monitor and manage our aggregate risk exposure by geographic area and have entered into reinsurance treaties to manage our exposure to these types of events. For 2004, catastrophe reinsurance was purchased to manage our risk exposure to a hurricane loss in excess of the modeled 300-year return time loss. We maintain $160 million of catastrophic excess of loss coverage for fire, flood and personal liability risks, with a per occurrence retention of the first $25 million. In addition, Florida hurricane losses are covered by the Florida Hurricane Catastrophe Fund (FHCF), with coverage equal to 90% of $102.1 million in excess of $27.5 million. This coverage has been in place as of June 1, 2004 and will continue through May 31, 2005. Future FHCF coverage will be determined by the FHCF in accordance with Florida statutes and will depend upon Assurant Solutions’ in force Florida risks and the FHCF claims paying capacity. Also, in Assurant Employee Benefits, we have purchased catastrophic reinsurance coverage in the group term life product line of $40 million in excess of our retention of the first $20 million.

Historically, a significant portion of Assurant Health’s business has been reinsured under non-proportional reinsurance agreements that provide for the reinsurers to indemnify us for losses in a calendar year on combined ratios up to but not exceeding 110%. We will not renew or replace this reinsurance effective as of December 31, 2004. If our loss ratios in this segment deteriorate beyond a certain level, we will not be entitled to certain reinsurance recoverables to which we were previously entitled.

With the exception of a small block of older policy forms, all of the LTC business of John Alden, one of our subsidiaries, has been reinsured with Employers Reassurance Corporation (“ERC”), a subsidiary of General Electric. All risks and profits generated by the reinsured business have been transferred to ERC. The reserves and premium transferred are in excess of 95% of the direct long-term care amounts generated by John Alden. The remaining small block of long-term care policies in John Alden has been reinsured with John Hancock as part of the sale of that division. See “— Business Dispositions” below.

Under indemnity reinsurance transactions in which we are the ceding insurer, we remain liable for policy claims if the assuming company fails to meet its obligations. To limit this risk, we have control procedures in place to evaluate the financial condition of reinsurers and to monitor the concentration of credit risk to minimize this exposure. The selection of reinsurance companies is based on criteria related to solvency and

reliability and, to a lesser degree, diversification as well as on developing strong relationships with our reinsurers for the sharing of risks.

In addition, we also purchase reinsurance when capital requirements and the economic terms of the reinsurance make it appropriate to do so.


	*Business Dispositions*

We have exited businesses through reinsurance ceded to third parties, such as our 2001 sale of the insurance operations of FFG to The Hartford. The assets backing the liabilities on these businesses are held in a trust. All separate account business and John Alden general account business relating to FFG were transferred through modified coinsurance, a form of proportional reinsurance in which the underlying assets and liabilities are still reflected on the ceding company’s balance sheet. Under this arrangement, The Hartford receives all premiums, pays all claims and funds all reserve increases net of investment income on reserves held. All other FFG business was reinsured by 100% coinsurance, which transfers all affected assets and liabilities as well as all premiums and claims to the assuming company. We would be responsible for administering this business in the event of a default by The Hartford.

In 1997, John Alden sold substantially all of its annuity operations to SunAmerica Life Insurance Company (“SunAmerica”), now a subsidiary of American International Group, Inc. In connection with the sale, John Alden reinsured its existing block of annuity policies to SunAmerica on a coinsurance basis. This coinsurance was initially on an indemnity basis and the parties agreed to transition the business to an assumption basis as soon as practical. An assumption basis is a form of reinsurance under which policy administration and the contractual relationship with the insured, as well as liabilities, pass to the reinsurer. In certain states, the transition to an assumption basis is subject to policyholder approval. To the extent that such transition does not take place with respect to any particular policy, the policy will remain reinsured on an indemnity basis. As of December 31, 2004, more than 97% of the ceded annuity reserves had either transitioned to an assumption basis or had lapsed.

In 2000, we sold all of our LTC operations to John Hancock. In connection with the sale, we reinsured our existing block of long-term care policies to John Hancock on a coinsurance basis. Under the coinsurance agreement, we transferred 100% of the policy reserves and related assets on this block of business to John Hancock, and John Hancock agreed to be responsible for 100% of the policy benefits. The assets backing the liabilities on this business are held in a trust and John Hancock is obligated to fund the trust if the value of the assets is deemed insufficient to fund the liabilities. If John Hancock fails to fulfill these obligations, we will be obligated to make these payments.


	*Assurant Solutions’ Client Risk and Profit Sharing*

Historically, our insurance subsidiaries in Assurant Solutions have ceded a portion of the premiums and risk related to business generated by certain clients to the client’s captive insurance companies or to reinsurance companies in which the clients have an ownership interest. In some cases, our insurance subsidiaries have assumed a portion of these ceded premiums and risk from the captive insurance companies and reinsurance companies. Through these arrangements, our insurance subsidiaries share some of the premiums and risk related to client-generated business with these clients. When the reinsurance companies are not authorized to do business in our insurance subsidiary’s domiciliary state, our insurance subsidiary generally obtains collateral, such as a trust or a letter of credit, from the reinsurance company or its affiliate in an amount equal to the outstanding reserves to obtain full financial credit in the domiciliary state for the third-party reinsurance. See “Item 7A — Quantitative and Qualitative Disclosures about Market Risk — Credit Risk.”

In addition, we complied with a John Doe summons received from the Internal Revenue Service (“IRS”) requesting information as to the identities of U.S. taxpayers that have engaged in producer-owned reinsurance company transactions in the Turks and Caicos with us. The IRS previously issued Notice 2002-70, which stated that certain tax benefits claimed in connection with producer-owned reinsurance company transactions involving credit insurance transactions with producers who own reinsurance companies located in

the Turks and Caicos will be denied and is investigating whether tax benefits claimed by the taxpayers they wish to identify are available. IRS Notice 2004-65 modified Notice 2002-70 by removing these transactions from the transactions listed under that notice. This summons did not raise any issue in the investigation relating to our tax liability and we have been notified that this matter is closed.


	*Gross Annualized Premium, Ceded Portion and Net Amount Retained*

The following table details our gross annualized premiums and other considerations, the portion that was ceded to reinsurers and the net amount that was retained for the year ended December 31, 2004.


		For the Year Ended December 31, 2004

								Percentage
		Gross(1)		Ceded		Net		Retained

		(In millions)
Life insurance		$	1,323	$	550	$	773		58	%
Accident and health			4,844		827		4,017		83	%
Property and casualty			2,590		897		1,693		65	%

	Total consolidated	$	8,757	$	2,274	$	6,483


(1)	Gross includes direct plus assumed premiums.

Claims Provisions/ Reserves

In accordance with industry and accounting practices and applicable insurance laws and regulatory requirements, we establish reserves for payment of claims and claims expenses for claims that arise from our insurance policies. We maintain reserves for future policy benefits and unpaid claims expenses. Policy reserves represent the accumulation of the premiums received that are set aside to provide for future benefits and expenses on claims not yet incurred. Claim reserves are established for future payments and associated expenses not yet due on claims that have already been incurred, whether reported to us or not. Reserves, whether calculated under Accounting Principles Generally Accepted in the United States of America (“GAAP”) or Statutory Accounting Principles (“SAP”), do not represent an exact calculation of future policy benefits and expenses but are instead estimates made by us using actuarial and statistical procedures. There can be no assurance that any such reserves would be sufficient to fund our future liabilities in all circumstances. Future loss development could require reserves to be increased, which would adversely affect earnings in current and/or future periods. Adjustments to reserve amounts may be required in the event of changes from the assumptions regarding future morbidity, the incidence of disability claims and the rate of recovery, including the effects thereon of inflation and other societal and economic factors, persistency, mortality, property claim frequency and severity and the interest rates used in calculating the reserve amounts. The reserves reflected in our consolidated financial statements are calculated in accordance with GAAP.

See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates — Reserves.”

Reserves are regularly reviewed and updated, using the most current information. Any adjustments are reflected in the current results of operations. However, because the establishment of reserves is an inherently uncertain process, there can be no assurance that ultimate losses will not exceed existing reserves.

Reserves are reviewed at least quarterly by our business segment management.

Investments

The investment portfolio is a critical part of our business activities and important to our overall profitability. The fundamental investment philosophy is to manage assets, within our stated risk parameters, to generate consistent and high levels of investment income, before gains and losses, while providing a total return that is competitive over the long-term. Our investment team is charged with: maintaining safety of principal and sufficient liquidity; managing credit, interest rate, prepayment and market risks; maintaining

adequate diversification among asset classes, industry concentrations and individual issuers; and adhering to all applicable regulatory requirements.

We have individual business segments with different needs and characteristics. Hence, our investment approach for each business segment is tailored to that business segment’s needs in terms of asset allocation, liquidity needs and duration of assets and liabilities.


	*Organization*

The general account is managed by our asset management department, Assurant Asset Management (“AAM”). In this capacity, AAM acts as both our investment advisor and our asset manager. As investment advisor, the AAM organization oversees the design and implementation of overall investment policy. As asset manager, AAM is responsible for (i) directly investing those general account assets for which the department has in-house expertise and (ii) selecting and monitoring outside managers for those assets for which AAM has limited expertise. AAM fulfills these roles through its involvement in the establishment of risk management techniques, business segment investment policy and asset benchmark construction and through leadership and participation in our two investment oversight entities: the Company’s risk management committee and the individual business segment investment committees.

Our risk management committee consists of the Chief Executive Officer, Chief Financial Officer, Chief Investment Officer, Corporate Actuary and Head of Strategic Analysis. It meets quarterly and is responsible for setting overall corporate risk tolerance for the general account. As such, it approves all investment risk limits including those affecting overall portfolio quality, liquidity, duration and asset class concentration. Additionally, it approves the use of new asset classes when appropriate and business segment asset allocation and investment policy.

The business segment investment committees meet quarterly and are co-chaired by the business segment Chief Financial Officer and either the Co-Head of Fixed Income Investments or the Head of Mortgage and Real Estate Investments. These committees are responsible for setting appropriate asset allocation and investment policy for our specific business segments. Additionally, they monitor investment strategy, performance, pricing and liability cash flows and research and recommend the use of new asset classes.

These committees, together with AAM, manage the overall risk parameters of our investment portfolios and seek to employ investment policies and strategies that are appropriate for and supportive of the needs of the individual businesses.

The portfolio and investment performance results are reviewed quarterly with our board of directors.


	Investment Process

Our investment process is initiated by the strategic analysis group within AAM. This group designs an appropriate asset allocation benchmark for each portfolio that is tailored to the associated liabilities and is designed to generate the highest level of investment income available given each business segment’s overall risk tolerance. Although income is the primary objective, total return is a significant secondary objective. We operate our business through multiple legal entities. At least one portfolio is maintained for each legal entity. In addition, separate portfolios are maintained for legal entities that conduct business for more than one business segment. The maturities of the assets are selected so as to satisfy a duration corridor for each portfolio that is appropriate to its underlying liabilities. Duration is the sensitivity of the portfolio to movements of interest rates. The actual duration is dynamic and will change with time and interest rate movement, as will the liability duration. The duration corridor is chosen by analyzing various risk/reward measures from appropriate asset/liability studies. The duration of our portfolio as of December 31, 2004 and 2003 was 5.97 and 5.92 years, respectively. This represents the amalgamated duration of our four operating business segments that is directly tied to their liabilities, many of which are short-tail. It is our intent to manage the portfolios such that their durations closely match the liabilities that they support.

In addition, the asset allocation benchmark will reflect multiple constraints, such as all risk tolerances established by our risk management committee, appropriate credit structure, prepayment risk tolerance,

liquidity requirements, capital efficiency, tax considerations and regulatory and rating agency requirements. The individual benchmarks are then aggregated together to give a total asset profile. Asset management is conducted at the portfolio level; however, risk constraints are also in place for the aggregate portfolio. Each benchmark is reviewed at least annually for appropriateness.

Our investment portfolios are invested in the following key asset classes: fixed income securities, including mortgage-backed and other asset-backed securities; preferred stocks; commercial mortgage loans; and commercial real estate. The investment portfolio contains private placements, including 144A securities. Currently we hold $1,087 million in 144A securities and $220 million in other private placements. We began investing in other private placement loans in the fourth quarter of 2003 and ultimately over the next few years intend to invest $500 million in other private placements. We do not currently invest new money in equity securities; however, we may do so in the future. As of December 31, 2004, less than 1% of the fair value of our total invested assets was invested in common stock.

Changes in individual security values are monitored on a regular basis in order to identify potential credit problems. In addition, each month the portfolio holdings are screened for securities whose market price is equal to 85% or less of their original purchase price. Management then makes their assessment as to which of these securities are other than temporarily impaired. Assessment factors include, but are not limited to, the financial condition of the issuer, any collateral held and the length of time the market value of the security has been below cost. Each quarter the watchlist is discussed at a meeting attended by members of our investment, accounting and finance departments. At this meeting, any security whose price decrease is deemed to have been other than temporarily impaired is written down to its then current market level, with the amount of the writedown reflected in our statement of operations for that quarter. Previously impaired issues are also monitored monthly, with additional writedowns taken quarterly if necessary.


	Fixed Income Portfolio Process

AAM controls the credit risk in the fixed income portfolio through a combination of issuer level credit research and portfolio level credit risk management. At the issuer level, we maintain a credit database that contains both qualitative and quantitative assessments of over 200 issuers and 35 industries. At the portfolio level, we control credit risk primarily through quality and industry diversification, individual issuer limits based upon credit rating and a sell discipline designed to reduce quickly exposure to deteriorating credits. In addition, we monitor changes in individual security values on a semi-monthly basis in order to identify potential problem credits. This process is also incorporated into our impairment watchlist process. The risks in the fixed income portfolio are controlled and monitored.

In order to invest in a wide variety of asset classes in our portfolio and to appropriately manage the accompanying risks, we had outsourced the management of approximately 16.1% of our portfolio’s market value as of December 31, 2004. We have engaged Wellington Management Co. for high yield investments, Spectrum Asset Management, Inc. and Flaherty & Crumrine Inc. for preferred stock investments, Prudential Private Placement Investors, LP for our private placements and Lancaster Investment Counsel and Phillips Hager & North Investment Management Ltd. for our Canadian investment portfolios.


	Commercial Mortgage Loans Investment Process

We originate fixed rate, first commercial mortgage loans through a nationwide group of exclusive, regional mortgage correspondents. We have a mortgage loan committee within AAM that is responsible for the approval of our mortgage loan related investments. Generally the mortgage correspondents service the loans they originate and we regularly meet with them to help foster a strong working relationship. We are a portfolio lender and generally hold our commercial mortgage loans to maturity. We typically do not securitize or otherwise sell our commercial mortgage loans.

A potential loss reserve based on historical data adjusted for current expectations is maintained and is typically between 1.25% and 2.25% of commercial mortgage loans on real estate. As of December 31, 2004, the reserve was approximately 1.7% of the unpaid principal of our commercial mortgage loans, or $18 million.


	Investment Real Estate Process

We invest in income-producing commercial properties to generate attractive risk-adjusted returns as well as to generate operating investment income with the potential for capital gains upon sale of the property. We invest with regional operating partners who generally invest capital in the property with us and provide management and leasing services. Our portfolio is diversified by location, property type, operating partner and lease term. Property types include office buildings, warehouse/industrial buildings and multi-family housing.


	*Portfolio Composition*

Our total invested assets were $12,148 million and $11,344 million, or 50% and 47%, of our total assets, as of December 31, 2004 and December 31, 2003, respectively. Our net investment income for the year ended December 31, 2004 and the year ended December 31, 2003 was 9% and 9%, respectively, of our total revenue, excluding realized investment losses and gains. We had a net realized gain on investments of $24 million and $2 million for the year ended December 31, 2004 and December 31, 2003, respectively. Our investment portfolio consists primarily of: fixed income securities, including mortgage-backed and other asset-backed securities; preferred stocks; private placement loans, commercial mortgage loans; and commercial real estate.

As of December 31, 2004 and December 31, 2003, fixed maturity securities accounted for 76% and 77%, respectively, of our total invested assets. The corporate bond portfolio is well diversified across industry classes.

The following table sets forth the carrying value of the securities held in our investment portfolio at the dates indicated:


		At December 31,

		2004		2003

		(In millions)
Fixed maturities		$	9,178	$	8,729
Equity securities			527		456
Commercial mortgage loans on real estate at amortized cost			1,054		933
Policy loans			65		68
Short-term investments			300		276
Collateral held under securities lending			535		420
Other investments			489		462

	Total	$	12,148	$	11,344


	Investment Results

The overall income yield on our investments after investment expenses, excluding net realized investment gains (losses), was 5.45% for the year ended December 31, 2004 and 5.61% for the year ended December 31, 2003. The overall income yield on our investments after investment expenses, including realized gains (losses), was 5.66% for the year ended December 31, 2004 and 5.63% for the year ended December 31, 2003.

The following table sets forth the income yield and net investment income, excluding realized investment gains/(losses), for each major investment category for the periods indicated.


		For the Year Ended						For the Year Ended
		December 31, 2004						December 31, 2003

		Yield(1)			Amount			Yield(1)			Amount

		(In millions)
Fixed maturities			5.84	%	$	494			5.96	%	$	473
Equity securities			11.70	%		36			7.71	%		27
Commercial mortgage loans on real estate			7.48	%		79			8.00	%		71
Policy loans			5.76	%		4			5.70	%		4
Short-term investments			1.10	%		3			1.41	%		7
Cash and cash equivalents			0.79	%		7			0.40	%		3
Other investments			7.58	%		36			14.48	%		46

Investment income before investment expenses			5.66	%		659			5.83	%		631
Investment expenses						(24	)					(24	)

	Net investment income		5.45	%	$	635			5.61	%	$	607

Total Return Fixed Maturity Portfolio(2)			6.03	%					7.33	%
Total Return Lehman U.S. Aggregate Index(3)			4.34	%					4.10	%


(1)	The yield is calculated by dividing income by average assets. The yield calculation for the year ended December 31, 2004 includes the average of asset positions as of December 31, 2003 and December 31, 2004. The yield calculation for the year ended December 31, 2003 includes the average of asset positions as of December 31, 2002 and December 31, 2003.

(2)	Total return is calculated using beginning and ending market portfolio value adjusted for external cash flows.

(3)	The actual portfolio is customized for the liabilities that it supports. It will therefore differ from the Lehman Index, both in asset allocation and duration. As of December 31, 2004, the actual portfolio had a duration of 5.97 years with 3% of the total portfolio in U.S. Government securities, 67% in U.S. credit and 13% in securitized assets. Commercial mortgages and real estate comprised the remainder of the portfolio. In contrast, the Lehman Index had a duration of 4.34 years with 36% in U.S. Government securities, 25% in U.S. credit and 39% in securitized assets.


	Fixed Maturity Securities

The amortized cost and fair value of fixed maturity securities at December 31, 2004 and 2003, by type of issuer, were as follows:


			Gross		Gross		Gross
			Amortized		Unrealized		Unrealized			Fair
			Cost		Gains		Losses			Value

			(In millions)
At December 31, 2004
	U.S. government and government agencies and authorities		$	1,498	$	31	$	(5	)	$	1,525
	States, municipalities and political subdivisions			198		20		—			218
	Foreign governments			511		18		(1	)		527
	Public utilities			1,003		80		(1	)		1,083
	All other corporate bonds			5,470		362		(7	)		5,825

		Total	$	8,680	$	511	$	(14	)	$	9,178

At December 31, 2003
	U.S. government and government agencies and authorities		$	1,647	$	39	$	(4	)	$	1,682
	States, municipalities and political subdivisions			187		16		—			203
	Foreign governments			307		12		(1	)		318
	Public utilities			910		74		—			984
	All other corporate bonds			5,179		371		(8	)		5,542

		Total	$	8,230	$	512	$	(13	)	$	8,729

The following table presents our fixed maturity securities portfolio by National Association of Insurance Commissioners (“NAIC”) designation and the equivalent ratings of the nationally recognized securities rating organizations as of December 31, 2004 and 2003, as well as the percentage based on fair value, that each designation comprises:


			At December 31, 2004							At December 31, 2003

							Percentage							Percentage
NAIC			Amortized		Fair		of Total			Amortized		Fair		of Total
Rating		Rating Agency Equivalent	Cost		Value		Fair Value			Cost		Value		Fair Value

	1	Aaa/Aa/A	$	5,847	$	6,142		67	%	$	5,770	$	6,074		70	%
	2	Baa		2,331		2,493		27	%		1,964		2,110		24	%
	3	Ba		389		416		5	%		331		361		4	%
	4	B		113		127		1	%		122		135		2	%
	5	Caa and lower		—		—		0	%		34		40		0	%
	6	In or near default		—		—		—			9		9		—

		Total	$	8,680	$	9,178		100	%	$	8,230	$	8,729		100	%

The amortized cost and fair value of fixed maturity securities at December 31, 2004 and 2003, by contractual maturity are shown below:


			At December 31, 2004				At December 31, 2003

			Amortized		Fair		Amortized		Fair
			Cost		Value		Cost		Value

			(In millions)
Due in one year or less			$	386	$	391	$	240	$	245
Due after one year through five years				1,798		1,864		1,728		1,824
Due after five years through ten years				2,297		2,424		2,136		2,275
Due after ten years				2,544		2,822		2,199		2,425

	Total			7,025		7,501		6,303		6,769
Mortgage and asset backed securities				1,655		1,677		1,927		1,960

		Total	$	8,680	$	9,178	$	8,230	$	8,729

Virtually all of our fixed maturity securities portfolio is publicly traded. Our investment portfolio contains private placements, including 144A securities. We have recently initiated the private placement program and plan to invest approximately $500 million in other privately placed securities over the next two years. Currently, we have less than 3% of our fixed maturity securities invested in other private placements, excluding 144A securities. As of December 31, 2004, approximately 92% of the fair market value of our fixed maturity securities were dollar denominated. As of December 31, 2004, we had approximately $710 (Canadian) million invested in Canadian fixed maturity securities; however, these assets directly support Canadian liabilities.


	Commercial Mortgage Loans

We have made commercial mortgage loans, collateralized by the underlying real estate, on properties located throughout the United States. At December 31, 2004 approximately 41% of the outstanding principal balance of commercial mortgage loans was concentrated in the states of California, New York, and Pennslyvania. Although we have a diversified loan portfolio, an economic downturn could have an adverse impact on the ability of our debtors to repay their loans. At December 31, 2004, the outstanding balances of commercial mortgage loans ranged in size from less than $1 million to $13 million with an average outstanding balance of $2.2 million. Loan commitments outstanding at December 31, 2004 and December 31, 2003 totaled $32 million and $76 million, respectively.


	Investment Real Estate

We also hold commercial equity real estate as part of our investment portfolio. We own real estate through real estate joint ventures and partnerships. Investments in real estate joint ventures totaled $57 million as of December 31, 2004 and 2003. Investments in limited partnership totaled $37 million and $31 million at December 31, 2004 and 2003, respectively. The main property types within our portfolio are office, industrial/warehouse and multi-family housing. At December 31, 2004, we are committed to fund additional capital contributions of $15 million to joint ventures and $14 million to certain investments in limited partnerships.

Competition

We face competition in each of our businesses; however, we believe that no single competitor competes against us in all of our business lines and the business lines in which we operate are generally characterized by a limited number of competitors. Competition in our operating business segments is based on a number of factors, including: quality of service, product features, price, scope of distribution, financial strength ratings and name recognition.

The relative importance of these factors depends on the particular product and market. We compete for customers and distributors with insurance companies and other financial services companies in our various businesses.

Assurant Solutions has numerous competitors in its product lines, but we believe no other company participates in all of the same lines or offers comparable comprehensive capabilities. Competitors include insurance companies and financial institutions. In Assurant Health, we believe the market is characterized by many competitors, and our main competitors include health insurance companies and the Blue Cross/ Blue Shield plans in the states in which we write business. In Assurant Employee Benefits, commercial competitors include other life insurance companies as well as not-for-profit Delta Dental plans. In Assurant PreNeed, our main competitors are two pre-need life insurance companies with nationwide representation, Forethought Financial Services and Homesteaders Life Company, and several small regional insurers. While we are among the largest competitors in terms of market share in many of our business lines, in some cases there are one or more major market players in a particular line of business.

Some of these companies may offer more competitive pricing, greater diversity of distribution, better brand recognition or higher financial strength ratings than we have. Some may also have greater financial resources with which to compete. In addition, many of our insurance products, particularly our group benefits and health insurance policies, are underwritten annually and, accordingly, there is a risk that group purchasers may be able to obtain more favorable terms from competitors rather than renewing coverage with us. The effect of competition may, as a result, adversely affect the persistency of these and other products, as well as our ability to sell products in the future.

Ratings

Rating organizations continually review the financial positions of insurers, including our insurance subsidiaries. Insurance companies are assigned financial strength ratings by independent rating agencies based upon factors relevant to policyholders. Ratings provide both industry participants and insurance consumers meaningful information on specific insurance companies and are an important factor in establishing the competitive position of insurance companies. Most of our active domestic operating insurance subsidiaries are rated by A.M. Best. A.M. Best maintains a letter scale rating system ranging from “A++” (Superior) to “S” (Suspended). Six of our domestic operating insurance subsidiaries are also rated by Moody’s. In addition, seven of our domestic operating insurance subsidiaries are rated by S&P.

All of our domestic operating insurance subsidiaries rated by A.M. Best have financial strength ratings of A (“Excellent”), which is the second highest of ten ratings categories and the highest within the category based on modifiers (i.e., A and A- are “Excellent”), or A- (“Excellent”), which is the second highest of ten ratings categories and the lowest within the category based on modifiers.

The Moody’s financial strength rating for one of our domestic operating insurance subsidiaries is A2 (“Good”), which is the third highest of nine ratings categories and mid-range within the category based on modifiers (i.e., A1, A2 and A3 are “Good”), and for five of our domestic operating insurance subsidiaries is A3 (“Good”), which is the third highest of nine ratings categories and the lowest within the category based on modifiers.

The S&P financial strength rating for four of our domestic operating insurance subsidiaries is A (“Strong”), which is the third highest of nine ratings categories and mid-range within the category based on modifiers (i.e., A+, A and A- are “Strong”), and for three of our domestic operating insurance subsidiaries is A- (“Strong”), which is the third highest of nine ratings categories and the lowest within the category based on modifiers.

The objective of A.M. Best’s, Moody’s and S&P’s ratings systems is to assist policyholders and to provide an opinion of an insurer’s financial strength, operating performance, strategic position and ability to meet ongoing obligations to its policyholders. These ratings reflect the opinions of A.M. Best, Moody’s and S&P of our ability to pay policyholder claims, are not applicable to our common stock or debt securities and are not a recommendation to buy, sell or hold any security, including our common stock or debt securities. These ratings are subject to periodic review by and may be revised upward, downward or revoked at the sole discretion of A.M. Best, Moody’s and S&P.

REGULATION

United States


	*State Regulation*


	General

Our insurance subsidiaries are subject to regulation in the various states and jurisdictions in which they transact business. The extent of regulation varies, but generally derives from statutes that delegate regulatory, supervisory and administrative authority to a department of insurance in each state. The regulation, supervision and administration relate, among other things, to: standards of solvency that must be met and maintained, the payment of dividends, changes of control of insurance companies, the licensing of insurers and their agents, the types of insurance that may be written, guaranty funds, high risk and reinsurance pools, privacy practices, the ability to enter and exit certain insurance markets, the nature of and limitations on investments, premium rates, or restrictions on the size of risks that may be insured under a single policy, reserves and provisions for unearned premiums, losses and other obligations, deposits of securities for the benefit of policyholders, payment of sales compensation to third parties, approval of policy forms, and the regulation of market conduct, including underwriting and claims practices.

State insurance departments also conduct periodic examinations of the affairs of insurance companies and require the filing of annual and other reports, prepared under SAP, relating to the financial condition of companies and other matters. Financial examinations completed during the past three years with respect to our operating subsidiaries have not resulted in material negative adjustments to statutory surplus and pending financial and market conduct examinations with respect to these subsidiaries have not identified any material findings to date. Two of our subsidiaries have responded affirmatively to an NAIC survey regarding race-based premiums, resulting in examinations by two state insurance departments. This relates to actions of the subsidiaries or predecessor companies before acquisition by us. One examination has been concluded and one is still in progress and, to date, no penalties have been imposed as a result of these examinations. The amount of in force business as to which these subsidiaries charged race-based premiums is very small, representing less than 1% of our in force block of business at December 31, 2004. While we do not expect that these examinations will have a material adverse effect on us, there can be no assurance that further examinations or litigation will not occur with respect to race-based premiums.

Recently, the insurance industry has been the subject of several investigations and increased regulatory activity by various state regulators and enforcement authorities concerning certain business practices, including the payment of contingent commissions by insurance companies to insurance brokers and agents, and the extent to which such compensation has been disclosed, the solicitation and provision of fictitious or inflated quotes, the use of inducements to brokers or companies in the sales of group insurance products, and the accounting treatment for finite reinsurance or other non-traditional or loss mitigation insurance products. We have received inquiries and informational requests from various insurance departments in certain states in which our insurance subsidiaries operate. To date, none of these inquiries, nor our own internal review, has resulted in any determination or finding that we have provided inflated or fictitious quotes or used improper inducements in the sale of our insurance products. For further information concerning the risks related to this and other regulatory actions and litigation see “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Factors.”

At the present time, our insurance subsidiaries are collectively licensed to transact business in all 50 states and the District of Columbia, although several of our insurance subsidiaries individually are licensed in only one or a few states. We have insurance subsidiaries domiciled in the states of Alabama, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Indiana, Iowa, Kentucky, Michigan, Mississippi, Missouri, Nebraska, New Mexico, New York, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas, Utah, Wisconsin, and in Puerto Rico.


	Regulation of Credit Insurance Products

Most states and other jurisdictions in which our insurance subsidiaries do business have enacted laws and regulations that apply specifically to consumer credit insurance. The methods of regulation vary but generally relate to, among other things, the amount and term of coverage, the content of required disclosures to debtors, the filing and approval of policy forms and rates, the ability to provide creditor-placed insurance and limitations on the amount of premiums that may be charged and on the amount of compensation that may be paid as a percentage of premiums. In addition, some jurisdictions have enacted or are considering regulations that may limit profitability arising from credit insurance based on underwriting experience.

The regulation of credit insurance is also affected by judicial activity. For example, federal court decisions have enhanced the ability of national banks to engage in activities that effectively compete with our consumer credit insurance business without being subject to various aspects of state insurance regulation.


	Regulation of Service Contracts and Warranties

The extent of regulation over the sale of service contracts and warranties varies considerably from state to state. In the states that do regulate the sales of these products, the regulations generally are less stringent than those applicable to the sale of insurance. For example, most states do not require the filing and approval of contract forms and rates for service contracts and warranties. States that do regulate such contract forms typically require specific wording regarding cancellation rights and regarding the consumer’s rights in the event of a claim. Most states do not require that individual salespersons of service contracts and warranties be licensed as insurance agents. In the states that do require such a license, salespersons may qualify for a limited license to sell service contracts and warranties without meeting the education and examination requirements applicable to insurance agents. In addition, the compensation paid to salespersons of service contracts and warranties is generally not regulated.


	Regulation of Health Insurance Products

State regulation of health insurance products varies from state to state, although all states regulate premium rates, policy forms and underwriting and claims practices to one degree or another. Most states have special rules for health insurance sold to individuals and small groups. For example, a number of states have passed or are considering legislation that would limit the differentials in rates that insurers could charge for health care coverage between new business and renewal business for small groups with similar demographics. Every state has also adopted legislation that would make health insurance available to all small employer groups by requiring coverage of all employees and their dependents, by limiting the applicability of pre-existing conditions exclusions, by requiring insurers to offer a basic plan exempt from certain benefits as well as a standard plan, or by establishing a mechanism to spread the risk of high risk employees to all small group insurers. The U.S. Congress and various state legislators have from time to time proposed changes to the health care system that could affect the relationship between health insurers and their customers, including external review. In addition, various states are considering the adoption of “play or pay” laws requiring that employers either offer health insurance or pay a tax to cover the costs of public health care insurance. We cannot predict with certainty the effect that any proposals, if adopted, or legislative developments could have on our insurance businesses and operations.

A number of states have enacted new health insurance legislation over the past several years. These laws, among other things, mandate benefits with respect to certain diseases or medical procedures, require health insurers to offer an independent external review of certain coverage decisions and establish health insurer liability. There has also been an increase in legislation regarding, among other things, prompt payment of claims, privacy of personal health information, health insurer liability, prohibition against insurers including discretionary clauses in their policy forms and relationships between health insurers and providers. We expect that this trend of increased legislation will continue. These laws may have the effect of increasing our costs and expenses.

In most states in which we operate, we provide our individual health insurance products through an association. The use of associations offers greater flexibility on pricing, underwriting and product design

compared to products sold directly to individuals on a true individual policy basis due to the greater regulatory scrutiny of true individual policies. The marketing of health insurance through association groups has recently come under increased scrutiny. An interruption in, or changes to, our relationships with various third-party distributors or our inability to respond to regulatory changes could impair our ability to compete and market our insurance products and services and materially adversely affect our results of operations and financial condition.


	Regulation of Employee Benefits Products

State regulation of non-medical group products, including group term life insurance, group disability and group dental products, also varies from state to state. As with individual insurance products, the regulation of these products generally also includes oversight over premium rates and policy forms, but often to a lesser degree. The regulatory environment for group term life insurance is relatively established, with few significant changes from year to year.

Group PPO dental insurance policies are generally regulated in the same manner as non-PPO dental policies, except to the extent that a small number of states have chosen to restrict the difference in benefits allowable between in-network and out-of-network services. Also, some states directly regulate the operation of the PPO network by requiring separate licensing or registration for the organization that contracts with the providers of dental care. In those states, PPOs also must comply with varying levels of regulatory oversight concerning the content of PPO contracts and provider practice standards. Most of the states in which prepaid dental plans are written recognize prepaid dental plans as an activity separate from traditional insurance, because providers are compensated through capitation arrangements. In most of these states, prepaid dental plans are written by a single-purpose, single-state affiliate that holds a license distinct from the life and health insurance license required for group dental insurance policies. Entities providing prepaid plans are variously licensed as Health Maintenance Organizations (“HMO”), prepaid dental plans, limited service health plans, life and health insurers or risk-bearing PPOs, where such licenses are required. Each state has different rules regarding organization, capitalization and reporting for the separate entities, with additional variations relating to provider contracting, oversight, plan management and plan operations.

Providers of group disability and dental insurance, like providers of group health insurance, are subject to state privacy laws, claims processing rules and “prompt pay” requirements in various states.

As an extension of past legislative activities in the medical insurance arena, legislative and regulatory consideration, at both the federal at state levels, is being directed toward an effort to mandate what its proponents call “mental health parity” in the policy provisions of group disability insurance plans. This would require providers of group disability insurance to extend the same benefits for disabilities related to mental illness as are provided for other disabilities.

Group benefit plans and the claims thereunder are also largely subject to federal regulation under ERISA, a complex set of laws and regulations subject to interpretation and enforcement by the IRS and the Department of Labor. Employee Retirement Income Security Act (“ERISA”) regulates certain aspects of the relationships between us and employers who maintain employee benefit plans subject to ERISA. Some of our administrative services and other activities may also be subject to regulation under ERISA.


	Regulation of Pre-Funded Funeral Insurance Products

State regulation of the pre-funded funeral insurance products business varies considerably from state to state. Our pre-funded funeral insurance products are typically structured as small whole life insurance policies, usually under $10,000 face amount, and are regulated as such by the states. State laws also restrict who may sell a pre-funded funeral. For example, in certain states a pre-funded funeral may only be offered through licensed funeral directors. In New York, the payment of commissions to a funeral director for the sale of insurance is prohibited.

State privacy laws, particularly those with “opt-in” clauses, can also affect the pre-funded funeral insurance business. These laws make it harder to share information for marketing purposes, such as generating

new sales leads. Similarly, state “do not call” lists, as well as the recently created national “do not call” list, also make it more difficult for our pre-funded funeral insurance agents to solicit new customers, particularly on a cold call basis.

In certain states, insurance companies offering pre-funded funeral insurance products must offer a “free-look period” of typically 30 days, during which the purchaser of the product may cancel and receive a full refund. Furthermore, in certain states, death benefits under pre-funded funeral insurance products must grow with the CPI.


	Insurance Holding Company Statutes

Although as a holding company, Assurant, Inc. is not regulated as an insurance company, we own capital stock in insurance subsidiaries and therefore are subject to state insurance holding company statutes, as well as certain other laws, of each of the states of domicile of our insurance subsidiaries. All holding company statutes, as well as other laws, require disclosure and, in some instances, prior approval of material transactions between an insurance company and an affiliate. The holding company statutes as well as other laws also require, among other things, prior approval of an acquisition of control of a domestic insurer, some transactions between affiliates and the payment of extraordinary dividends or distributions.


	Insurance Regulation Concerning Dividends

The payment of dividends to us by any of our insurance subsidiaries in excess of a certain amount (i.e., extraordinary dividends) must be approved by the subsidiary’s domiciliary state department of insurance. Ordinary dividends, for which no regulatory approval is generally required, are limited to amounts determined by formula, which varies by state. The formula for the majority of the states in which our subsidiaries are domiciled is the lesser of (i) 10% of the statutory surplus as of the end of the prior year or (ii) the prior year’s statutory net income. In some states, the formula is the greater amount of clauses (i) and (ii). Some states, however, have an additional stipulation that dividends may only be paid out of earned surplus. If insurance regulators determine that payment of an ordinary dividend or any other payments by our insurance subsidiaries to us (such as payments under a tax sharing agreement or payments for employee or other services) would be adverse to policyholders or creditors, the regulators may block such payments that would otherwise be permitted without prior approval. Based on the dividend restrictions under applicable laws and regulations, the maximum amount of dividends that our subsidiaries could pay to us in 2005 without regulatory approval is approximately $364 million. Dividends paid by our subsidiaries totaled $361.7 million through December 31, 2004.


	SAP

SAP is a basis of accounting developed to assist insurance regulators in monitoring and regulating the solvency of insurance companies. It is primarily concerned with measuring an insurer’s statutory surplus. Accordingly, statutory accounting focuses on valuing assets and liabilities of insurers at financial reporting dates in accordance with appropriate insurance law and regulatory provisions applicable in each insurer’s domiciliary state.

GAAP is concerned with a company’s solvency, but it is also concerned with other financial measurements, such as income and cash flows. Accordingly, GAAP gives more consideration to appropriate matching of revenue and expenses and accounting for management’s stewardship of assets than does SAP. As a direct result, different assets and liabilities and different amounts of assets and liabilities will be reflected in financial statements prepared in accordance with GAAP as opposed to SAP.

SAP established by the NAIC and adopted, for the most part, by the various state insurance regulators determine, among other things, the amount of statutory surplus and statutory net income of our insurance subsidiaries and thus determine, in part, the amount of funds they have available to pay as dividends to us.


	Assessments for Guaranty Funds

Virtually all states require insurers licensed to do business in their state to bear a portion of the loss suffered by some insureds as a result of the insolvency of other insurers. Depending upon state law, insurers can be assessed an amount that is generally equal to between 1% and 3% of premiums written for the relevant lines of insurance in that state each year to pay the claims of an insolvent insurer. A portion of these payments is recoverable through premium rates, premium tax credits or policy surcharges. Significant increases in assessments could limit the ability of our insurance subsidiaries to recover such assessments through tax credits or other means. In addition, there have been some legislative efforts to limit or repeal the tax offset provisions, which efforts, to date, have been generally unsuccessful. These assessments are expected to increase in the future.


	Insurance Regulations Concerning Change of Control

Many state insurance regulatory laws intended primarily for the protection of policyholders contain provisions that require advance approval by the state insurance commissioner of any change in control of an insurance company that is domiciled, or, in some cases, having such substantial business that it is deemed to be commercially domiciled, in that state. Prior to granting such approval, the state insurance commissioner will consider such factors as the financial strength of the applicant, the integrity of the applicant’s board of directors and executive officers, the applicant’s plans for the future operations of the domestic insurer and any anti-competitive results that may arise from the consummation of the acquisition of control. We own, directly or indirectly, all of the shares of stock of insurance companies domiciled in the states listed in the “General” section above. “Control” is generally presumed to exist through the ownership of 10% (5% in the case of Florida, in which certain of our insurance subsidiaries are domiciled) or more of the voting securities of a domestic insurance company or of any company that controls a domestic insurance company. Any purchaser of shares of common stock representing 10% (5% in the case of Florida) or more of the voting power of our capital stock will be presumed to have acquired control of our domestic insurance subsidiaries unless, following application by that purchaser in each insurance subsidiary’s state of domicile, the relevant insurance commissioner determines otherwise.

In addition to these filings, the laws of many states contain provisions requiring pre-notification to state agencies prior to any change in control of a non-domestic insurance company admitted to transact business in that state. While these pre-notification statutes do not authorize the state agency to disapprove the change of control, they do authorize issuance of cease and desist orders with respect to the non-domestic insurer if it is determined that some conditions, such as undue market concentration, would result from the acquisition.

Any future transactions that would constitute a change in control of any of our insurance subsidiaries would generally require prior approval by the insurance departments of the states in which our insurance subsidiaries are domiciled or commercially domiciled and may require pre-acquisition notification in those states that have adopted pre-acquisition notification provisions and in which such insurance subsidiaries are admitted to transact business. Regulatory approval for a change of control may also be required in one or more of the foreign jurisdictions in which we have insurance subsidiaries.

These requirements may deter, delay or prevent transactions affecting the control of our common stock, including transactions that could be advantageous to our stockholders.


	Insurance Regulatory Information System (“IRIS”)

The NAIC IRIS was developed to help state regulators identify companies that may require special attention. The IRIS system consists of a statistical phase and an analytical phase whereby financial examiners review annual statements and financial ratios. The statistical phase consists of 12 key financial ratios based on year-end data that are generated from the NAIC database annually; each ratio has an established “usual range” of results. These ratios assist state insurance departments in executing their statutory mandate to oversee the financial condition of insurance companies.

A ratio result falling outside the usual range of IRIS ratios is not considered a failing result; rather, unusual values are viewed as part of the regulatory early monitoring system. Furthermore, in some years, it may not be unusual for financially sound companies to have several ratios with results outside the usual ranges. Generally, an insurance company will become subject to regulatory scrutiny if it falls outside the usual ranges of four or more of the ratios. In the past, variances in certain ratios of our insurance subsidiaries have resulted in inquiries from insurance departments, to which we have responded. These inquiries have not led to any restrictions affecting our operations.


	Risk-Based Capital (“RBC”) Requirements

In order to enhance the regulation of insurer solvency, the NAIC has adopted formulas and model laws to implement RBC requirements for life and health insurers, for property and casualty insurers, and, most recently, for health organizations. These formulas and model laws are designed to determine minimum capital requirements and to raise the level of protection that statutory surplus provides for policyholder obligations.

Under laws adopted by individual states, insurers having less total adjusted capital (generally, as defined by the NAIC), than that required by the relevant RBC formula will be subject to varying degrees of regulatory action, depending on the level of capital inadequacy. The RBC laws provide for four levels of regulatory action. The extent of regulatory intervention and action increases as the ratio of total adjusted capital to RBC falls. The first level, the company action level, requires an insurer to submit a plan of corrective actions to the regulator if total adjusted capital falls below 200% of the RBC amount (or below 250%, when the insurer has a “negative trend” as defined under the RBC laws). The second level, the regulatory action level, requires an insurer to submit a plan containing corrective actions and requires the relevant insurance commissioner to perform an examination or other analysis and issue a corrective order if total adjusted capital falls below 150% of the RBC amount. The third level, the authorized control level, authorizes the relevant insurance commissioner to take whatever regulatory actions considered necessary to protect the best interests of the policyholders and creditors of the insurer, which may include the actions necessary to cause the insurer to be placed under regulatory control, i.e., rehabilitation or liquidation, if total adjusted capital falls below 100% of the RBC amount. The fourth action level is the mandatory control level, which requires the relevant insurance commissioner to place the insurer under regulatory control if total adjusted capital falls below 70% of the RBC amount.

The formulas have not been designed to differentiate among adequately capitalized companies that operate with higher levels of capital. Therefore, it is inappropriate and ineffective to use the formulas to rate or to rank these companies. At December 31, 2004, all of our insurance subsidiaries had total adjusted capital in excess of amounts requiring company or regulatory action at any prescribed RBC action level.


	*Federal Regulation*


	General

In 1945, the U.S. Congress enacted the McCarran-Ferguson Act which declared the regulation of insurance to be primarily the responsibility of the individual states. Although repeal of McCarran-Ferguson is debated in the U.S. Congress from time to time, the federal government generally does not directly regulate the insurance business. However, federal legislation and administrative policies in several areas, including healthcare, pension regulation, age and sex discrimination, financial services regulation, securities regulation, privacy laws, terrorism and federal taxation, do affect the insurance business.


	Federal Securities Regulation of Fortis Variable Insurance Product Business

Two of our subsidiaries, Fortis Benefits Insurance Company and First Fortis Life Insurance Company, are subject to various federal securities regulations because they have been involved in the issuance of variable insurance products that are required to be registered as securities under the Securities Act. These registered insurance contracts, which are no longer being sold, have been 100% reinsured with The Hartford through modified coinsurance agreements. The Hartford now administers this closed block of business pursuant to a third-party administration agreement. Nevertheless, because these two subsidiaries are still considered the

issuers of the products, they are subject to regulation by the Securities and Exchange Commission (“SEC”). As a result, they must file periodic reports under the Securities Exchange Act of 1934, as amended (“Exchange Act”) and are periodically examined for compliance with applicable federal securities laws by the SEC. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Factors Affecting Results — Acquisitions and Dispositions of Businesses.”


	HIPAA

As with other lines of insurance, the regulation of health insurance historically has been within the domain of the states. However, HIPAA and the implementing regulations promulgated thereunder by the Department of Health and Human Services impose new obligations for issuers of health and dental insurance coverage and health and dental benefit plan sponsors. HIPAA requires certain guaranteed issuance and renewability of health insurance coverage for individuals and small employer groups (generally 50 or fewer employees) and limits exclusions based on pre-existing conditions. Most of the insurance reform provisions of HIPAA became effective for plan years beginning on or after July 1, 1997.

HIPAA also establishes new requirements for maintaining the confidentiality and security of individually identifiable health information and new standards for electronic health care transactions. The Department of Health and Human Services promulgated final HIPAA regulations in 2002. The privacy regulations required compliance by April 2003, the electronic transactions regulations by October 2003 and the security regulations by April 2005. As have other entities in the health care industry, we have incurred substantial costs in meeting the requirements of these HIPAA regulations and expect to continue to incur costs to achieve and to maintain compliance. We have been working diligently to comply with these regulations in the time periods required. However, there can be no assurances that we will achieve such compliance with all of the required transactions or that other entities with which we interact will take appropriate action to meet the compliance deadlines. Moreover, as a consequence of these new standards for electronic transactions, we may see an increase in the number of health care transactions that are submitted to us in paper format, which could increase our costs to process medical claims.

HIPAA is far-reaching and complex and proper interpretation and practice under the law continue to evolve. Consequently, our efforts to measure, monitor and adjust our business practices to comply with HIPAA are ongoing. Failure to comply could result in regulatory fines and civil lawsuits. Knowing and intentional violations of these rules may also result in federal criminal penalties.


	The Terrorism Risk Insurance Act

On November 26, 2002, the Terrorism Risk Insurance Act was enacted to ensure the availability of insurance coverage for terrorist acts in the United States. This law requires insurers writing certain lines of property and casualty insurance to offer coverage against certain acts of terrorism causing damage within the United States or to U.S. flagged vessels or aircraft. In return, the law requires the federal government to indemnify such insurers for 90% of insured losses resulting from covered acts of terrorism, subject to a premium-based deductible. Any existing policy exclusions for such coverage were immediately nullified by the law, although such exclusions may be reinstated if either the insured consents to reinstatement or fails to pay any applicable increase in premium resulting from the additional coverage within 30 days of being notified of such an increase. It should be noted that an “act of terrorism” as defined by the law excludes purely domestic terrorism. For an act of terrorism to have occurred, the U.S. Secretary of the Treasury must make several findings, including that the act was committed on behalf of a foreign person or foreign interest. The law expires automatically at the end of 2005, although legislation has been introduced to extend the law through 2007.

The Terrorism Risk Insurance Act required the U.S. Secretary of the Treasury to conduct an expedited study as to whether or not group life insurance should be covered under the law. Based on the study, the Secretary concluded that inclusion of group life insurance was not appropriate.

We have a geographically diverse block of group life business and have secured limited reinsurance protection against catastrophic losses in our group life product line. Nevertheless, we are exposed to the risk of substantial group life losses from a catastrophe, including a terrorist act.

Given that our property and casualty insurance products primarily cover personal residences and personal property, we do not believe our property and casualty exposure to terrorist acts to be significant.


	Obstruct Terrorism Act of 2001(“USA PATRIOT Act”)

On October 26, 2001, the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 was enacted into law as part of the USA PATRIOT Act. Among its many provisions the law requires that financial institutions adopt anti-money laundering programs that include policies, procedures and controls to detect and prevent money laundering, designate a compliance officer to oversee the program and provide for employee training, and periodic audits in accordance with regulations proposed by the U.S. Treasury Department. Proposed Treasury regulations governing portions of our life insurance business would require us to develop and implement procedures designed to detect and prevent money laundering and terrorist financing. We remain subject to U.S. regulations that prohibit business dealings with entities identified as threats to national security. We have licensed software to enable us to detect and prevent such activities in compliance with existing regulations and we are developing policies and procedures designed to comply with the proposed regulations should they come into effect.

There are significant criminal and civil penalties that can be imposed for violation of the aforementioned Treasury regulations. We believe that the steps we are taking to comply with the current regulations and to prepare for compliance with the proposed regulations should be sufficient to minimize the risks of such penalties.


	Gramm-Leach-Bliley Act

On November 12, 1999, the Gramm-Leach-Bliley Act of 1999 became law, implementing fundamental changes in the regulation of the financial services industry in the United States. The Act permits the transformation of the already converging banking, insurance and securities industries by permitting mergers that combine commercial banks, insurers and securities firms under one holding company. Under the Act, national banks retain their existing ability to sell insurance products in some circumstances. In addition, bank holding companies that qualify and elect to be treated as “financial holding companies” may engage in activities, and acquire companies engaged in activities, that are “financial” in nature or “incidental” or “complementary” to such financial activities, including acting as principal, agent or broker in selling life, property and casualty and other forms of insurance, including annuities. A financial holding company can own any kind of insurance company or insurance broker or agent, but its bank subsidiary cannot own the insurance company. Under state law, the financial holding company would need to apply to the insurance commissioner in the insurer’s state of domicile for prior approval of the acquisition of the insurer, and the act provides that the commissioner, in considering the application, may not discriminate against the financial holding company because it is affiliated with a bank. Under the Act, no state may prevent or interfere with affiliations between banks and insurers, insurance agents or brokers, or the licensing of a bank or affiliate as an insurer or agent or broker. Privacy provisions of the Act became fully effective in 2001. These provisions established consumer protections regarding the security and confidentiality of nonpublic personal information and require us to make full disclosure of our privacy policies to our customers.


	Regulation by the Federal Reserve Board

Fortis Bank, which is a company in the Fortis Group, obtained approval in 2002 from state banking authorities and the Federal Reserve to establish branch offices in Connecticut and New York. By virtue of the opening of these offices, the Fortis Group’s operations and investments (including the Fortis Group’s investment in us) became subject to the nonbanking prohibitions of Section 4 of the U.S. Bank Holding Company Act (“BHCA”). Except to the extent that a BHCA exemption or authority is available, Section 4 of the BHCA does not permit foreign banking organizations with U.S. branches to own more than 5% of any class of voting shares or otherwise to control any company that conducts commercial activities, such as manufacturing, distribution of goods or real estate development.

To broaden the scope of activities and investments permissible for the Fortis Group and us, the Fortis Group in 2002 notified the Federal Reserve of its election to be a “financial holding company” for purposes of the BHCA and the Federal Reserve’s implementing regulations in Regulation Y. As a financial holding company, the Fortis Group may own shares of companies engaged in activities in the United States that are “financial in nature,” “incidental to such financial activity” or “complementary to a financial activity.” Activities that are “financial in nature” include, among other things: insuring, guaranteeing or indemnifying against loss, harm, damage, illness, disability or death, or providing and issuing annuities and acting as principal, agent or broker for purposes of the foregoing.

In connection with Fortis Bank’s establishment of U.S. branches, staff of the Federal Reserve inquired as to whether certain of our activities are financial in nature under Section 4(k) of the BHCA. In light of the Fortis Group’s contemplated divestiture of our shares, this inquiry was suspended at the Fortis Group’s and our request. To the extent that any of our activities might be deemed not to be financial in nature under Section 4(k), the Fortis Group may rely on an exemption in Section 4(a)(2) of the BHCA that permits the Fortis Group to continue to hold interests in companies engaged in activities that are not financial in nature for an initial period of two years and, with Federal Reserve approval for each extension, for up to three additional one-year periods. The Federal Reserve also has the discretion to permit the Fortis Group to hold such interests after the five-year period under certain provisions other than Section 4(a)(2). The initial two-year period under Section 4(a)(2) expired on December 2, 2004. The Fortis Group has requested an initial one-year extension of the divestiture period.

If the Federal Reserve does not grant an extension of the divestiture period for any one-year period or if Fortis holds more than 5% of any class of our voting shares after December 2, 2007, without the consent or acquiescence of the Federal Reserve, and the Federal Reserve determined that certain of our activities are nonfinancial, the Fortis Group may be required (i) to rely on another provision of the BHCA, (ii) to close the U.S. branches of Fortis Bank, or (iii) to divest any of our shares exceeding 5% of any class of our voting shares and to divest any control over us for purposes of the BHCA.

The Fortis Group will continue to qualify as a financial holding company so long as Fortis Bank remains “well capitalized” and “well managed,” as those terms are defined in Regulation Y. Generally, Fortis Bank will be considered “well capitalized” if it maintains tier 1 and total RBC ratios of at least 6% and 10%, respectively. The Fortis Group will be considered “well managed” if it has received at least a satisfactory composite rating of its U.S. branch operations at its most recent examination. If the Fortis Group lost and were unable to regain its financial holding company status, the Fortis Group could be required (i) to close the U.S. branches of Fortis Bank or (ii) to divest any of our shares exceeding 5% of any class of our voting securities and to divest any control over us for purposes of the BHCA.

In addition, the Federal Reserve has jurisdiction under the BHCA over all of the Fortis Group’s direct and indirect U.S. subsidiaries. We and our subsidiaries will be considered subsidiaries of the Fortis Group for purposes of the BHCA so long as the Fortis Group owns 25% or more of any class of our voting shares or otherwise controls or has been determined to have a controlling influence over us within the meaning of the BHCA. The Federal Reserve could take the position that the Fortis Group continues to control us until the Fortis Group reduces its ownership to less than 5% of our voting shares. So long as the Fortis Group controls us for purposes of the BHCA, the Federal Reserve could require us immediately to discontinue, restructure or divest any of our operations that are deemed to be impermissible under the BHCA, which could result in reduced revenues, increased costs or reduced profitability for us.


	*Legislative Developments*

Legislation has been introduced in the U.S. Congress that would allow state-chartered and regulated insurance companies, such as our insurance subsidiaries, to choose instead to be regulated exclusively by a federal insurance regulator. We do not believe that such legislation will be enacted during the current Congressional term.

Numerous proposals to reform the current health care system have been introduced in the U.S. Congress and in various state legislatures. Proposals have included, among other things, modifications to the existing

employer-based insurance system, a quasi-regulated system of “managed competition” among health insurers, and a single-payer, public program. Changes in health care policy could significantly affect our business. For example, federally mandated, comprehensive major medical insurance, if proposed and implemented, could partially or fully replace some of our current products. Furthermore, legislation has been introduced from time to time in the U.S. Congress that could result in the federal government assuming a more direct role in regulating insurance companies.

In addition, the U.S. Congress is considering the expansion of risk retention groups, which were originally established in 1986 to address the lack of available product liability insurance. Risk retention groups may be chartered in a state with favorable regulations and then proceed to do business in any state, even though insurance companies competing in the other states may be subject to more stringent regulations. This is a continuing risk to the extended service contract business at Assurant Solutions.

There is also legislation pending in the U.S. Congress and in various states designed to provide additional privacy protections to consumer customers of financial institutions. These statutes and similar legislation and regulations in the United States or other jurisdictions could affect our ability to market our products or otherwise limit the nature or scope of our insurance operations.

The NAIC and individual states have been studying small face amount life insurance for the past two years. Some initiatives that have been raised at the NAIC include further disclosure for small face amount policies and restrictions on premium to benefit ratios. The NAIC is also studying other issues such as “suitability” of insurance products for certain customers. This may have an effect on our pre-funded funeral insurance business. Suitability requirements such as a customer assets and needs worksheet could extend and complicate the sale of pre-funded funeral insurance products.

MSA’s were created by U.S. Congress as a trial program in 1996. MSAs allow self-employed individuals, as well as employees of small employers (i.e., employers with 50 or fewer employees), to set aside funds on a tax-free basis for the purpose of paying eligible medical expenses, so long as such persons are covered under a high-deductible health insurance policy. MSA health insurance policies have become an important and growing product line for Assurant Health. On December 8, 2003, The Act was signed into law. The Act includes a provision providing for HSAs. In addition, the House passed a 12-month extension on MSAs, providing a transition period for the continued offering of MSAs.

We are unable to evaluate new legislation that may be proposed and when or whether any such legislation will be enacted and implemented. However, many of the proposals, if adopted, could have a material adverse effect on our financial condition, cash flows or results of operations, while others, if adopted, could potentially benefit our business.

Foreign Jurisdictions

A portion of our business is carried on in foreign countries. We have insurance subsidiaries domiciled in Argentina, Brazil, Mexico, the Dominican Republic, the Turks and Caicos Islands and the United Kingdom. Certain subsidiaries operate in Canada under the branch system. The degree of regulation and supervision in foreign jurisdictions varies from minimal in some to stringent in others. Generally, our insurance subsidiaries operating in such jurisdictions must satisfy local regulatory requirements. Licenses issued by foreign authorities to our insurance subsidiaries are subject to modification or revocation by such authorities, and these subsidiaries could be prevented from conducting business in certain of the jurisdictions where they currently operate. In the past, we have been allowed to modify our operations to conform with new licensing requirements in most jurisdictions.

In addition to licensing requirements, our foreign operations are also regulated in various jurisdictions with respect to: currency, policy language and terms, amount and type of security deposits, amount and type of reserves, amount and type of local investment and the share of profits to be returned to policyholders on participating policies.

Some foreign countries regulate rates on various types of policies. Certain countries have established reinsurance institutions, wholly or partially owned by the state, to which admitted insurers are obligated to

cede a portion of their business on terms which do not always allow foreign insurers full compensation. In some countries, regulations governing constitution of technical reserves and remittance balances may hinder remittance of profits and repatriation of assets.

Employees

As of March 4, 2005, we had approximately 12,000 employees. In Assurant Solutions, we have employees in Brazil, Mexico and Argentina who are represented by labor unions. None of our other employees are subject to collective bargaining agreements governing employment with us or represented by labor unions. We believe that we have an excellent relationship with our employees.


Item 2.	*Properties*

We own seven properties, including five buildings that serve as headquarters locations for our operating business segments and two buildings that serve as operation centers for Assurant Solutions. Assurant Solutions has headquarters buildings located in Miami, Florida and Atlanta, Georgia. Assurant Solutions operation centers are located in Florence, South Carolina and Springfield, Ohio. Assurant Employee Benefits has a headquarters building in Kansas City, Missouri. Assurant Health has a headquarters building in Milwaukee, Wisconsin. Assurant PreNeed’s AMLIC channel has a headquarters building in Rapid City, South Dakota. We lease office space for various offices and service centers located throughout the United States and internationally, including our New York corporate office, Assurant PreNeed’s independent distribution headquarters in Atlanta and our data center in Woodbury, Minnesota. Our leases have terms ranging from month-to-month to twenty-five years. We believe that our owned and leased properties are adequate for our current business operations.


Item 3.	*Legal Proceedings*

We are regularly involved in litigation in the ordinary course of business, both as a defendant and as a plaintiff. We may from time to time be subject to a variety of legal and regulatory actions relating to our current and past business operations. While we cannot predict the outcome of any pending or future litigation, examination or investigation and although no assurances can be given, we do not believe that any pending matter will have a material adverse effect on our financial condition or results of operations.

The Assurant Solutions segment is subject to a number of pending actions, primarily in the State of Mississippi, many of which allege that our credit insurance products were packaged and sold with lenders’ products without buyer consent. The judicial climate in Mississippi is such that the outcome of these cases is extremely unpredictable. We have been advised by legal counsel that we have meritorious defenses to all claims being asserted against us. We believe, based on information currently available, that the amounts accrued for any losses are adequate.

One of our subsidiaries, American Reliable Insurance Company (“ARIC”), participated in certain excess of loss reinsurance programs in the London market and, as a result, reinsured certain personal accident, ransom and kidnap insurance risks from 1995 to 1997. ARIC and a foreign affiliate ceded a portion of these risks to retrocessionaires. ARIC ceased reinsuring such business in 1997. However, certain risks continued beyond 1997 due to the nature of the reinsurance contracts written. ARIC and some of the other reinsurers involved in the programs are seeking to avoid certain treaties on various grounds, including material misrepresentation and non-disclosure by the ceding companies and intermediaries involved in the programs. Similarly, some of the retrocessionaires are seeking avoidance of certain treaties with ARIC and the other reinsurers and some reinsureds are seeking collection of disputed balances under some of the treaties. The disputes generally involve multiple layers of reinsurance, and allegations that the reinsurance programs involved interrelated claims “spirals” devised to disproportionately pass claims losses to higher-level reinsurance layers. Many of the companies involved in these programs, including ARIC, are currently involved in negotiations, arbitrations and/or litigation between multiple layers of retrocessionaires, reinsurers, ceding companies and intermediaries, including brokers, in an effort to resolve these disputes. Many of those disputes relating to the 1995 program year, including those involving ARIC, were settled on December 3, 2003. Loss

accruals previously established relating to the 1995 program year were adequate. However, our exposure under the 1995 program year was less significant than the exposure remaining under the 1996 and 1997 program years. While the majority of the negotiations, arbitrations and/or litigations between the multiple layers of reinsurers, ceding companies and intermediaries are still ongoing, ARIC and an affiliated company, Bankers Insurance Company Limited (BICL), did resolve disputes with two of its reinsurers in the 1996 and 1997 program years by means of a commutation agreement. As a result of the settlement, the two affiliated reinsurers paid ARIC and BICL $6 million and both parties agreed to release each other from any past, present or future obligations of any kind.

We were notified on August 26, 2004 that one of our employees is being investigated by the criminal division of the IRS for responses he made to questions he was asked by the IRS relating to an approximately $18 million tax reserve taken by us in 1999. At this stage, it would be speculative to predict the outcome of this investigation. However, it could result in a fine assessed against the employee and the Company, negative publicity for the Company or more serious sanctions.

We believe, based on information currently available, that the amounts accrued for currently outstanding disputes are adequate. The inherent uncertainty of arbitrations and lawsuits, including the uncertainty of estimating whether any settlements we may enter into in the future, would be on favorable terms, makes it difficult to predict the outcomes with certainty.

As a result of regulatory scrutiny of our industry practices or our businesses, such as examinations of race-based premiums charged in the past by two of our acquired subsidiaries, it is possible that we may be subject to legal proceedings in the future relating to those practices and businesses. See “Item 1 — Business — Regulation.”

See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Factors.”


Item 4.	*Submission of Matters to a Vote of Security Holders*

No matter was submitted to a vote of stockholders of Assurant, Inc. during the fourth quarter of 2004.

Part II


Item 5.	*Market For Registrant’s Common Equity and Related Stockholder Matters*

Common Stock Price

Our common stock is listed on the NYSE under the symbol “AIZ”. The following table sets forth the high and low intraday sales prices per share of our common stock as reported by the NYSE since our initial public offering in February 2004 for the periods indicated.


Year Ended December 31, 2004	High		Low

First Quarter (from February 5, 2004)	$	26.19	$	23.09
Second Quarter		26.59		23.48
Third Quarter		27.03		23.86
Fourth Quarter		31.29		24.92


Year Ended December 31, 2005	High		Low

First Quarter (through March 24, 2005)	$	35.01	$	29.70

Holders

On March 4, 2005, there were approximately 115 registered holders of record of our common stock, and we estimate that there were approximately 42,000 beneficial owners of our common stock. The closing price of our common stock on the NYSE on March 24, 2005 was $33.65

Shares Repurchased


								Maximum
						Total Number of		Number of Shares
						Shares Purchased as		that may yet be
	Total Number					Part of Publicly		Purchased under
	of Shares			Average Price		Announced Plans or		the Plans or
Period in 2004	Purchased			Paid per Share		Programs		Programs(2)

April		—			—		—		—
May		28,626	(1)	$	24.75		—		—
June		3,500	(1)		25.65		—		—
July		—			—		—		—
August		896,300	(2)		25.74		896,300		—
September		458,900	(1)(2)		26.51		458,800		—
October		953,500	(2)		25.99		953,500		—
November		104,200	(1)(2)		26.92		102,900		—
December		100	(1)		29.81		—		—
Total		2,445,126		$	26.02		2,411,500		11,815,311


(1)	Shares were purchased by a rabbi trust pursuant to the Company’s Executive 401(k) Plan in open market purchases. The shares are held of record in the name of the trust, and continue to be considered issued and outstanding. For accounting purposes, however, these shares are classified as treasury shares and are also excluded from the calculation of basic earnings per share.

(2)	On August 2, 2004, the Company announced that its Board of Directors had approved a share repurchase program under which the Company may repurchase up to 10% of its outstanding common stock.

Dividend Policy

On February 9, 2005 we announced that our board of directors has declared a quarterly dividend of $0.07 per common shares payable on March 14, 2005 to shareholders of record as of February 28, 2005. We paid dividends of $0.07 per share of common stock on June 8, 2004, September 7, 2004 and December 7, 2004. Any determination to pay future dividends will be at the discretion of our board of directors and will be dependent upon: our subsidiaries’ payment 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; any legal, tax, regulatory and contractual restrictions on the payment of dividends; and any other factors our board of directors deems relevant.

We are a holding company and, therefore, our ability to pay dividends, service our debt and meet our other obligations depends primarily on the ability of our insurance subsidiaries to pay dividends and make other statutorily permissible payments to us. Our insurance subsidiaries are subject to significant regulatory and contractual restrictions limiting their ability to declare and pay dividends. See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Factors — Risks Relating to Our Company — The inability of our subsidiaries to pay dividends to us in sufficient amounts could harm our ability to meet our obligations and pay future stockholder dividends.” For the calendar year 2005, the maximum amount of dividends that our subsidiaries could pay to us under applicable laws and regulations without prior regulatory approval is approximately $364 million. Dividends paid by our subsidiaries totaled $361.7 million through December 31, 2004.

We may seek approval of regulators to pay dividends in excess of any amounts that would be permitted without such approval. However, there can be no assurance that we would seek such approval or would obtain such approval.

In addition, payments of dividends on the shares of common stock are subject to the preferential rights of preferred stock that our board of directors may create from time to time. For more information regarding restrictions on the payment of dividends by us and our insurance subsidiaries, including pursuant to the terms

of our revolving credit facilities, see “Item 1 — Business — Regulation — United States — State Regulation — Insurance Regulation Concerning Dividends and — SAP” and “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

In addition, our $500 million senior revolving credit facility restricts payments of dividends in the event that an event of default under the facility has occurred or a proposed dividend payment would cause an event of default under the facility.


Item 6.	*Selected Financial Data*

Five-Year Summary of Selected Financial Data Assurant, Inc.


		As of and for the Years Ended December 31,

		2004			2003		2002			2001			2000

		(In thousands, except share amounts and per share data)
Consolidated Statement of Operations Data:
*Revenues*
Net earned premiums and other considerations		$	6,482,871		$	6,156,772	$	5,681,596		$	5,242,185		$	5,144,375
Net investment income			634,749			607,313		631,828			711,782			690,732
Net realized gains (losses) on investments			24,308			1,868		(118,372	)		(119,016	)		(44,977	)
Amortization of deferred gain on disposal of businesses			57,632			68,277		79,801			68,296			10,284
(Loss)/ Gain on disposal of businesses			(9,232	)		—		10,672			61,688			11,994
Fees and other income			213,136			231,983		246,675			221,939			399,571

	Total revenues		7,403,464			7,066,213		6,532,200			6,186,874			6,211,979


			As of and for the Years Ended December 31,

			2004		2003		2002			2001		2000

			(In thousands, except share amounts and per share data)
*Benefits, losses and expenses*
Policyholder benefits				3,839,769		3,657,763		3,435,175			3,240,091		3,208,054
Amortization of deferred acquisition costs and value of businesses acquired				862,568		863,647		732,010			648,918		486,284
Underwriting, general and administrative expenses				2,106,618		1,965,491		1,876,222			1,846,550		2,081,816
Amortization of goodwill				—		—		—			113,300		106,773
Interest expense				56,418		1,175		—			14,001		24,726
Distributions on mandatorily redeemable preferred securities				2,163		112,958		118,396			118,370		110,142
Interest premium on redemption of preferred securities				—		205,822		—			—		—

		Total benefits, losses and expenses		6,867,536		6,806,856		6,161,803			5,981,230		6,017,795
	Income before income taxes and cumulative effect of change of accounting principle			535,928		259,357		370,397			205,644		194,184
Income taxes				185,368		73,705		110,657			107,591		104,500

		Net income before cumulative effect of change in accounting principle		350,560		185,652		259,740			98,053		89,684
Cumulative effect of change in accounting principle(1)				—		—		(1,260,939	)		—		—

		Net income (loss)	$	350,560	$	185,652	$	(1,001,199	)	$	98,053	$	89,684

Earnings per share:
Basic and Diluted
Net income before cumulative effect of change in accounting principle			$	2.53	$	1.70	$	2.38		$	0.90	$	0.85
Cumulative effect of change in accounting principle				—		—		(11.55	)		—		—

Net income (loss)			$	2.53	$	1.70	$	(9.17	)	$	0.90	$	0.85

Dividends per share			$	0.21	$	1.66	$	0.38		$	1.00	$	0.20


	As of and for the Years Ended December 31,

	2004		2003		2002		2001		2000

	(In thousands, except share amounts and per share data)
Share Data:
Weighted average shares outstanding used in per share calculations		138,358,767		109,222,276		109,222,276		109,222,276		104,915,373
Plus: Dilutive securities		108,797		—		—		—		—

Weighted average shares used in diluted per share calculations		138,467,564		109,222,276		109,222,276		109,222,276		104,915,373

Selected Consolidated Balance Sheet Data:
Cash and cash equivalents and investments	$	12,955,128	$	12,302,585	$	11,071,537	$	10,605,861	$	11,047,330
Total assets		24,503,896		24,060,016		22,634,469		24,827,436		24,392,536
Policy liabilities(2)		13,381,936		12,840,554		12,388,623		12,064,643		11,534,891
Debt		971,611		1,750,000		—		—		238,983
Mandatorily redeemable preferred securities		—		196,224		1,446,074		1,446,074		1,449,738
Mandatorily redeemable preferred stock		24,160		24,160		24,660		25,160		25,160
Total shareholder’s equity		3,635,431		2,632,103		2,555,059		3,452,405		3,367,713
Per Share Data:
Total book value per share(3)	$	26.01	$	24.10	$	23.39	$	31.61	$	30.83


(1)	On January 1, 2002 we adopted FAS 142. As a result, we recognized a non-cash goodwill impairment charge of $1,261 million. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Significant Accounting Standard Affecting Our Business.”

(2)	Policy liabilities include future policy benefits and expenses, unearned premiums and claims and benefits payable.

(3)	Total stockholders’ equity divided by the basic shares of common stock outstanding. At December 31, 2004 there were 139,766,177 shares of common stock outstanding. At December 31, 2003, 2002, 2001 and 2000, there were 109,222,276 shares of common stock outstanding.


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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and accompanying notes which appear elsewhere in this report. It contains forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” for more information. Our actual results could 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 “— Risk Factors” and “Forward-Looking Statements.”

General

We pursue a differentiated strategy of building leading positions in specialized market segments for insurance products and related services in North America and selected other markets. We provide: creditor-placed homeowners insurance; manufactured housing homeowners insurance; debt protection administration; credit insurance; warranties and extended service contracts; individual health and small employer group health

insurance; group dental insurance; group disability insurance; group life insurance and pre-funded funeral insurance.

The markets we target are generally complex, have a relatively limited number of competitors and, we believe, offer attractive profit opportunities.

We report our results through five segments: Assurant Solutions, Assurant Health, Assurant Employee Benefits, Assurant PreNeed and Corporate and Other. The Corporate and Other segment includes activities of the holding company, financing expenses, net realized gains (losses) on investments, interest income earned from short-term investments held and interest income from excess surplus of insurance subsidiaries not allocated to other segments. The Corporate and Other segment also includes the amortization of deferred gains associated with the portions of the sales of FFG and LTC. FFG and LTC were sold through reinsurance agreements as described below.

Critical Factors Affecting Results

Our profitability depends on the adequacy of our product pricing, underwriting and the accuracy of our methodology for the establishment of reserves for future policyholder benefits and claims, returns on invested assets and our ability to manage our expenses. As such, factors affecting these items may have a material adverse effect on our results of operations or financial condition.


	*Revenues*

We derive our revenues primarily from the sale of our insurance policies and, to a lesser extent, fee income by providing administrative services to certain clients. Sales of insurance policies are recognized in revenue as earned premiums while sales of administrative services are recognized as fee income. In late 2000, the majority of our credit insurance clients began a transition from the purchase of our credit insurance products from which we earned premium revenue to debt protection administration programs, from which we earn fee income. Debt protection administration programs include services for non-insurance products that cancel or defer the required monthly payment on outstanding loans when covered events occur.

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. Our investment portfolio is currently primarily invested in fixed maturity securities. Both investment income and realized capital gains on these investments can be significantly impacted by changes in interest rates.

Interest rate volatility can reduce unrealized gains or create unrealized losses in our 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 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 decease with interest rates. In addition, actual net investment income and/or cash flows from investments that carry prepayment risk, such as mortgage-backed and other asset-backed securities, may differ from those anticipated at time of investment as a result of interest rate fluctuations. In periods of declining interest rates, mortgage prepayments generally increase and mortgage-backed securities, commercial mortgage obligations and bonds in our investment portfolio are more likely to be prepaid or redeemed as borrowers seek to borrow at lower interest rates, and we may be required to reinvest those funds in lower interest-bearing investments.

In addition, Assurant PreNeed generally writes whole life insurance policies with increasing death benefits. As of December 31, 2004, approximately 83% of Assurant PreNeed’s in force insurance policy reserves relate to policies that provide for death benefit growth that is either pegged to changes in the CPI or determined periodically at the discretion of the Company. In extended periods of declining interest rates or high inflation, there may be compression in the spread between Assurant PreNeed’s death benefit growth rates

and its investment earnings. As a result, declining interest rates or high inflation rates may have a material adverse effect on our results of operations and our overall financial condition.


	*Expenses*

Our expenses primarily consist of policyholder benefits, underwriting, general and administrative expenses, and distributions on preferred securities of subsidiary trusts.

Selling, underwriting and general expenses consist primarily of commissions, premium taxes, licenses, fees, amortization of deferred acquisition costs (“DAC”) and value of businesses acquired (“VOBA”) and general operating expenses. For a description of DAC and VOBA, see Notes 2, 19 and 20 of the Notes to Consolidated Financial Statements included elsewhere in this report.

Our profitability depends in large part on accurately predicting benefits, claims and other costs, including medical and dental costs. It also depends on our ability to manage future benefit and other costs through product design, underwriting criteria, utilization review or claims management and, in health and dental insurance, negotiation of favorable provider contracts. Changes in the composition of the kinds of work available in the economy, market conditions and numerous other factors may also materially adversely affect our ability to manage claim costs. As a result of one or more of these factors or other factors, claims could substantially exceed our expectations, which could have a material adverse effect on our business, results of operations and financial condition.

In 2004, we granted approximately 3.9 million stock appreciation rights to our employees and directors. For every dollar by which our stock price exceeds $22.00, we will recognize an expense of approximately $3 million.

At December 31, 2003, and December 31, 2004, we had $1,970 million and $996 million, respectively of debt and preferred stock. This has had an impact on our annual interest and dividend costs.

We will need to comply with certification requirements under Section 404 of the Sarbanes Oxley Act as of December 31, 2005, and we expect to incur increased expenses to comply with these requirements.


	*Regulation*

Legislation or other regulatory reform that increases the regulatory requirements imposed on us or that changes the way we are able to do business may significantly harm our business or results of operations in the future. For example, some states have imposed new time limits for the payment of uncontested covered claims and require health care and dental service plans to pay interest on uncontested claims not paid promptly within the required time period. Some states have also granted their insurance regulatory agencies additional authority to impose monetary penalties and other sanctions on health and dental plans engaging in certain “unfair payment practices.” If we were to be unable for any reason to comply with these requirements, it could result in substantial costs to us and may materially adversely affect our results of operations and financial condition. In addition, in some of our businesses, such as individual medical products, our revenues and net income will be affected by our ability to get regulatory approval for rate increases. Where rate increases are unacceptable to us, we could withdraw from a state but may for a limited period of time be required to participate in state sponsored risk pools for our former insureds who cannot get replacement policies.

For other factors affecting our results of operations or financial condition, see “— Risk Factors.”


	*Acquisitions and Dispositions of Businesses*

Our results of operations were affected by the following material dispositions, including:

On May 3, 2004, we sold the assets of our WorkAbility division of CORE, Inc. (“CORE”). We recorded a pre-tax loss on the sale of $9 million, which was included in the Corporate and Other segment.


	On June 28, 2002, we sold our 50% ownership in Neighborhood Health Partnership (“NHP”) to NHP Holding LLC. We recorded pre-tax gains on sale of $11 million, which was included in the Corporate and Other segment.

Critical Accounting Estimates

There are certain accounting policies that we consider to be critical due to the amount of judgment and uncertainty inherent in the application of those policies. In calculating financial statement estimates, the use of different assumptions could produce materially different estimates. In addition, if factors such as those described above or in “— Risk Factors” cause actual events to differ from the assumptions used in applying the accounting policies and calculating financial estimates, there could be a material adverse effect on our results of operations, financial condition and liquidity.

We believe the following critical accounting policies require significant estimates which, if such estimates are not materially correct, could affect the preparation of our consolidated financial statements. Also, see “— Reserves” for the sensitivity analysis of our significant critical accounting estimates.


	*Premiums*


	Short Duration Contracts

Our short duration contracts are those on which we recognize revenue on a pro rata basis over the contract term. Our short duration contracts primarily include: group term life, group disability, group medical and group dental, property and warranty, credit life and disability and extended service contracts and individual medical contracts issued after 2002 in most jurisdictions.


	Long Duration Contracts

Currently, our long duration contracts being sold are pre-funded funeral life insurance and investment-type annuities. For pre-funded funeral life insurance policies, any excess of the gross premium over the net premium is deferred and is recognized in income in a constant relationship with the insurance in force. For pre-funded funeral investment-type annuity contracts, revenues consist of charges assessed against policy balances.

For individual medical contracts sold prior to 2003 and currently in a limited number of jurisdictions and traditional life insurance contracts sold by Assurant PreNeed that are no longer offered, revenue is recognized when due from policyholders.

For universal life insurance and investment-type annuity contracts sold by Assurant Solutions that are no longer offered, revenues consist of charges assessed against policy balances.

Premiums for LTC insurance and traditional life insurance contracts within FFG are recognized as revenue when due from the policyholder. For universal life insurance and investment-type annuity contracts within FFG, revenues consist of charges assessed against policy balances. For the FFG and LTC businesses previously sold, all revenue is ceded to The Hartford and John Hancock, respectively.


	Reinsurance Assumed

Reinsurance premiums assumed are calculated based upon payments received from ceding companies together with accrual estimates which are based on both payments received and in force policy information received from ceding companies. Any subsequent differences arising on such estimates are recorded in the period in which they are determined.


	*Fee Income*

We primarily derive income from fees received from providing administration services. Fee income is earned when services are performed.


	*Reserves*

Reserves are established according to GAAP, using generally accepted actuarial methods and are based on a number of factors. These factors include experience derived from historical claim payments and actuarial assumptions to arrive at loss development factors. Such assumptions and other factors include trends, the incidence of incurred claims, the extent to which all claims have been reported and internal claims processing charges. The process used in computing reserves cannot be exact, particularly for liability coverages, since actual claim costs are dependent upon such complex factors as inflation, changes in doctrines of legal liability and damage awards. The methods of making such estimates and establishing the related liabilities are periodically reviewed and updated.

Reserves, whether calculated under GAAP or SAP, do not represent an exact calculation of exposure, but instead represent our best estimates, generally involving actuarial projections at a given time, of what we expect the ultimate settlement and administration of a claim or group of claims will cost based on our assessment of facts and circumstances then known. The adequacy of reserves will be impacted by future trends in claims severity, frequency, judicial theories of liability and other factors. These variables are affected by both external and internal events, such as: changes in the economic cycle, changes in the social perception of the value of work, emerging medical perceptions regarding physiological or psychological causes of disability, emerging health issues and new methods of treatment or accommodation, inflation, judicial trends, legislative changes and claims handling procedures.

Many of these items are not directly quantifiable, particularly on a prospective basis. Reserve estimates are refined as experience develops. Adjustments to reserves, both positive and negative, are reflected in the statement of operations of the period in which such estimates are updated. Because establishment of reserves is an inherently uncertain process involving estimates of future losses, there can be no certainty that ultimate losses will not exceed existing claims 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.


	Short Duration Contracts

For short duration contracts, claims and benefits payable reserves are recorded when insured events occur. The liability is based on the expected ultimate cost of settling the claims. The claims and benefits payable reserves include (1) case reserves for known but unpaid claims as of the balance sheet date; (2) incurred but not reported (“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.

For group disability, the case reserves and the IBNR are recorded at an amount equal to the net present value of the expected claims future payments. Group long-term disability and group term life waiver of premium reserves are discounted to the valuation date at the valuation interest rate. The valuation interest rate is reviewed quarterly by taking into consideration actual and expected earned rates on our asset portfolio, with adjustments for investment expenses and provisions for adverse deviation. Group long term disability and group term life reserve adequacy studies are performed annually, and morbidity and mortality assumptions are adjusted where appropriate.

Unearned premium reserves are maintained for the portion of the premiums on short duration contracts that is related to the unexpired period of the policy.

We have exposure to asbestos, environmental and other general liability claims arising from our participation in various reinsurance pools from 1971 through 1983. This exposure arose from a short duration contract that we discontinued writing many years ago. We carried case reserves for these liabilities as recommended by the various pool managers and bulk reserves for IBNR of $50 million (before reinsurance) and $38.9 million (after reinsurance) in the aggregate at December 31, 2004. 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 an occurrence. In addition, the determination of ultimate damages and the final allocation of losses to financially responsible parties are highly uncertain. However, based on information currently available, and after consideration of the reserves reflected in the financial statements, we believe that any changes in reserve estimates for these claims are not reasonably likely to be material. Asbestos, environmental and other general liability claim payments, net of reinsurance recoveries, were $2.3 million, $2.9 million and $1.4 million for the years ended December 31, 2004, 2003 and 2002, respectively.

One of our subsidiaries, ARIC, participated in certain excess of loss reinsurance programs in the London market and, as a result, reinsured certain personal accident, ransom and kidnap insurance risks from 1995 to 1997. ARIC and a foreign affiliate ceded a portion of these risks to other reinsurers (retrocessionaires). ARIC ceased reinsuring such business in 1997. However, certain risks continued beyond 1997 due to the nature of the reinsurance contracts written. ARIC and some of the other reinsurers involved in the programs are seeking to avoid certain treaties on various grounds, including material misrepresentation and non-disclosure by the ceding companies and intermediaries involved in the programs. Similarly, some of the retrocessionaires are seeking avoidance of certain treaties with ARIC and the other reinsurers and some reinsureds are seeking collection of disputed balances under some of the treaties. The disputes generally involve multiple layers of reinsurance, and allegations that the reinsurance programs involved interrelated claims “spirals” devised to disproportionately pass claims losses to higher-level reinsurance layers. Many of the companies involved in these programs, including ARIC, are currently involved in negotiations, arbitrations and/or litigation between multiple layers of retrocessionaires, reinsurers, ceding companies and intermediaries, including brokers, in an effort to resolve these disputes. Many of those disputes relating to the 1995 program year, including those involving ARIC, were settled on December 3, 2003. Loss accruals previously established relating to the 1995 program year were adequate. However, our exposure under the 1995 program year was less significant than the exposure remaining under the 1996 and 1997 program years. While the majority of the negotiations, arbitrations and/or litigations between the multiple layers of reinsurers, ceding companies and intermediaries are still ongoing, ARIC and an affiliated company, BICL did resolve disputes with two of its reinsurers in the 1996 and 1997 program years by means of a commutation agreement. As a result of the settlement, the two affiliated reinsurers paid ARIC and BICL $6 million and both parties agreed to release each other from any past, present or future obligations of any kind.

Based on information currently available, and after consideration of the reserves reflected in the financial statements, we believe that it is not reasonably likely that any liabilities we experience in connection with these programs would have a material adverse effect on our financial condition or results of operations. However, the inherent uncertainty of arbitrations and lawsuits, including the uncertainty of estimating whether any settlements we may enter into in the future would be on favorable terms, makes it difficult to predict the outcomes with certainty.


	Long Duration Contracts

Future policy benefits and expense reserves on LTC, life insurance policies and annuity contracts that are no longer offered, individual medical contracts sold prior to 2003 or issued in a limited number of jurisdictions and the traditional life insurance contracts within FFG are recorded at the present value of future benefits to be paid to policyholders and related expenses less the present value of the future net premiums. These amounts are estimated and include assumptions as to the expected investment yield, inflation, mortality, morbidity and withdrawal rates as well as other assumptions that are based on our experience. These assumptions reflect anticipated trends and include provisions for possible unfavorable deviations.

Future policy benefits and expense reserves for pre-funded funeral investment-type annuities, universal life insurance policies and investment-type annuity contracts that are no longer offered, and the variable life insurance and investment-type annuity contracts in FFG consist of policy account balances before applicable surrender charges and certain deferred policy initiation fees that are being recognized in income over the terms of the policies. Policy benefits charged to expense during the period include amounts paid in excess of policy account balances and interest credited to policy account balances.

Future policy benefits and expense reserves for pre-funded funeral life insurance contracts are recorded as the present value of future benefits to policyholders and related expenses less the present value of future net premiums. Reserve assumptions are selected using best estimates for expected investment yield, inflation, mortality and withdrawal rates. These assumptions reflect current trends, are based on Company experience and include provision for possible unfavorable deviation. An unearned revenue reserve is also recorded for these contracts which represents the balance of the excess of gross premiums over net premiums that is still to be recognized in future years’ income in a constant relationship to insurance in force.

DAC

The costs of acquiring new business that vary with and are primarily related to the production of new business have been deferred to the extent that such costs are deemed recoverable from future premiums or gross profits. Acquisition costs primarily consist of commissions, policy issuance expenses, premium tax and certain direct marketing expenses.

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


	Short Duration Contracts

DAC 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 marketing 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 and group dental consist primarily of new business underwriting, field sales support, commissions to agents and brokers, 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 on individual medical contracts issued in most jurisdictions after 2002 and small group medical contracts consist primarily of commissions to agents and brokers and compensation to representatives. These contracts are considered short duration because the terms of the contract are not fixed at issue and they are not guaranteed renewable. As a result, these costs are not deferred but rather are recorded in the statement of operations in the period in which they are incurred.


	Long Duration Contracts

Acquisition costs for pre-funded funeral life insurance policies and life insurance policies no longer offered are deferred and amortized in proportion to anticipated premiums over the premium-paying period.

For pre-funded funeral investment-type annuities and 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 margins or 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 individual medical contracts issued prior to 2003 and in a limited numbers of juridictions are deferred and amortized over the estimated average terms of the underlying contracts. These acquisition costs relate to commissions and policy issuance expenses. Commissions represent the majority of deferred costs and result from commission schedules that pay significantly higher rates in the first year. The

majority of deferred policy issuance expenses are the costs of separately underwriting each individual medical contract.

Acquisition costs on the FFG and LTC disposed businesses were written off when the businesses were sold.


	*Investments*

We regularly monitor our investment portfolio to ensure that investments that may be other than temporarily impaired are identified in a timely fashion and properly valued and that any impairments are charged against earnings in the proper period. Our methodology to identify potential impairments requires professional judgment.

Changes in individual security values are regularly monitored in order to identify potential problem credits. In addition, pursuant to our impairment process, each month the portfolio holdings are screened for securities whose market price is equal to 85% or less of their original purchase price. Management then makes their assessment as to which of these securities are other than temporarily impaired. Assessment factors include, but are not limited to, the financial condition and rating of the issuer, any collateral held and the length of time the market value of the security has been below cost. Each quarter the watchlist is discussed at a meeting attended by members of our investment, accounting and finance departments. At this meeting, any security whose price decrease is deemed to have been other than temporarily impaired is written down to its then current market level, with the amount of the writedown reflected in our statement of operations for that quarter. Previously impaired issues are also monitored monthly, with additional writedowns taken quarterly if necessary.

Inherently, there are risks and uncertainties involved in making these judgments. Changes in circumstances and critical assumptions such as a continued weak economy, a more pronounced economic downturn or unforeseen events which affect one or more companies, industry sectors or countries could result in additional writedowns in future periods for impairments that are deemed to be other-than-temporary. See also “Investments” in Note 2 of the Notes to Consolidated Financial Statements included elsewhere in this report.


	*Reinsurance*

Reinsurance recoverables include amounts related to paid benefits and estimated amounts related to unpaid policy and contract claims, future policyholder benefits and policyholder contract deposits. The cost of reinsurance is accounted for 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. The ceding of insurance does not discharge our primary liability to our insureds. An estimated allowance for doubtful accounts is recorded on the basis of periodic evaluations of balances due from reinsurers, reinsurer solvency, management’s experience and current economic conditions.


	*Other Accounting Policies*

For a description of other accounting policies applicable to the periods covered by this report, see Note 2 of the Notes to Consolidated Financial Statements included elsewhere in this report.


	*Significant Accounting Standard Affecting Our Business*

On January 1, 2002, we adopted FAS 142. As of our adoption of FAS 142, we ceased amortizing goodwill. In addition, we were required to subject our goodwill to an initial impairment test. As a result of FAS 142, we are required to conduct impairment testing on an annual basis and between annual tests if an event occurs or circumstances change indicating a possible goodwill impairment. In the absence of an impairment event, our net income will be higher as a result of not having to amortize goodwill.

As a result of this initial impairment test, we recognized a non-cash goodwill impairment charge of $1,261 million. The impairment charge was recorded as a cumulative effect of a change in accounting

principle as of January 1, 2002. The impairment charge had no impact on cash flows or the statutory-basis capital and surplus of our insurance subsidiaries. We performed a January 1, 2003 and 2004 impairment test during the six months ended June 30, 2003 and 2004 and concluded that goodwill was not further impaired. We also performed a January 1, 2005 impairment test during the three months ended March 31, 2005 and management believes that goodwill will not be impaired.

See “Recent Accounting Pronouncements” in Note 2 of the Notes to Consolidated Financial Statements included elsewhere in this report for a description of additional recent accounting standards that are applicable to us.

Results of Operations


	*Consolidated Overview*

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


			For the Year Ended
			December 31,

			2004			2003			2002

			(In millions)
Revenues:
	Net earned premiums and other considerations		$	6,483		$	6,157		$	5,681
	Net investment income			635			607			632
	Net realized gains (losses) on investments			24			2			(118	)
	Amortization of deferred gains on disposal of businesses			58			68			80
	(Loss)/gain on disposal of businesses			(9	)		—			11
	Fees and other income			213			232			246

		Total revenues		7,404			7,066			6,532

Benefits, losses and expenses:
	Policyholder benefits			(3,840	)		(3,658	)		(3,435	)
	Selling, underwriting and general expenses(1)			(2,970	)		(2,828	)		(2,609	)
	Interest expense			(56	)		(1	)		—
	Distributions on preferred securities			(2	)		(113	)		(118	)
	Premium on redemption of preferred securities			—			(206	)		—

		Total benefits, losses and expenses		(6,868	)		(6,806	)		(6,162	)

Income before income taxes				536			260			370
	Income taxes			(185	)		(74	)		(110	)

Net income before cumulative effect of change in accounting principle				351			186			260

Cumulative effect of change in accounting principle				—			—			(1,261	)

Net income (loss)			$	351		$	186		$	(1,001	)


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

Note:	The table above includes the cumulative effect of change in accounting principle in 2002. These items are only included in this Consolidated Overview. As a result, the tables presented under the segment discussions do not total to the same amounts shown on this consolidated overview table. See Note 21 of the Notes to Consolidated Financial Statements included elsewhere in this report.


	*Year Ended December 31, 2004 Compared to December 31, 2003*


	*Total Revenues*

Total revenues increased by $338 million, or 5%, from $7,066 million for the year ended December 31, 2003, to $7,404 million for the year ended December 31, 2004.

Net earned premiums and other considerations increased by $326 million, or 5%, from $6,157 million for the year ended December 31, 2003, to $6,483 million for the year ended December 31, 2004, primarily due to an increase of $87 million and $222 million in Assurant Solutions and Assurant Health, respectively. The increase in Assurant Solutions was primarily due to growth in the extended service contract, international, and creditor placed and voluntary homeowners businesses. This growth was offset by a decline in domestic credit insurance and our manufactured housing businesses. The increase in Assurant Health was primarily due to increased sales, which partially reflect the success of HSAs, and increased rates.

Net investment income increased by $28 million, or 5%, from $607 million for the year ended December 31, 2003 to $635 million for the year ended December 31, 2004. The average portfolio yield decreased 16 basis points from 5.61% for the year ended December 31, 2003 to 5.45% for the year ended December 31, 2004. The decrease in the average portfolio yield was due to the lower interest rate environment. The average invested assets increased by approximately 8% for the year ended December 31, 2004 compared to the year ended December 31, 2003.

Net realized gains on investments improved by $22 million, or over 100%, from net realized gains of $2 million for the year ended December 31, 2003, to net realized gains of $24 million for the year ended December 31, 2004. Net realized gains on investments are comprised of both other-than-temporary impairments and realized gains (losses) on sales of securities. For the years ended December 31, 2003 and 2004, we had other-than-temporary impairments on fixed maturity and equity securities of $20 million and $0.6 million, respectively. The Company also recorded realized losses of $11 million and $4.2 million for the years ended December 31, 2003 and 2004, respectively, related to other investments. There were no individual impairments in excess of $10 million for the years ended December 31, 2003 and 2004.

Amortization of deferred gains on disposal of businesses decreased by $10 million, or 15%, from $68 million for the year ended December 31, 2003, to $58 million for the year ended December 31, 2004. The decrease was consistent with the anticipated run-off of the business ceded to The Hartford in 2001 and John Hancock in 2000. See “Reinsurance.”

On May 3, 2004 we sold our WorkAbility division and recorded a $9 million loss on disposal of this business in the second quarter of 2004.

Fees and other income decreased by $19 million, or 8%, from $232 million for the year ended December 31, 2003, to $213 million for the year ended December 31, 2004. The decrease was primarily due to decreases of $25 million and $9 million in Assurant Employee Benefits and Corporate and Other, respectively, offset by increases of $7 million and $6 million in Assurant Solutions and in Assurant Health, respectively. The decrease in Assurant Employee Benefits was primarily driven by lower fee income resulting from the sale of the WorkAbility division. The decrease in Corporate and Other was due to a one-time adjustment recorded in third quarter of 2003. The increase in Assurant Solutions was primarily due to an increase in fees related to growth in extended service contracts and debt deferment businesses. The increase in Assurant Health was primarily due to additional insurance policy fees and higher fee-based product sales in individual markets.


	*Total Benefits, Losses and Expenses*

Total benefits, losses and expenses increased by $62 million, or 1%, from $6,806 million for the year ended December 31, 2003, to $6,868 million for the year ended December 31, 2004.

Policyholder benefits increased by $182 million, or 5%, from $3,658 million for the year ended December 31, 2003, to $3,840 million for the year ended December 31, 2004. The increase was primarily due to increases of $37 million, $106 million and $29 million in Assurant Solutions, Assurant Health and Assurant Employee Benefits, respectively. The increase in Assurant Solutions was primarily due to higher catastrophe

losses, net of reinsurance, in 2004 from Hurricanes Charley, Frances, Ivan and Jeanne. We incurred losses from catastrophes, net of reinsurance, of $93 million and $30 million for the years ended December 31, 2004 and 2003, respectively. This was partially offset by improved loss experience in our specialty property business absent the catastrophes. The increase in Assurant Health was consistent with the increase in net earned premiums and other considerations. The increase in Assurant Employee Benefits was primarily due to a reserve reduction in 2003. During the third quarter of 2003, we completed actuarial reserve adequacy studies for the group disability, group life and group dental products, which reflected that, in the aggregate, these reserves were redundant by $18 million. Therefore, we reduced reserves by $18 million in the third quarter of 2003 to reflect these estimates.

Selling, underwriting and general expenses increased by $142 million, or 5%, from $2,828 million for the year ended December 31, 2003, to $2,970 million for the year ended December 31, 2004. The increase was primarily due to increases of $61 million, $86 million, $10 million and $8 million in Assurant Solutions, Assurant Health, Assurant PreNeed and Corporate and Other, respectively, offset by a decrease in Assurant Employee Benefits of $23 million. The increase in Assurant Solutions was primarily due to an increase in extended service contract, international and creditor-placed homeowners businesses and Sarbanes-Oxley related expenses. The increase in Assurant Health was primarily due to increased commission expense associated with our individual health businesses. The decrease in Assurant Employee Benefits was primarily due to the sale of the WorkAbility division. The increase in Assurant PreNeed was primarily due to higher amortized commissions and expenses incurred as a result of the change in mix of business to more single-pay sales. The increase in Corporate and Other was primarily due to public company costs, including expenses related to our initial and secondary public stock offerings and additional costs related to Sarbanes-Oxley.

Interest expense increased by $55 million from $1 million for the year ended December 31, 2003 to $56 million for the year ended December 31, 2004. The increase was the result of two senior notes that we issued in February 2004. See “— Liquidity and Capital Resources.”

Distributions on preferred securities decreased by $111 million, or 98%, from $113 million for the year ended December 31, 2003 to $2 million for the year ended December 31, 2004. The decline was due to the early redemption of $1,250 million of preferred securities in December 2003 and $196 million of preferred securities in January 2004.

In 2003, we incurred a $206 million interest charge due to the early redemption of $1,446 million of preferred securities.


	*Net Income*

Net income increased by $165 million, or 89%, from $186 million for the year ended December 31, 2003 to $351 million for the year ended December 31, 2004.

Income taxes increased by $111 million, or 150%, from $74 million for the year ended December 31, 2003, to $185 million for the year ended December 31, 2004. The effective tax rate for the year ended December 31, 2003 was 28.5% compared to 34.5% for the year ended December 31, 2004. In December 2004, pursuant to the American Jobs Creation Act (“Jobs Act”), we repatriated $110 million of capital from our Puerto Rico subsidiary and incurred approximately $19 million of tax expense. In accordance with proposed legislation, we anticipate that approximately $5 million of this expense will be recaptured as a tax benefit when the proposed legislation becomes enacted. In addition, during the fourth quarter of 2004, an analysis of our Federal Tax Liability resulted in a $10 million reduction of our tax liability.


	*Year Ended December 31, 2003 Compared to December 31, 2002*


	*Total Revenues*

Total revenues increased by $534 million, or 8%, from $6,532 million for the year ended December 31, 2002, to $7,066 million for the year ended December 31, 2003.

Net earned premiums and other considerations increased by $476 million, or 8%, from $5,681 million for the year ended December 31, 2002, to $6,157 million for the year ended December 31, 2003. The increase in net earned premiums and other considerations was primarily due to increases of $285 million, $175 million, and $23 million in Assurant Solutions, Assurant Health, and Assurant Employee Benefits, respectively, with an offsetting decrease of $8 million in Assurant PreNeed. The increase in Assurant Solutions was due to growth in specialty property and consumer protection products. The increase in Assurant Health was primarily due to increases in individual health insurance business due to membership growth and premium rate increases.

Net investment income decreased by $25 million, or 4%, from $632 million for the year ended December 31, 2002, to $607 million for the year ended December 31, 2003. The decrease was primarily due to a decrease in investment yields driven by the lower interest rate environment. The yield on average invested assets was 5.61% for the year ended December 31, 2003, as compared to 6.27% for the year ended December 31, 2002.

Net realized gains (losses) on investments improved by $120 million, or 102%, from net realized losses of $118 million for the year ended December 31, 2002, to net realized gains of $2 million for the year ended December 31, 2003. Net realized gains (losses) on investments are comprised of both other-than-temporary impairments and realized capital gains (losses) on sales of securities. For the year ended December 31, 2003, we had other-than-temporary impairments of $20 million as compared to $85 million for the year ended December 31, 2002. There were no individual impairments in excess of $10 million for the year ended December 31, 2003. Impairments on available for sale securities in excess of $10 million for the year ended December 31, 2002 consisted of an $18 million writedown of fixed maturity investments in NRG Energy, a $12 million writedown of fixed maturity investments in AT&T Canada and an $11 million writedown of fixed maturity investments in MCI WorldCom. Excluding the effects of other-than-temporary impairments, we recorded an increase in net realized gains of $55 million in the Corporate and Other segment.

Amortization of deferred gain on disposal of businesses decreased by $12 million, or 15%, from $80 million for the year ended December 31, 2002, to $68 million for the year ended December 31, 2003. The decrease was consistent with the run-off of the businesses ceded to The Hartford and John Hancock. See “— Reinsurance.”

Gain on disposal of businesses decreased by $11 million, or 100%, from $11 million for the year ended December 31, 2002 to zero for the year ended December 31, 2003. There were no disposals in 2003. On June 28, 2002, we sold our investment in NHP, which resulted in pre-tax gains of $11 million.

Fees and other income decreased by $14 million, or 6%, from $246 million for the year ended December 31, 2002 to $232 million for the year ended December 31, 2003. The decrease was primarily due to $15 million of income recognized in Corporate and Other segment for the year ended December 31, 2002, associated with a settlement true-up of a 1999 sale of a small block of business to a third party and reversal of bad debt allowances due to successful collection of receivables that had been previously written off.


	*Total Benefits, Losses and Expenses*

Total benefits, losses and expenses increased by $644 million, or 10%, from $6,162 million for the year ended December 31, 2002 to $6,806 million for the year ended December 31, 2003.

Policyholder benefits increased by $222 million, or 6%, from $3,435 million for the year ended December 31, 2002, to $3,658 million for the year ended December 31, 2003. The increase was primarily due to increases of $144 million, $95 million and $8 million in Assurant Solutions, Assurant Health and Assurant PreNeed, respectively, with an offsetting decrease of $24 million in Assurant Employee Benefits. The increase in Assurant Solutions was primarily due to growth in specialty property products, primarily in creditor-placed and voluntary homeowners insurance lines of business. The increase in Assurant Health was primarily due to the increase in individual health insurance business, which was consistent with growth in this business.

Selling, underwriting and general expenses increased by $220 million, or 8%, from $2,609 million for the year ended December 31, 2002, to $2,828 million for the year ended December 31, 2003. The increase was

primarily due to increases of $141 million, $43 million and $11 million in Assurant Solutions, Assurant Health and Assurant Employee Benefits, respectively. The increase in Assurant Solutions was consistent with growth in the specialty property and consumer protection products business. The increase in Assurant Health was primarily due to increases in commissions, amortization of deferred policy acquisition costs and general expenses, which was consistent with the growth in business.

Distributions on preferred securities decreased by $5 million, or 4%, from $118 million for the year ended December 31, 2002 to $113 million for the year ended December 31, 2003. We redeemed $1,250 million of the preferred securities in mid-December 2003, resulting in lower expenses. We redeemed the remaining $196 million of preferred securities in early January 2004. As a result of the early extinguishment of all the preferred securities, we incurred $206 million in interest premiums on redemption for the year ended December 31, 2003 compared to zero in 2002.


	*Net Income*

Net income increased by $1,187 million, or 119%, from a loss of $1,001 million for the year ended December 31, 2002, to a profit of $186 million for the year ended December 31, 2003.

Net income before cumulative effect of change in accounting principle for the year ended December 31, 2002 was $260 million. When we adopted FAS 142 in 2002, we recognized a cumulative effect of change in accounting principle which resulted in an expense of $1,261 million in 2002 as compared to zero recognized in 2003.

Income taxes decreased by $36 million, or 33%, from $110 million for the year ended December 31, 2002, to $74 million for the year ended December 31, 2003. The effective tax rate for 2003 was 28.5% compared to 29.7% in 2002.


	*Assurant Solutions*


	Overview

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


			For the Year Ended
			December 31,

			2004			2003			2002

			(In millions)
Revenues:
	Net earned premiums and other considerations		$	2,449		$	2,362		$	2,077
	Net investment income			185			187			205
	Fees and other income			136			129			119

		Total revenues		2,770			2,678			2,401

Benefits, losses and expenses:
	Policyholder benefits			(936	)		(899	)		(755	)
	Selling, underwriting and general expenses			(1,651	)		(1,590	)		(1,449	)

		Total benefits, losses and expenses		(2,587	)		(2,489	)		(2,204	)

Segment income before income tax				183			189			197
	Income taxes			(57	)		(56	)		(65	)

Segment income after tax			$	126		$	133		$	132

Net earned premiums and other considerations by major product groupings:
	Specialty Property Solutions(1)		$	769		$	733		$	552
	Consumer Protection Solutions(2)			1,680			1,629			1,525

		Total	$	2,449		$	2,362		$	2,077


(1)	“Specialty Property Solutions” includes a variety of specialized property insurance programs that are coupled with differentiated administrative capabilities.

(2)	“Consumer Protection Solutions” includes an array of debt protection, administrative services, credit based programs and extended service contracts.


	*Year Ended December 31, 2004 Compared to December 31, 2003*


	*Total Revenues*

Total revenues increased by $92 million, or 3%, from $2,678 million for the year ended December 31, 2003 to $2,770 million for the year ended December 31, 2004.

Net earned premiums and other considerations increased by $87 million, or 4% from $2,362 million for the year ended December 31, 2003 to $2,449 million for the year ended December 31, 2004. This increase was primarily due to an increase of $51 million in net earned premiums and other considerations from our consumer protection solutions products, primarily due to growth in our extended service contract and international businesses, partially offset by the decline of our domestic credit insurance business. Net earned premiums and other considerations from our specialty property solutions products increased by $36 million, primarily from growth in our creditor-placed and voluntary homeowners insurance product lines. This growth was partially offset by lower net earned premiums in our manufactured housing business, primarily due to the overall decline in manufactured housing sales.

Net investment income decreased by $2 million, or 1%, from $187 million for the year ended December 31, 2003 to $185 million for the year ended December 31, 2004. The average portfolio yield decreased by 40 basis points from 5.18% for the year ended December 31, 2003, to 4.78% for the year ended December 31, 2004, due to the lower interest rate environment. The average invested assets increased by approximately 7% for the year ended December 31, 2004 compared to the year ended December 31, 2003.

Fees and other income increased by $7 million, or 5%, from $129 million for the year ended December 31, 2003 to $136 million for the year ended December 31, 2004, primarily due to an increase in fees related to growth in our extended service contracts and our debt deferment businesses. These increases were partially offset by two factors. The year ended December 31, 2003 included fee income of $6 million pertaining to certain non-profitable membership programs that were discontinued in the latter part of 2003 and in the first quarter of 2003 we recognized fees for a one-time project.


	*Total Benefits, Losses and Expenses*

Total benefits, losses and expenses increased by $98 million, or 4%, from $2,489 million for the year ended December 31, 2003 to $2,587 million for the year ended December 31, 2004.

Policyholder benefits increased by $37 million, or 4%, from $899 million for the year ended December 31, 2003 to $936 million for the year ended December 31, 2004. The increase was primarily attributable to higher catastrophe losses, net of reinsurance, in 2004 from Hurricanes Charley, Frances, Ivan and Jeanne. We incurred losses, net of reinsurance, from catastrophes of $93 million and $30 million for the year ended December 31, 2004 and 2003, respectively. The higher catastrophe losses in 2004 were partially offset by improved loss experience, in our specialty property business absent the catastrophes.

Selling, underwriting and general expenses increased by $61 million, or 4%, from $1,590 million for the year ended December 31, 2003 to $1,651 million for the year ended December 31, 2004. Commissions, taxes, licenses and fees, of which amortization of DAC is a component, increased by $15 million, which is consistent with the change in the mix of business. General expenses increased by $46 million, primarily due to increased business from our extended service contracts, international, and creditor-placed homeowners insurance businesses. Additionally, in 2004 we incurred Sarbanes-Oxley related expenses and an increase in guaranty fund assessments attributable to the four hurricanes.


	*Segment Income After Tax*

Segment income after tax decreased by $7 million, or 5%, from $133 million for the year ended December 31, 2003 to $126 million for the year ended December 31, 2004.

Income taxes increased by $1 million, or 2%, from $56 million for the year ended December 31, 2003 to $57 million for the year ended December 31, 2004. The change in income taxes is consistent with the change in pretax income and reflects a change in the mix of international and domestic taxable income.


	*Year Ended December 31, 2003 Compared to December 31, 2002*


	*Total Revenues*

Total revenues increased by $277 million, or 12%, from $2,401 million for the year ended December 31, 2002, to $2,678 million for the year ended December 31, 2003.

Net earned premiums and other considerations increased by $285 million, or 14%, from $2,077 million for the year ended December 31, 2002, to $2,362 million for the year ended December 31, 2003. This increase was primarily due to $181 million of additional net earned premiums and other considerations attributable to our special property products, primarily due to our creditor-placed and voluntary homeowners insurance and manufactured housing homeowners insurance lines of business generated from new clients and increased sales growth from our existing clients. Consumer protection products also contributed $104 million in net earned premiums and other considerations primarily from growth in our warranty and extended service contracts business.

Net investment income decreased by $18 million, or 9%, from $205 million for the year ended December 31, 2002, to $187 million for the year ended December 31, 2003. The average portfolio yield dropped 67 basis points from 5.85% for the year ended December 31, 2002, to 5.18% for the year ended December 31, 2003 due to the lower interest rate environment. The average allocated invested assets increased by approximately 3%.

Fees and other income increased by $10 million, or 8%, from $119 million for the year ended December 31, 2002, to $129 million for the year ended December 31, 2003, primarily due to the continuing transition of our credit insurance business to our debt protection administration business. We also recognized fees for a one time project in the first quarter of 2003 of $2.9 million.


	*Total Benefits, Losses and Expenses*

Total benefits, losses and expenses increased by $285 million, or 13%, from $2,204 million for the year ended December 31, 2002, to $2,489 million for the year ended December 31, 2003.

Policyholder benefits increased by $144 million, or 19%, from $755 million for the year ended December 31, 2002, to $899 million for the year ended December 31, 2003. Our specialty property products accounted for $112 million of the increase primarily due to growth in our creditor-placed and voluntary homeowners insurance lines of business and approximately $18 million of the increase was attributable to various catastrophes ($30 million in 2003 compared to $12 million in 2002). Our consumer protection products also contributed $32 million of the increase primarily due to growth in our warranty and extended service contracts line of business.

Selling, underwriting and general expenses increased by $141 million, or 10%, from $1,449 million for the year ended December 31, 2002, to $1,590 million for the year ended December 31, 2003. Selling and underwriting expenses, of which amortization of DAC is a component, increased by $116 million, which consisted of $45 million primarily from our specialty property products due to growth in our creditor-placed and voluntary homeowners insurance and manufactured housing insurance lines. Also, $71 million of the increase was from our consumer protection products due to increased growth in our warranty and extended service contract lines of business. General expenses increased by $25 million, primarily from start up costs related to setting up new clients in the creditor-placed homeowners insurance area and increased business from our warranty and extended service contract products.


	*Segment Income After Tax*

Segment income after tax increased by $1 million, or 1%, from $132 million for the year ended December 31, 2002, to $133 million for the year ended December 31, 2003. Excluding the decrease in investment income of $13 million after-tax, segment income after tax increased by $14 million, or 11%.

Income taxes decreased by $9 million, or 14%, from $65 million for the year ended December 31, 2002, to $56 million for the year ended December 31, 2003. This decrease was mainly due to a decrease in pre-tax income and a lower effective tax rate in 2003.


	*Assurant Health*


	Overview

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


			For the Year Ended
			December 31,

			2004			2003			2002

			(In millions except membership data)
Revenues:
	Net earned premiums and other considerations		$	2,231		$	2,009		$	1,834
	Net investment income			68			49			55
	Fees and other income			39			33			23

		Total revenues		2,338			2,091			1,912

Benefits, losses and expenses:
	Policyholder benefits			(1,423	)		(1,317	)		(1,222	)
	Selling, underwriting and general expenses			(675	)		(589	)		(546	)

		Total benefits, losses and expenses		(2,098	)		(1,906	)		(1,768	)

Segment income before income tax				240			185			144
	Income taxes			(82	)		(64	)		(49	)

Segment income after tax			$	158		$	121		$	95

Loss ratio(1)				63.8	%		65.6	%		66.6	%
Expense ratio(2)				29.7	%		28.9	%		29.4	%
Combined ratio(3)				92.4	%		93.3	%		95.2	%
Membership by product line (in thousands):
	Individual			782			761			670
	Small employer group			333			376			355

		Total		1,115			1,137			1,025


(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.


	*Year Ended December 31, 2004 Compared to December 31, 2003*


	*Total Revenues*

Total revenues increased by $247 million, or 12%, from $2,091 million for the year ended December 31, 2003, to $2,338 million for the year ended December 31, 2004.

Net earned premiums and other considerations increased by $222 million, or 11%, from $2,009 million for the year ended December 31, 2003, to $2,231 million for the year ended December 31, 2004. Net earned premium growth in individual health insurance business was attributable to continued sales which partially reflect the success of the HSAs that were introduced on January 1, 2004, and premium rate increases. Net earned premium growth in our small employer group health insurance business was attributable to premium rate increases partially offset by decreases in membership.

Net investment income increased by $19 million, or 39%, from $49 million for the year ended December 31, 2003, to $68 million for the year ended December 31, 2004. The average portfolio yield decreased by 8 basis points from 5.55% for the year ended December 31, 2003, to 5.47% for the year ended December 31. 2004, due to the lower interest rate environment. The average invested assets increased by approximately 39% for the year ended December 31, 2004 compared to the year ended December 31, 2003.

Fees and other income increased by $6 million, or 18%, from $33 million for the year ended December 31, 2003, to $39 million for the year ended December 31, 2004, primarily due to additional insurance policy fees and higher fee-based product sales in individual markets, such as sales of our non-insurance health access discount cards.


	*Total Benefits, Losses and Expenses*

Total benefits, losses and expenses increased by $192 million, or 10%, from $1,906 million for the year ended December 31, 2003, to $2,098 million for the year ended December 31, 2004.

Policyholder benefits increased by $106 million, or 8%, from $1,317 million for the year ended December 31, 2003, to $1,423 million for the year ended December 31, 2004. The loss ratio improved 180 basis points from 65.6% for the year ended December 31, 2003 to 63.8% for the year ended December 31, 2004. This improvement was attributable to favorable loss experience predominantly on individual health insurance business, as well as a higher mix of individual health insurance business compared to small employer group health insurance business in 2004.

Selling, underwriting and general expenses increased by $86 million, or 15%, from $589 million for the year ended December 31, 2003, to $675 million for the year ended December 31, 2004. The expense ratio increased by 80 basis points from 28.9% for the year ended December 31, 2003 to 29.7% for the year ended December 31, 2004. These increases were primarily related to increased commission expense on first year individual health insurance business and additional spending on initiatives to improve our product offerings, distribution, customer service, and infrastructure.


	*Segment Income After Tax*

Segment income after tax increased by $37 million, or 31%, from $121 million for the year ended December 31, 2003 to $158 million for the year ended December 31, 2004.

Income taxes increased by $18 million, or 28%, from $64 million for the year ended December 31, 2003, to $82 million for the year ended December 31, 2004. This increase was primarily due to the increase in pre-tax income.


	*Year Ended December 31, 2003 Compared to December 31, 2002*


	*Total Revenues*

Total revenues increased by $179 million, or 9.0%, from $1,912 million for the year ended December 31, 2002, to $2,091 million for the year ended December 31, 2003.

Net earned premiums and other considerations increased by $175 million, or 10%, from $1,834 million for the year ended December 31, 2002, to $2,009 million for the year ended December 31, 2003. Net earned premiums attributable to our individual health insurance business increased $156 million due to membership growth and premium rate increases. Net earned premiums attributable to our small employer group health insurance business increased $19 million primarily because we instituted premium rate increases in select small group markets to sufficiently price for the underlying medical costs of existing business and for anticipated future medical trends.

Net investment income decreased by $6 million, or 11%, from $55 million for the year ended December 31, 2002, to $49 million for the year ended December 31, 2003. There was a 88 basis point decrease in yield on the investment portfolio from 6.4% for the year ended December 31, 2002, to 5.55% for the year ended December 31, 2003, due to the lower interest rate environment. Offsetting the decrease in yield was a 4% increase in average invested assets for the year ended December 31, 2003, over the comparable prior year period.

Fees and other income increased by $10 million, or 43%, from $23 million for the year ended December 31, 2002, to $33 million for the year ended December 31, 2003, due to additional insurance policy fees and higher fee-based product sales in individual markets, such as sales of our non-insurance health access discount cards.


	*Total Benefits, Losses and Expenses*

Total benefits, losses and expenses increased by $138 million, or 8%, from $1,768 million for the year ended December 31, 2002, to $1,906 million for the year ended December 31, 2003.

Policyholder benefits increased by $95 million, or 8%, from $1,222 million for the year ended December 31, 2002, to $1,317 million for the year ended December 31, 2003. This increase was consistent with the increase in net earned premiums and other considerations. The loss ratio improved 100 basis points from 66.6% for the year ended December 31, 2002, to 65.6% for the year ended December 31, 2003, primarily due to our risk management activities.

Selling, underwriting and general expenses increased by $43 million, or 8%, from $546 million for the year ended December 31, 2002, to $589 million for the year ended December 31, 2003. Commissions increased by $33 million corresponding to an increase in first year net earned premiums over the prior year. Taxes, licenses and fees decreased by $6 million due to reduced premium tax rates on a portion of the medical premium. Amortization of deferred policy acquisition costs increased by $7 million due to higher sales of individual health insurance products beginning in 2000. General expenses increased by $9 million mainly due to additional spending to improve claims experience. The expense ratio improved 50 basis points from 29.4% for the year ended December 31, 2002, to 28.9% for the year ended December 31, 2003.


	*Segment Income After Tax*

Segment income after tax increased by $26 million, or 27%, from $95 million for the year ended December 31, 2002, to $121 million for the year ended December 31, 2003.

Income taxes increased by $15 million, or 31%, from $49 million for the year ended December 31, 2002, to $64 million for the year ended December 31, 2003. The increase was consistent with the 27% increase in segment income before income tax during the year ended December 31, 2003.


	*Assurant Employee Benefits*


	Overview

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


			For the Year Ended
			December 31,

			2004			2003			2002

			(In millions)
Revenues:
	Net earned premiums and other considerations		$	1,277		$	1,256		$	1,233
	Net investment income			150			140			148
	Fees and other income			29			54			74

		Total revenues		1,456			1,450			1,455

Benefits, losses and expenses:
	Policyholder benefits			(950	)		(921	)		(945	)
	Selling, underwriting and general expenses			(410	)		(433	)		(422	)

		Total benefits, losses and expenses		(1,360	)		(1,354	)		(1,367	)

Segment income before income tax				96			96			88
	Income taxes			(34	)		(34	)		(31	)

Segment income after tax			$	62		$	62		$	57

Loss ratio(1)				74.4	%		73.3	%		76.6	%
Expense ratio(2)				31.4	%		33.1	%		32.3	%
Premium persistency ratio(3)				81.1	%		79.9	%		79.9	%
Net earned premiums and other considerations by major product groupings:
	Group dental		$	521		$	539		$	554
	Group disability			506			461			400
	Group life			250			256			279

		Total	$	1,277		$	1,256		$	1,233


(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 premium persistency ratio is equal to the rate at which existing business for all issue years at the beginning of the period remains in force at the end of the period. The calculation for the year ended December 31, 2002 excludes DBD.


	*Year Ended December 31, 2004 Compared to December 31, 2003*


	*Total Revenues*

Total revenues increased by $6 million, or less than 1%, from $1,450 million for the year ended December 31, 2003, to $1,456 million for the year ended December 31, 2004.

Net earned premiums and other considerations increased by $21 million, or 2%, from $1,256 million for the year ended December 31, 2003, to $1,277 million for the year ended December 31, 2004. Net earned premium growth was driven by our disability business. Group disability net earned premiums increased by

$45 million for the year ended December 31, 2004 compared to the comparable prior year period. The increase was primarily driven by an increase in business written through alternate distribution sources, as well as the transition of a block of business from administrative fee only business to fully insured business. The increase in group disability net earned premiums was partially offset by decreases in group dental and group life net earned premiums and other considerations. Group Dental net earned premiums and other considerations decreased by $18 million for the year ended December 31, 2004 compared to the comparable prior year period. We are maintaining pricing discipline in an increasingly competitive market, which has resulted in lower sales and renewals. Group life net earned premiums decreased by $6 million for the year ended December 31, 2004 compared to the comparable prior year period. The decrease was due to the non-renewal of certain unprofitable business during 2003. This resulted in an aggregate premium persistency of 81.1% for 2004, an increase of 120 basis points from 2003.

Net investment income increased by $10 million, or 7%, from $140 million for the year ended December 31, 2003, to $150 million for the year ended December 31, 2004. The average portfolio yield declined 17 basis points from 6.39% for the year ended December 31, 2003, to 6.22% for the year ended December 31, 2004, due to the lower interest rate environment. The average invested assets increased by approximately 10% for the year ended December 31, 2004 compared to the year ended December, 2003.

Fees and other income decreased by $25 million, or 46%, from $54 million for the year ended December 31, 2003, to $29 million for the year ended December 31, 2004. The decrease was primarily due to lower fee income resulting from the sale of the WorkAbility division, as well as the transition of a block of business from administrative fee only business to fully insured business. See “— Corporate and Other.”


	*Total Benefits, Losses and Expenses*

Total benefits, losses and expenses increased by $6 million, or less than 1%, from $1,354 million for the year ended December 31, 2003, to $1,360 million for the year ended December 31, 2004.

Policyholder benefits increased by $29 million, or 3%, from $921 million for the year ended December 31, 2003, to $950 million for the year ended December 31, 2004. The loss ratio increased by 110 basis points from 73.3% for the year ended December 31, 2003 to 74.4% for the year ended December 31, 2004. These year over year increases were primarily driven by a reduction in reserves in 2003. During the third quarter of 2003, we completed actuarial reserve adequacy studies for group disability, group life, and group dental products, which reflected that, in the aggregate, these reserves were redundant by $18 million. Therefore, we reduced reserves by $18 million in the third quarter of 2003 to reflect these estimates. Also contributing to the increase in 2004 was poor experience on a single large disability case and deterioration in group dental experience, partially offset by lower group disability incidence and improved group life mortality experience.

Selling, underwriting and general expenses decreased by $23 million or 5% from $433 million for the year ended December 31, 2003, to $410 million for the year ended December 31, 2004. The expense ratio decreased by 170 basis points from 33.1% for the year ended December 31, 2003, to 31.4% for the year ended December 31, 2004. The decrease was primarily driven by the sale of the WorkAbility division noted earlier, as well as the writedown of previously capitalized software in 2003, not incurred in 2004.


	*Segment Income After Tax*

Segment income after tax for the years ended December 31, 2003 and 2004 was $62 million.

Income taxes for the years ended December 31, 2003 and 2004 were $34 million.


	*Year Ended December 31, 2003 Compared to Year Ended December 31, 2002*


	*Total Revenues*

Total revenues decreased by $5 million, less than 1%, from $1,455 million for the year ended December 31, 2002, to $1,450 million for the year ended December 31, 2003.

Net earned premiums and other considerations increased by $23 million, or 2%, from $1,233 million for the year ended December 31, 2002, to $1,256 million for the year ended December 31, 2003. The increase in disability net earned premium of $61 million was primarily due to additional disability reinsurance premiums assumed from DRMS. Partially offsetting this increase was a $23 million decrease in group life net earned premiums, due to the non-renewal of certain unprofitable business and less new business due to continued pricing discipline. In addition, dental net earned premiums decreased by $15 million, driven by lower sales and the non-renewal of a large account. This resulted in an aggregate premium persistency of 79.9% for 2003, which was unchanged from 2002.

Net investment income decreased by $8 million, or 5%, from $148 million for the year ended December 31, 2002, to $140 million for the year ended December 31, 2003. There was a 77 basis point decrease in yield on the investment portfolio from 7.16% for the year ended December 31, 2002 to 6.39% for the year ended December 31, 2003 due to the lower interest rate environment. Average invested assets increased by 6% from 2002 to 2003.

Fees and other income decreased by $20 million, or 27%, from $74 million for the year ended December 31, 2002, to $54 million for the year ended December 31, 2003. The decrease was primarily due to lower fee revenue from CORE due to the sale of PRA.


	*Total Benefits, Losses and Expenses*

Total benefits, losses, and expenses decreased by $13 million, or 1%, from $1,367 million for the year ended December 31, 2002, to $1,354 million for the year ended December 31, 2003.

Policyholder benefits decreased by $24 million, or 3%, from $945 million for the year ended December 31, 2002, to $921 million for the year ended December 31, 2003. The decrease was driven by favorable development in disability claims and lower claim volume due to the reduction in dental and group life net earned premiums. In addition, during the third quarter of 2003, we completed reserve studies for the group disability, group life, and group dental products, which concluded that, in the aggregate, these reserves were redundant. Adjustments were made to reserves to reflect current mortality and morbidity experience. In addition, the reserve discount rate on all claims was changed to reflect the continuing low interest rate environment. The net impact of these adjustments was a reduction in reserves of approximately $18 million. The benefits loss ratio improved from 76.6% in 2002 to 73.3% in 2003. Excluding the reserve release discussed above, the benefits loss ratio improvement was driven primarily by favorable disability experience.

Selling, underwriting and general expenses increased by $11 million, or 3%, from $422 million for the year ended December 31, 2002, to $433 million for the year ended December 31, 2003. The expense ratio increased from 32.3% in 2002, to 33.1% in 2003, primarily due to a $6.2 million writedown of previously capitalized software related to our new administration system.


	*Segment Income After Tax*

Segment income after tax increased by $5 million, or 9%, from $57 million for the year ended December 31, 2002 to $62 million for the year ended December 31, 2003.

Income tax expense increased by $3 million, or 10%, from $31 million for the year ended December 31, 2002 to $34 million for the year ended December 31, 2003. The increase was consistent with the 9% increase in segment income before tax.


	*Assurant PreNeed*


	Overview

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


			For the Year Ended
			December 31,

			2004			2003			2002

			(In millions)
Revenues:
	Net earned premiums and other considerations		$	526		$	530		$	538
	Net investment income			206			188			184
	Fees and other income			7			5			5

		Total revenues		739			723			727

Benefits, losses and expenses:
	Policyholder benefits			(531	)		(521	)		(513	)
	Selling, underwriting and general expenses			(157	)		(147	)		(137	)

		Total benefits, losses and expenses		(688	)		(668	)		(650	)

Segment income before income tax				51			55			77
	Income taxes			(17	)		(19	)		(27	)

Segment income after tax			$	34		$	36		$	50

Net earned premiums and other considerations by channel:
	AMLIC		$	273		$	283		$	293
	Independent			253			247			245

		Total	$	526		$	530		$	538


	*Year Ended December 31, 2004 Compared to December 31, 2003*


	*Total Revenues*

Total revenues increased by $16 million, or 2%, from $723 million for the year ended December 31, 2003 to $739 million for the year ended December 31, 2004.

Net earned premiums and other considerations decreased by $4 million, or less than 1%, from $530 million for the year ended December 31, 2003, to $526 million for the year ended December 31, 2004. The decrease was primarily due to a 3.6% decline in new sales as a result of our decision to make pricing changes on certain new business as well as a decrease in renewal premiums in the AMLIC channel. These were partially offset by the change in the mix of business from limited-pay to single-pay sales in the independent channel.

Net investment income increased by $18 million, or 10%, from $188 million for the year ended December 31, 2003, to $206 million for the year ended December 31, 2004. The average portfolio yield decreased 23 basis points from 6.57% for the year ended December 31, 2003 to 6.34% for the year ended December 31, 2004 due to the lower interest rate environment. The average invested assets increased by approximately 14% for the year ended December 31, 2004 from the year ended December 31, 2003.

Fees and other income increased by $2 million, or 40% from $5 million for the year ended December 31, 2003, to $7 million for the year ended December 31, 2004. The primary reason for this increase is $1 million of income related to a derivative instrument, the CPI cap.


	*Total Benefits, Losses and Expenses*

Total benefits, losses and expenses increased by $20 million, or 3%, from $668 million for the year ended December 31, 2003 to $688 million for the year ended December 31, 2004.

Policyholder benefits increased by $10 million, or 2%, from $521 million for the year ended December 31, 2003, to $531 million for the year ended December 31, 2004. The increase was primarily due to a larger in force block of business as well as an increase of $5 million over 2003 related to higher customer utilization of an early pay off feature that allows conversions from limited pay policies to single-pay policies. These increases were partially offset by a reduction in growth rates on the discretionary growth business which reduced policyholder benefits by $5 million for the year ended December 31, 2004.

Selling, underwriting and general expenses increased by $10 million, or 7%, from $147 million for the year ended December 31, 2003 to $157 million for the year ended December 31, 2004 primarily due to higher amortized commissions and expenses incurred as a result of the change in mix of business to more single-pay sales.


	*Segment Income After Tax*

Segment income after tax decreased by $2 million, or 6%, from $36 million for the year ended December 31, 2003, to $34 million for the year ended December 31, 2004.

Income taxes decreased by $2 million, or 11%, from $19 million for the year ended December 31, 2003, to $17 million for the year ended December 31, 2004. The decrease was primarily due to the decrease in pre-tax income.


	*Year Ended December 31, 2003 Compared to December 31, 2002*


	*Total Revenues*

Total revenues decreased by $4 million, or 1%, from $727 million for the year ended December 31, 2002, to $723 million for the year ended December 31, 2003.

Net earned premiums and other considerations decreased by $8 million, or 2%, from $538 million for the year ended December 31, 2002, to $530 million for the year ended December 31, 2003. The decrease was primarily due to a $10 million decline in our AMLIC channel which was caused by a 24% drop in new face sales from SCI, AMLIC’s principal customer.

Net investment income increased by $4 million, or 2%, from $184 million for the year ended December 31, 2002, to $188 million for the year ended December 31, 2003. A 8% increase in average invested assets was offset by a 34 basis point decrease in the annualized investment yield, which was 6.91% at December 31, 2002 compared to 6.57% at December 31, 2003. The increase in average invested assets was due to a larger in force block of business. The rate decline reduced net investment income by $10 million over the comparable prior year period. The decline in yields was due to the lower interest rate environment and the restructuring of the portfolio in 2002 to improve credit quality.


	*Total Benefits, Losses and Expenses*

Total benefits, losses and expenses increased by $18 million, or 3%, from $650 million for the year ended December 31, 2002, to $668 million for the year ended December 31, 2003.

Policyholder benefits increased by $8 million, or 2%, from $513 million for the year ended December 31, 2002, to $521 million for the year ended December 31, 2003. This increase was due to the increase in business written and other factors. A portion of our pre-funded funeral insurance policies use a CPI rate credited on policies. The CPI rate increased from 1.97% in 2002 to 2.40% in 2003. This increased policyholder benefits by $2 million in 2003. In addition, benefit expense increased $4 million over 2002 levels related to higher customer utilization of an early pay off feature that allows conversions from limited pay policies to single-pay policies.

Selling, underwriting and general expenses increased by $10 million, or 7%, from $137 million for the year ended December 31, 2002, to $147 million for the year ended December 31, 2003. Amortization of DAC and VOBA expense increased $9 million for the year ended December 31, 2003, principally due to a larger in force block of business. Overall general operating expenses before deferral of costs declined $2 million over the comparable prior year period due to expense control. This reduction includes a $0.7 million charge associated with restructuring of the sales force in our independent division. Non deferrable general operating expenses were even with the prior year.


	*Segment Income After Tax*

Segment income after tax decreased by $14 million, or 28%, from $50 million for the year ended December 31, 2002, to $36 million for the year ended December 31, 2003. This decrease was caused primarily by smaller spreads between investment income earned and the fixed benefits credited to policyholders, increased growth credited on the CPI block of business and higher utilization of the early pay off feature.

Income taxes decreased by $8 million, or 30%, from $27 million for the year ended December 31, 2002, to $19 million for the year ended December 31, 2003, which was consistent with the 28% decrease in segment income before tax.


	*Corporate and Other*


	Overview

The Corporate and Other segment includes activities of the holding company, financing expenses, net realized gains (losses) on investments, interest income earned from short-term investments held and interest income from excess surplus of insurance subsidiaries not allocated to other segments. The Corporate and Other segment also includes the amortization of deferred gains associated with the sales of the FFG and LTC businesses.

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


			For the Year Ended
			December 31,

			2004			2003			2002

			(In millions)
Revenues:
	Net earned premiums and other considerations		$	—		$	—		$	—
	Net investment income			26			43			40
	Net realized gains (losses) on investments			24			2			(118	)
	Amortization of deferred gains on disposal of businesses			58			68			80
	Gain (loss) on disposal of businesses			(9	)		—			11
	Fees and other income			2			11			25

		Total revenues		101			124			38

Benefits, losses and expenses:
	Policyholder benefits			—			—			—
	Selling, underwriting and general expenses			(77	)		(69	)		(55	)
	Interest expense			(56	)		(1	)		—
	Distributions on preferred securities			(2	)		(113	)		(118	)
	Premium on redemption of preferred securities			—			(206	)		—

		Total benefits, losses and expenses		(135	)		(389	)		(173	)

Segment (loss) before income tax				(34	)		(265	)		(135	)
	Income taxes			5			99			61

Segment (loss) after tax			$	(29	)	$	(166	)	$	(74	)

As of December 31, 2004, we had approximately $330 million (pre-tax) of deferred gains that had not yet been amortized. We expect to amortize deferred gains from dispositions through 2031. The deferred gains are being amortized in a pattern consistent with the expected future reduction of the in force blocks of business ceded to The Hartford and John Hancock. This reduction is expected to be more rapid in the first few years after sale and to be slower as the liabilities in the blocks decrease.


	*Year Ended December 31, 2004 Compared to December 31, 2003*


	*Total Revenues*

Total revenues decreased by $23 million, or 19%, from $124 million for the year ended December 31, 2003, to $101 million for the year ended December 31, 2004.

Net investment income decreased by $17 million, or 40%, from $43 million for the year ended December 31, 2003, to $26 million for the year ended December 31, 2004 mainly due to the lower interest rate environment and the decrease in average invested assets.

Net realized gains on investments improved by $22 million, or over 100%, from net realized gains of $2 million for the year ended December 31, 2003, to net realized gains of $24 million for the year ended December 31, 2004. Net realized gains on investments are comprised of both other-than-temporary impairments and realized gains (losses) on sales of securities. For the year ended December 31, 2003 and 2004, we had other-than-temporary impairments on fixed maturity and equity securities of $20 million and $0.6 million, respectively. The Company also recorded realized losses of $11 million and $4.2 million for the years ended December 31, 2003 and 2004, respectively, related to other investments. There were no individual impairments in excess of $10 million for the years ended December 31, 2004 and 2003.

Amortization of deferred gain on disposal of businesses decreased by $10 million, or 15%, from $68 million for the year ended December 31, 2003, to $58 million for the year ended December 31, 2004. This decrease was consistent with the anticipated run-off of the business ceded to The Hartford in 2001 and John Hancock in 2000.

On May 3, 2004, we sold our WorkAbility division and recorded a $9 million loss on disposal of business in the second quarter of 2004.

Fees and other income decreased by $9 million, or 82%, from $11 million for the year ended December 31, 2003, to $2 million for the year ended December 31, 2004 primarily due to a one-time adjustment recorded in the third quarter of 2003.


	*Total Benefits, Losses and Expenses*

Total benefits, losses and expenses decreased by $254 million, or 65%, from $389 million for the year ended December 31, 2003, to $135 million for the year ended December 31, 2004.

Selling, underwriting and general expenses increased by $8 million, or 12%, from $69 million for the year ended December 31, 2003, to $77 million for the year ended December 31, 2004. The increase was primarily due to $25 million of public company costs in 2004, including expenses related to our initial and secondary public stock offerings and additional costs related to Sarbanes-Oxley. In 2003, we incurred $14 million of public company costs, including expenses related to our initial public offering.

Interest expense increased by $55 million from $1 million for the year ended December 31, 2003, to $56 million for the year ended December 31, 2004. The increase was the result of the two senior notes that we issued in February 2004. See “— Liquidity and Capital Resources.”

Distributions on preferred securities decreased by $111 million, or 98%, from $113 million for the year ended December 31, 2003, to $2 million for the year ended December 31, 2004. The decline was due to the early redemption of $1,250 million of preferred securities in December 2003 and $196 million of preferred securities in January 2004.

In 2003, we incurred a $206 million interest charge due to the early redemption of $1,446 million of preferred securities.


	*Segment Loss After Tax*

Segment loss after income tax improved by $137 million, or 83%, from $166 million for the year ended December 31, 2003, to $29 million for the year ended December 31, 2004.

Income tax benefit decreased by $94 million, or 95%, from an income tax benefit of $99 million for the year ended December 31, 2003, to an income tax benefit of $5 million for the year ended December 31, 2004. The change in the income tax benefit was consistent with the change in segment loss before income tax. Also, in December 2004, pursuant to the Jobs Act, we repatriated $110 million of capital from our Puerto Rico subsidiary and incurred approximately $19 million of tax expense. In accordance with proposed legislation, we anticipate that approximately $5 million of this expense will be recaptured as a tax benefit when the proposed legislation becomes enacted. In addition, during the fourth quarter of 2004, an analysis of our Federal Tax Liability resulted in a $10 million reduction of our tax liability.


	*Year Ended December 31, 2003 Compared to December 31, 2002*


	*Total Revenues*

Total revenues increased by $86 million, or 226%, from $38 million for the year ended December 31, 2002, to $124 million for the year ended December 31, 2003.

Net investment income increased by $3 million, or 8%, from $40 million for the year ended December 31, 2002, to $43 million for the year ended December 31, 2003.

Net realized gains (losses) on investments improved by $120 million, or 102%, from net realized losses of $118 million for the year ended December 31, 2002, to net realized gains of $2 million for the year ended December 31, 2003. In 2003, we had other than temporary impairments of $20 million as compared to $85 million for the year ended December 31, 2002. There were no individual impairments of available for sale securities in excess of $10 million in 2003. Impairments on available for sale securities in excess of $10 million in 2002 consisted of an $20 million writedown of fixed maturity investments in NRG Energy, a $12 million writedown of fixed maturity investments in AT&T Canada and an $11 million writedown of fixed maturity investments in MCI WorldCom. Excluding the effects of other-than-temporary impairments, we recorded an increase in net realized gains of $55 million.

Amortization of deferred gain on disposal of businesses decreased by $12 million, or 15%, from $80 million for the year ended December 31, 2002, to $68 million for the year ended December 31, 2003. This decrease was consistent with the run-off of the businesses ceded to The Hartford and John Hancock. See “— Reinsurance.”

Gains on disposal of businesses decreased by $11 million, or 100%, from $11 million for the year ended December 31, 2002, to zero for the year ended December 31, 2003. On June 28, 2002, we sold our investment in NHP, which resulted in pre-tax gains of $11 million.

Fees and other income decreased by $14 million, or 56%, from $25 million for the year ended December 31, 2002, to $11 million for the year ended December 31, 2003. The decrease was primarily due to $15 million of income recognized in 2002 associated with a settlement true-up of a 1999 sale of a small block of business to a third party and reversal of bad debt allowances due to successful collection of receivables that had been previously written off.


	*Total Benefits, Losses and Expenses*

Total benefits, losses and expenses increased by $216 million, or 125%, from $173 million for the year ended December 31, 2002, to $389 million for the year ended December 31, 2003.

Selling, underwriting and general expenses increased by $14 million, or 25%, from $55 million for the year ended December 31, 2002, to $69 million for the year ended December 31, 2003. This increase was primarily due to $14 million of consulting and compensation expenses incurred in 2003, related to our initial public offering in February 2004.

Distributions on preferred securities decreased by $5 million, or 4%, from $118 million for the year ended December 31, 2002, to $113 million for the year ended December 31, 2003. We redeemed $1,250 million of our mandatorily redeemable preferred securities in mid-December 2003, resulting in lower expenses. We redeemed the remaining $196 million of mandatorily redeemable preferred securities in January 2004. As a result of the early extinguishment of all the mandatorily redeemable preferred securities we incurred $206 million of interest premiums for the year ended December 31, 2003 compared to zero recognized in 2002.


	*Segment Loss After Tax*

Segment loss after tax increased by $92 million, or 124%, from $74 million in 2002 to $166 million in 2003. This change was primarily due to the $206 million of interest premiums incurred related to early extinguishment of mandatorily redeemable preferred securities, partially offset by the favorable $120 million change in net realized capital gains (losses) on investments.

Income tax benefit increased by $38 million, or 62%, from $61 million in 2002 to $99 million in 2003. The change in the income tax benefit was consistent with the change in segment loss before income tax. In 2002 we also recognized the release of approximately $13 million of previously provided tax accruals, which were no longer considered necessary based on the resolution of certain domestic tax matters.

Investments

The following table shows the carrying value of our investments by type of security as of the dates indicated:


		As of				As of				As of
		December 31,				December 31,				December 31,
		2004				2003				2002

		(In millions)
Fixed maturities		$	9,178	76	%	$	8,729	77	%	$	8,036	77	%
Equity securities			527	4			456	4			272	3
Commercial mortgage loans on real estate			1,054	9			933	8			842	8
Policy loans			65	1			68	1			69	1
Short-term investments			300	2			276	2			684	7
Collateral head under securities lending			535	4			420	4			377	3
Other investments			489	4			462	4			181	1

	Total investments	$	12,148	100	%	$	11,344	100	%	$	10,461	100	%

Of our fixed maturity securities shown above, 67% and 70% (based on total fair value) were invested in securities rated “A” or better as of December 31, 2004 and December 31, 2003, respectively. As interest rates increase, the market value of fixed maturity securities decreases.

The following table provides the cumulative net unrealized gains (pre-tax) on fixed maturity securities and equity securities as of the dates indicated:


		As of		As of		As of
		December 31,		December 31,		December 31,
		2004		2003		2002

		(In millions)
Fixed maturities:
	Amortized cost	$	8,680	$	8,230	$	7,631
	Net unrealized gains		498		499		405

	Fair value	$	9,178	$	8,729	$	8,036

Equities:
	Cost	$	513	$	437	$	265
	Net unrealized gains		14		19		7

	Fair value	$	527	$	456	$	272

Net unrealized gains on fixed maturity securities decreased by $1 million, or less than 1%, from December 31, 2003 to December 31, 2004. Net unrealized gains on equity securities decreased by $5 million, or 26%, from December 31, 2003, to December 31, 2004. The decrease in net unrealized gains was primarily due to the net effect of the change in treasury yields. The 10-year treasury yield decreased 3 basis points between December 31, 2003 and December 31, 2004 and the 5-year treasury yield increased 36 basis points between December 31, 2003 and December 31, 2004.

Net unrealized gains on fixed maturity securities increased by $94 million, or 23%, from December 31, 2002 to December 31, 2003. Net unrealized gains on equity securities decreased by $12 million, or 171%, from December 31, 2002, to December 31, 2003. The increase in net unrealized gains was primarily due to the decline in investment grade corporate securities yield spreads combined with an increase in treasury yields. Spreads on investment grade corporate securities fell by approximately 119 basis points while yields on 10-year treasury securities increased by 44 basis points between December 31, 2002 and December 31, 2003.

We recorded $0.6 million, $20 million, and $85.3 million of pre-tax realized losses in 2004, 2003 and 2002, respectively, associated with other-than-temporary declines in value of available for sale securities. We also recorded $4.2 million, $11 million, and zero of pre-tax realized losses in 2004, 2003 and 2002, respectively, associated with other investments.

The investment category and duration of our gross unrealized losses on fixed maturities and equity securities at December 31, 2004 were as follows:


			Less Than 12 Months					12 Months or More					Total

					Unrealized					Unrealized					Unrealized
			Fair Value		Losses			Fair Value		Losses			Fair Value		Losses

Fixed maturities
Bonds:
	United States Government and government agencies and authorities		$	303	$	(3	)	$	44	$	(1	)	$	347	$	(4	)
	States, municipalities and political subdivisions			21		—			1		—			22		—
	Foreign governments			54		—			25		(1	)		79		(1	)
	Public utilities			92		(1	)		3		—			95		(1	)
	All other corporate bonds			553		(6	)		39		(1	)		592		(7	)

		Total fixed maturities	$	1,023	$	(10	)	$	112	$	(3	)	$	1,135	$	(13	)

Equity securities
Non-redeemable preferred stocks:														-		—
	Non-sinking fund preferred stocks		$	88	$	(2	)	$	7	$	(1	)	$	95	$	(3	)

		Total equity securities	$	88	$	(2	)	$	7	$	(1	)	$	95	$	(3	)

The total unrealized losses represent less than 1% of the aggregate fair value of the related securities. Approximately 77% of these unrealized losses have been in a continuous loss position for less than twelve months. The total unrealized losses are comprised of 474 individual securities with 92% of the individual securities having an unrealized loss of less than $0.1 million. The total unrealized losses on securities that were in a continuous unrealized loss position for longer than six months but less than 12 months was approximately $7.9 million, with no security with a book value of greater than $1.0 million having a market value below 86% of book value.

As part of our ongoing monitoring process, we regularly review our investment portfolio to ensure that investments that may be other than temporarily impaired are identified on a timely basis and that any impairment is charged against earnings in the proper period. We have reviewed these securities and concluded that there were no additional other than temporary impairments for the year ended December 31, 2004. Due to issuers’ continued satisfaction of the securities’ obligations in accordance with their contractual terms and their continued expectations to do so, as well as our evaluation of the fundamentals of the issuers’ financial condition, we believe that the prices of the securities in an unrealized loss position as of December 31, 2004 in the sectors discussed above were temporarily depressed primarily as a result of the prevailing level of interest rates at the time the securities were purchased.

Reserves

The following table presents reserve information as of the dates indicated:


		As of		As of		As of
		December 31,		December 31,		December 31,
		2004		2003		2002

		(In millions)
Future policy benefits and expenses		$	6,413	$	6,235	$	5,807
Unearned premiums			3,354		3,134		3,208
Claims and benefits payable			3,615		3,472		3,374

	Total policy liabilities	$	13,382	$	12,841	$	12,389

Future policy benefits and expenses increased by $178 million, or 3%, from December 31, 2003 to December 31, 2004 and by $428 million, or 7%, from December 31, 2002 to December 31, 2003. The main contributing factor to these increases was growth in underlying business.

Unearned premiums increased by $220 million, or 7%, from December 31, 2003 to December 31, 2004 and decreased by $74 million, or 2%, from December 31, 2002 to December 31, 2003. The main contributing factor to the increase from December 31, 2003 to December 31, 2004 was new extended service contract business assumed in late 2003. The decrease from December 31, 2002 to December 31, 2003 was primarily driven by the run-off of our domestic credit insurance contracts, offset by growth in other short duration contracts.

Claims and benefits payable increased by $143 million, or 4%, from December 31, 2003 to December 31, 2004 and by $98 million, or 3%, from December 31, 2002 to December 31, 2003. The main contributing factor to these increases was growth in underlying business.

The following table provides reserve information by our major lines of business for the years ended December 31, 2004 and 2003:


		December 31, 2004						December 31, 2003

		Future						Future
		Policy				Claims and		Policy				Claims and
		Benefits and		Unearned		Benefits		Benefits and		Unearned		Benefits
		Expenses		Premiums		Payable		Expenses		Premiums		Payable

		(In millions)
Long Duration Contracts:
	Pre-funded funeral life insurance policies and investment-type annuity contracts	$	2,684	$	3	$	14	$	2,276	$	3	$	14
	Life insurance no longer offered		525		1		2		688		1		4
	Universal life and annuities no longer offered		320		1		12		322		1		17
	FFG and LTC disposed businesses		2,694		48		216		2,744		48		177
	All other		190		53		123		205		57		151
Short Duration Contracts:
	Group term life		—		10		393		—		13		394
	Group disability		—		4		1,446		—		4		1,375
	Medical		—		100		349		—		67		266
	Dental		—		6		35		—		7		39
	Property and warranty		—		1,105		597		—		1,149		580
	Credit life and disability		—		655		359		—		759		403
	Extended service contracts		—		1,347		38		—		1,023		18
	All other		—		21		31		—		2		34

	Total policy liabilities	$	6,413	$	3,354	$	3,615	$	6,235	$	3,134	$	3,472

For a description of our reserving methodology, see Note 16 of the Notes to Consolidated Financial Statements included elsewhere in this report.


	*Long Duration*

The following discusses the reserving process for our major long duration product line.

Reserves for future policy benefits are recorded as the present value of future benefits to policyholders and related expenses less the present value of future net premiums. Reserve assumptions are selected using best estimates for expected investment yield, inflation, mortality and withdrawal rates. These assumptions reflect current trends, are based on Company experience and include provision for possible unfavorable deviation. An unearned revenue reserve is also recorded which represents the balance of the excess of gross premiums over net premiums that is still to be recognized in future years’ income in a constant relationship to insurance in force.

Loss recognition testing is performed annually and reviewed quarterly. Such testing involves the use of best estimate assumptions to determine if the net liability position (all liabilities less DAC) exceeds the minimum liability needed. Any premium deficiency would first be addressed by removing the provision for adverse deviation. To the extent a premium deficiency still remains, it would be recognized immediately by a charge to the statement of operations and a corresponding reduction in DAC. Any additional deficiency would be recognized as a premium deficiency reserve.

Historically, loss recognition testing has not resulted in an adjustment to DAC or reserves. Such adjustments would occur only if economic or mortality conditions significantly deteriorated.


	*Short Duration*

For short duration contracts, claims and benefits payable reserves are recorded when insured events occur. The liability is based on the expected ultimate cost of settling the claims. The claims and benefits payable reserves include (1) case reserves for known but unpaid claims 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 case 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 disability policies and for disability waiver of premium benefits on group term life policies. Assumptions considered in setting such reserves include disabled life mortality and claim termination rates (the rates at which disabled claimants come off claim, either through recovery or death), 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 for group long-term disability claim reserves include the discount rate and claim termination rates. If the discount rate were reduced (or increased) by 100 basis points, reserves at December 31, 2004 would be approximately $50.0 million higher (or $47.7 million lower). If claim termination rates were 10% lower (or higher) than currently assumed, reserves at December 31, 2004 would be approximately $33.9 million higher (or $31.7 million lower).

The discount rate is also a key sensitivity for group term life waiver of premium reserves. If the discount rate were reduced (or increased) by 100 basis points, reserves at December 31, 2004 would be approximately $12.0 million higher (or $11.3 million lower).

As set forth in Note 16 of the Notes to Consolidated Financial Statements for the years ended December 31, 2004, 2003 and 2002, Group Disability incurred losses related to prior years were approximately $12 million less, $53 million more, and $3 million less than the reserves that were previously estimated for the years ended December 31, 2003, 2002 and 2001, respectively. Group Disability reserves are long term in nature, and the reserves are estimated based on claims incurred in several prior years. The Group Disability reserve deficiency in 2003, and its related upward revision, reflects the result of reserve adequacy studies concluded in the third quarter of 2003. Based on results of those studies, reserves were increased by $44 million, almost all of which was attributable to a reduction in the discount rate to reflect current yields on invested assets. The Group Disability reserve redundancies in 2002 and 2004, which were less than 1% of prior-year reserves, arose as a result of our actual claim recovery rates exceeding those assumed in our beginning-of-year case reserves, after taking into account an offset of one less year of discounting reflected in the Company’s end-of-year case reserves. The difference in actual versus best estimate recovery rates reflects an experience gain, which is recognized in the period the gain is realized.

As set forth in Note 16 of the Notes to Consolidated Financial Statements for the years ended December 31, 2004, 2003 and 2002, Group Term Life incurred losses related to prior years were approximately $36 million, $93 million, and $29 million less than the reserves that were previously estimated for the years ended December 31, 2003, 2002 and 2001, respectively. A significant portion of the Group Term Life reserve is related to waiver of premium reserves for disabled claimants. Group Term Life waiver of premium reserves are long-term in nature, and the reserves are estimated based on claims incurred in several prior years.

Group Term Life reserves were reduced in the third quarter of 2003 to reflect the results of reserve adequacy studies conducted. Based on the results of those studies, reserves were reduced by $59 million. The

change in estimate reflects an increase in the discount rate, lower mortality rates and higher recovery rates. These changes were made to reflect current yields on invested assets and recent mortality and recovery experience. Another portion of the Group Term Life reserve redundancies in all years described above was caused by actual mortality rates being lower than assumed in our beginning-of-year reserves and recovery rates being higher than assumed in our beginning-of-year wavier of premium reserves. The remaining redundancy was due to shorter-than-expected lags between incurred claim dates and paid claim dates. These adjustments were made to reflect current yields on invested assets, and recent mortality and recovery experience. These changes were offset by one less year of discounting reflected in the Company’s end-of-year waiver of premium reserves. The differences in actual versus best estimate mortality, recovery and paid claim lag rates reflect experience gains, which are recognized in the period the gains emerge.

The conclusion of the 2003 reserve studies determined that, in the aggregate, the reserves were redundant. The reserve discount rate on all claims was changed to reflect the continuing low interest rate environment. The net impact of these adjustments was a reduction in reserves of approximately $18 million, which included $3 million of reserve release relating to the group dental business.


	Medical

IBNR reserves represent the largest component of reserves estimated for claims and benefits payable in our Medical line of business, and we use a number of methods in their estimation, including the loss development method and the projected claim method for recent claim periods. We use several methods in our Medical line of business because of the limitations of relying exclusively on a single method.

A key sensitivity is the loss development factors used. Loss development factors selected take into consideration claims processing levels, claims under case management, medical inflation, seasonal effects, medical provider discounts and product mix. A 1% reduction (or increase) to the loss development factors for the most recent four months would result in approximately $18 million higher (or $14 million lower) reserves at December 31, 2004. Our historical claims experience indicates that approximately 80% of medical claims are paid within four months of the incurred date.

As set forth in Note 16 of the Notes to Consolidated Financial Statements for the years ended December 31, 2004, 2003 and 2002, actual losses incurred in our Medical business related to prior years were $50 million, $58 million, and $43 million less than previously estimated for the years ended December 31, 2003, 2002 and 2001, respectively. Due to the short-tail nature of this business, these developments related to claims incurred in the preceding year (i.e., in 2003, 2002 and 2001 respectively). The redundancies in our Medical line of business, and the related downward revisions in our Medical reserve estimates, were caused by our claims developing more favorably than expected. Our actual claims experience reflected lower medical provider utilization and lower medical inflation than assumed in our prior-year pricing and reserving processes. The differences in actual versus best estimate paid claim lag rates, medical provider utilization and medical inflation reflect experience gains, which are recognized in the period the gains emerge.

None of the changes in incurred claims from prior years in our Medical line of business, and the related downward revisions in our Medical estimated reserves, were attributable to any change in our reserve methods or assumptions.


	Property and Warranty

Our Property and Warranty line of business includes creditor-placed homeowners, manufactured housing homeowners, credit property, credit unemployment and warranty insurance and some longer-tail coverages (e.g., asbestos, environmental, other general liability and personal accident). Our Property and Warranty loss reserves consist of case reserves and bulk reserves. Bulk reserves consist of IBNR and development on case reserves. The method we most often use in setting our Property and Warranty bulk 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 bulk 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, and we consider recent trends and business specific matters such as current claims payment practices.

We may use other methods depending on data credibility and product line. We use the estimates generated by the various methods to establish a range of reasonable estimates. The best estimate is selected from the middle to upper end of the third quartile of the range of reasonable estimates.

As set forth in Note 16 of the Notes to Consolidated Financial Statements for the periods ended December 31, 2004, 2003 and 2002, actual losses incurred in our property and warranty lines of business related to prior years were $25 million less, $13 million less, and $2 million more than previously estimated for the years ended December 31, 2003, 2002 and 2001, respectively. The Company’s property and warranty lines of business had a small deficiency in 2002 which was largely attributable to a shift in the mix of business away from the credit property and unemployment product lines. In addition, an increase in the claim frequency of unemployment contributed to additional development on the small deficiency experienced in 2002. In 2003, unemployment claim frequencies stabilized, contributing to a modest redundancy. In 2004, an improved economic environment led to lower unemployment levels, which meant that loss payments on existing claims as well as payments on new claims in our credit unemployment lines, were not as high as would have been expected. This, coupled with lower reserve levels as a result of reduced premium writings in this line, lead to a redundancy. These changes reflect experience gains and losses from actual claim frequencies differing from best estimate claim frequencies, and difference in actual versus best estimate paid claim lag rates. Such gains and losses are recognized in the periods they emerge.

Most of our credit insurance business is written on a retrospective commission basis, which permits Assurant Solutions to adjust commissions based on claims experience. Thus, any adjustment to prior years’ incurred claims in this line of business is largely offset by a change in contingent commissions which is included in the selling, underwriting and general expenses line in the results of operations.

Reinsurance

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

As of

December 31,

2004

2003

2002

(In millions)

Reinsurance recoverables

4,133

4,377

4,650

Reinsurance recoverables decreased by $244 million, or 6%, from December 31, 2003 to December 31, 2004 and by $273 million, or 6%, from December 31, 2002 to December 31, 2003. We have used reinsurance to exit certain businesses, such as the dispositions of FFG and LTC. The reinsurance recoverables relating to these dispositions amounted to $2,389 million, $2,410 million, and $2,255 million at December 31, 2004, December 31, 2003 and 2002, 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:


	2004		2003

	(In millions)
Ceded future policyholder benefits and expense	$	2,504	$	2,551
Ceded unearned premium		767		971
Ceded claims and benefits payable		720		747
Ceded paid losses		142		108

Total	$	4,133	$	4,377

We utilize ceded reinsurance for loss protection and capital management, business dispositions and, in Assurant Solutions, for client risk and profit sharing.

Based on our December 31, 2004 results, we anticipate that we will receive approximately $34 million from reinsurers in respect of the 2004 Florida hurricanes. Our benefits, losses and expenses for the year ended December 31, 2004 reflect this anticipated recovery.


	*Loss Protection and Capital Management*

As part of our overall risk and capacity management strategy, we purchase reinsurance for certain risks underwritten by our various business segments, including significant individual or catastrophic claims, and to free up capital to enable us to write additional business.

For those product lines where there is exposure to catastrophes, we closely monitor and manage the aggregate risk exposure by geographic area, and we have entered into reinsurance treaties to manage exposure to these types of events.

Under indemnity reinsurance transactions in which we are the ceding insurer, we remain liable for policy claims if the assuming company fails to meet its obligations. To limit this risk, we have control procedures to evaluate the financial condition of reinsurers and to monitor the concentration of credit risk to minimize this exposure. The selection of reinsurance companies is based on criteria related to solvency and reliability and, to a lesser degree, diversification as well as developing strong relationships with our reinsurers for the sharing of risks.


	*Business Dispositions*

We have used reinsurance to exit certain businesses, such as the dispositions of FFG and LTC. Reinsurance was used in these cases to facilitate the transactions because the businesses shared legal entities with business segments that we retained. Assets backing liabilities ceded relating to these businesses are held in trusts, and the separate accounts relating to FFG are still reflected in our balance sheet.

The reinsurance recoverable from The Hartford was $1,507 million and $1,537 million as of December 31, 2004 and 2003, respectively. The reinsurance recoverable from John Hancock was $882 million and $873 million as of December 31, 2004 and 2003, respectively. We would be responsible for administering this business and funding policyholder liabilities in the event of a default by reinsurers. In addition, under the reinsurance agreement, The Hartford is obligated to contribute funds to increase the value of the separate account assets relating to modified guaranteed annuity business sold if such value declines below the value of the associated liabilities. If The Hartford fails to fulfill these obligations, we will be obligated to make these payments.


	*Assurant Solutions Segment Client Risk and Profit Sharing*

The Assurant Solutions segment writes business produced by its clients, such as mortgage lenders and servicers and financial institutions, and reinsures all or a portion of such business to insurance subsidiaries of the clients. Such arrangements allow significant flexibility in structuring the sharing of risks and profits on the underlying business.

A substantial portion of Assurant Solutions’ reinsurance activities are related to agreements to reinsure premiums and risk related to business generated by certain clients to the clients’ captive insurance companies or to reinsurance subsidiaries in which the clients have an ownership interest. Through these arrangements, our insurance subsidiaries share some of the premiums and risk related to client-generated business with these clients. When the reinsurance companies are not authorized to do business in our insurance subsidiary’s domiciliary state, our insurance subsidiary obtains collateral, such as a trust or a letter of credit, from the reinsurance company or its affiliate in an amount equal to the outstanding reserves to obtain full financial credit in the domiciliary state for the reinsurance. Our reinsurance agreements do not relieve us from our direct obligation to our insured. Thus, a credit exposure exists to the extent that any reinsurer is unable to meet the obligations assumed in the reinsurance agreements. To minimize our exposure to reinsurance insolvencies, we evaluate the financial condition of our reinsurers and hold substantial collateral (in the form

of funds, trusts and letters of credit) as security under the reinsurance agreements. See “Item 7A — Quantitative and Qualitative Disclosures about Market Risk — Credit Risk.”

Liquidity and Capital Resources

Assurant, Inc. is a holding company, and as such, has limited direct operations of its own. Our holding company assets consist primarily of the capital stock of our subsidiaries. Accordingly, our 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. Solvency regulations, capital requirements and rating agencies are some of the factors used in determining the amount of capital used for dividends. For 2004, the maximum amount of distributions our subsidiaries could pay under applicable laws and regulations without prior regulatory approval was $302 million. For a discussion of the various restrictions on the ability of our subsidiaries to pay dividends, please see “Item 1 — Business — Regulation” and “Item 5 — Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Dividend Policy.”

Dividends paid by our subsidiaries totaled $361.7 million for the year ended December 31, 2004, $99.5 million for the year ended December 31, 2003, and $186.5 million for the year ended December 31, 2002. We used these cash inflows primarily to pay expenses, to make interest payments on indebtedness and to make dividend payments to our stockholders.

The primary sources of funds for our subsidiaries consist of premiums and fees collected, the proceeds from the sales and maturity of investments and 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 income.

In December 2003, we entered into two senior bridge credit facilities of $650 million and $1,100 million. The aggregate indebtedness of $1,750 million under the facility was in connection with the extinguishment of our mandatorily redeemable preferred securities.

On January 30, 2004, we entered into a $500 million senior revolving credit facility with a syndicate of banks arranged by J.P. Morgan Securities Inc. (successor by merger to Banc One Capital Markets, Inc.) and Citigroup Global Markets, Inc., which is available for working capital and other general corporate purposes. The revolving credit facility is unsecured and is available until February 2007, so long as we are not in default.

The revolving credit facility contains restrictive covenants. The terms of the revolving credit facility also require that we maintain certain specified minimum ratios or thresholds. As of December 31, 2004, we are in compliance with all covenants and we maintain all specified minimum ratios and thresholds.

On February 10, 2004, we received a $725.5 million capital contribution from Fortis simultaneously with the closing of our initial public offering. The proceeds from that contribution were used to repay the outstanding indebtedness under the $650 million senior bridge credit facility and $75.5 million of outstanding indebtedness under the $1,100 million senior bridge credit facility. In addition, we repaid a portion of the $1,100 million senior bridge credit facility with $49.5 million in cash. We also refinanced the remaining amount outstanding under the $1,100 million senior bridge credit facility with the proceeds of our $975 million senior note offerings described below. All amounts outstanding under our senior bridge credit facilities were paid off in 2004.

On February 18, 2004, we issued two series of senior notes in an aggregate principal amount of $975 million. The first series is $500 million in principal amount, bears interest at 5.625% per year and is

payable in a single installment due February 15, 2014. The second series is $475 million in principal amount, bears interest at 6.750% per year and is payable in a single installment due February 15, 2034.

In March 2004, we established a $500 million commercial paper program, which is available for working capital and other general corporate purposes. Our subsidiaries do not maintain commercial paper or other borrowing facilities at their level. This program is backed up by a $500 million senior revolving credit facility with a syndicate of banks arranged by J.P. Morgan Securities Inc. (successor by merger to Banc One Capital Markets, Inc.) and Citigroup Global Market, Inc., which was established on January 30, 2004. The revolving credit facility is unsecured and is available until February 2007, so long as we are in compliance with all the covenants. This facility is also available for general corporate purposes, but to the extent used thereto, would be unavailable to back up the commercial paper program. On June 1, 2004, August 9, 2004 and October 18, 2004, we used $20 million, $40 million and $40 million, respectively, from the commercial paper program for general corporate purposes, which was repaid on June 15, 2004, August 20, 2004 and October 29, 2004, respectively. There were no amounts relating to the commercial paper program outstanding at December 31, 2004. We did not use the revolving credit facility during the twelve months ended December 31, 2004 and no amounts are currently outstanding.

Interest on our senior notes is payable semi-annually on February 15 and August 15 of each year, commencing August 15, 2004. The senior notes are our unsecured obligations and rank equally with all of our other senior unsecured indebtedness. The senior notes are not redeemable prior to maturity. The net proceeds from the issuance of the senior notes were used to repay the remaining portion of our outstanding indebtedness under our $1,100 million senior bridge facility.

Our qualified pension plan was under-funded by $57.4 million at December 31, 2004. We established a funding policy in which service cost plus 15% of plan deficit will be contributed annually. In the full year 2004, we made contributions to the pension fund totaling $26 million. This funding policy will be revised annually to take into effect any assumption changes, return on plan assets and funded status of the plan. In accordance with ERISA, there is no expected minimum funding requirement for 2004 or 2005. Our nonqualified plan, which is unfunded, had a projected benefit obligation of $85.2 million at December 31, 2004. The expected Company payments to retirees under this plan are approximately $4 million per year in 2004 and 2005. Also, our post-retirement plans (other than pension), which are partially funded with $7 million of assets, had an accumulated post-retirement benefit obligation of $54.5 million at December 31, 2004. In the full year 2004, we contributed $5.7 million towards pre-funding these benefits. In addition, the expected Company payments to retirees and dependents under the postretirement plan are approximately $1.2 million per year in 2004 and 2005. See Note 18 of the Notes to Consolidated Financial Statements included elsewhere in this prospectus.

We estimate that our capital expenditures in connection with our name change and rebranding initiative have been approximately $10 million, which were expensed in 2004. We are not currently planning to make any other significant capital expenditures in 2005.

During January 2004, we paid to participants in the Assurant Appreciation Incentive Rights Plan an aggregate of $25 million in connection with the cash-out of all outstanding Fortis incentive rights.

In management’s opinion, our subsidiaries’ cash flow from operations 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 both the consolidated and subsidiary levels. Cash flow forecasts at the consolidated and subsidiary levels are provided on a monthly basis, and we use trend and variance analyses to project future cash needs making adjustments to the forecasts when needed.

The table below shows our recent net cash flows:


		For the Year Ended
		December 31,

		2004			2003			2002

		(In millions)
Net cash provided by (used in):
	Operating activities	$	834		$	741		$	364
	Investing activities		(644	)		(711	)		(379	)
	Financing activities		(341	)		318			(43	)

Net change in cash		$	(151	)	$	348		$	(58	)

Cash Flows for the Years Ended December 31, 2004, 2003 and 2002. The key changes of the net cash outflow of $151 million for the year ended December 31, 2004 were net purchases of fixed maturity securities of $1,238 million, maturities of these securities of $851 million, repayment of debt in the amount of $1,750 million, issuance of debt of $972 million, and issuance of common stock of $725 million. The key changes of the net cash inflow of $348 million for the year ended December 31, 2003 were net purchases of fixed maturity securities of $1,929 million, maturities of these securities of $1,131 million and issuance of debt in the amount of $2,400 million. Key changes of the net cash outflow of $58 million for the year ended December 31, 2002 were net purchases of fixed maturity securities of $1,164 million and maturities of these securities of $858 million.

At December 31, 2004, we had total debt outstanding of $996 million, as compared to $1,970 million at December 31, 2003 and $1,471 million at December 31, 2002. At December 31, 2004, this debt consisted of $972 million of senior notes and $24 million of mandatorily redeemable preferred stock.

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


		For the Year Ended
		December 31,

Security		2004		2003		2002

		(In millions)
Mandatorily redeemable preferred securities and interest paid		$	38	$	129	$	117
Mandatorily redeemable preferred stock dividends			1		1		1
Common stock dividends			30		181		42

	Total	$	69	$	311	$	160


	*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, 2004, are detailed in the table below by maturity date as of the dates indicated:


		As of December 31,

		Less Than		1-3		3-5		More Than
		1 Year		Years		Years		5 Years		Total

		(In millions)
Contractual obligations:
Insurance liabilities(1)		$	1,515	$	637	$	256	$	991	$	3,399
Debt			—		—		—		975		975
Interest on debt			60		181		181		762		1,184
Mandatorily redeemable preferred stock			—		—		—		24		24
Operating leases			35		52		37		28		152
Commitments:
Investment purchases Outstanding:
	unsettled trades		35		—		—		—		35
	commercial mortgage loans on real estate		32				—		—		32
	other investments		24		5		—		—		29

Total obligations and commitments		$	1,701	$	875	$	474	$	2,780	$	5,830

(1)

Insurance liabilities, reflected in the commitments and contingencies table above, include products for which we are currently making periodic payments and products for which we are not making periodic payments, but for which we believe the amount and timing of future payments is essentially fixed and determinable. Amounts included in insurance liabilities reflect estimated cash payments to be made to policyholders. The total amount represents the claims and benefits payable on all of our long and short duration contracts with the exception of $216 million related to our FFG and LTC disposed businesses. The payment of these liabilities has been fully reinsured. See “Item 1 — Business — Business Dispositions.”

Liabilities for future policy benefits and expenses of $6,413 million and unearned premiums of $3,354 million as of December 31, 2004 have been excluded from 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. These liabilities have been excluded from the table above because the determination of these liability amounts and the timing of payments are not reasonably fixed and determinable since the insurable event, payment triggering or revenue recognition event has not yet occurred.

In addition, as of December 31, 2004, the Assurant Appreciation Incentive Rights Plan liability was $49 million. This liability will be paid based on the plan description.


	*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 $66 million and $117 million of letters of credit outstanding as of December 31, 2004 and December 31, 2003, respectively.

RISK FACTORS

Risks Related to Our Company


	*Our profitability may decline if we are unable to maintain our relationships with significant clients, distributors and other parties important to the success of our business.*

Our relationships and contractual arrangements with significant clients, distributors and other parties with which we do business are important to the success of our business segments. Many of these arrangements are exclusive. For example, in Assurant Solutions, we have exclusive relationships with several mortgage lenders and servicers, retailers, credit card issuers and other financial institutions through which we distribute our products. In Assurant Health, we have exclusive distribution relationships for our individual health insurance products with IPSI, a wholly owned subsidiary of State Farm Mutual Automobile Insurance Company (State Farm), and USAA, as well as a relationship with HAA, the association through which we provide many of our individual health insurance products through Assurant Health’s agreement dated September 1, 2003 with its administrator, NAC. An association in the health insurance market is an entity formed and maintained in good faith for purposes other than obtaining insurance and does not make health insurance coverage offered through the association available other than in connection with membership in the association. The agreement that provides for our exclusive distribution relationship with IPSI terminates in June 2008, but may be extended if agreed to by both parties. We also maintain contractual relationships with several separate networks of health and dental care providers, each referred to as a PPO, through which we obtain discounts. A PPO is an entity that acts as an intermediary between an insurer and a network of hospitals, physicians, dentists or other providers of health care who have agreed to provide care to insureds subject to contractually established reimbursement rates. In Assurant PreNeed, we have an exclusive distribution relationship with SCI. Many of these arrangements have terms ranging from one to five years. Although we believe we have generally been successful in maintaining our client, distribution and related relationships, if these parties decline to renew or seek to terminate these arrangements or seek to renew these contracts on less favorable terms, our results of operations and financial condition could be materially adversely affected. In addition, we are subject to the risk that these parties may face financial difficulties, reputational issues or problems with respect to their own products and services, which may lead to decreased sales of our products and services. Moreover, if one or more of our clients or distributors consolidate or align themselves with other companies, we may lose business or suffer decreased revenues. A loss of the discount arrangements with PPOs could also lead to higher medical or dental costs and/or a loss of members to other medical or dental plans.

For example, Assurant Solutions lost a few clients over the last three years as a result of bankruptcies and termination of contracts either by it or its clients; however, none of the clients lost was significant to its business. At Assurant Health, client turnover has been stable over the last three years as none of the clients lost was significant to its business. Assurant PreNeed terminated several client relationships with three funeral home groups in 2003 because of profitability issues with the business; none of the clients terminated was significant to its business.


	*Sales of our products and services may be reduced if we are unable to attract and retain sales representatives or develop and maintain distribution sources.*

We distribute our insurance products and services through a variety of distribution channels including: independent employee benefits specialists, brokers, managing general agents, life agents, financial institutions, mortgage lenders and servicers, retailers, funeral directors, association groups and other third-party marketing organizations.

Our relationships with these various distributors are significant both for our revenues and profits. We do not distribute our insurance products and services through captive or affiliated agents. In Assurant Health, we depend in large part on the services of independent agents and brokers and on associations, including HAA, in the marketing of our products. In Assurant Employee Benefits, independent agents and brokers who act as advisors to our customers, market and distribute our products. Independent agents and brokers are typically not exclusively dedicated to us and usually also market products of our competitors. Strong competition exists

among insurers to form relationships with agents and brokers of demonstrated ability. We compete with other insurers for sales representatives, agents and brokers primarily on the basis of our financial position, support services, compensation and product features. In addition, by relying on independent agents and brokers to distribute products for us, we face continued competition from our competitors’ products. Moreover, our ability to market our products and services depends on our ability to tailor our channels of distribution to comply with changes in the regulatory environment. Recently, the marketing of health insurance through association groups and broker compensation arrangements have come under increased scrutiny. An interruption in, or changes to, our relationships with various third-party distributors or our inability to respond to regulatory changes could impair our ability to compete and market our insurance products and services and materially adversely affect our results of operations and financial condition.

We have our own sales representatives whose role in the distribution process varies by segment. We depend in large part on our sales representatives to develop and maintain client relationships. Our inability to attract and retain effective sales representatives could materially adversely affect our results of operations and financial condition.


	*General economic, financial market and political conditions may adversely affect our results of operations and financial condition.*

Our results of operations and financial condition may be materially adversely affected from time to time by general economic, financial market and political conditions. These conditions include economic cycles such as insurance industry cycles, levels of employment, levels of consumer lending, levels of inflation and movements of the financial markets.

Fluctuations in interest rates, monetary policy, demographics, and legislative and competitive factors also influence our performance. During periods of economic downturn:


	•	individuals and businesses may choose not to purchase our insurance products and other related products and services, may terminate existing policies or contracts or permit them to lapse, may choose to reduce the amount of coverage purchased or, in Assurant Employee Benefits and in small group employer health insurance in Assurant Health, may have fewer employees requiring insurance coverage due to rising unemployment levels;

	•	new disability insurance claims and claims on other specialized insurance products tend to rise;

	•	there is a higher loss ratio on credit card and installment loan insurance due to rising unemployment levels; and

	•	insureds tend to increase their utilization of health and dental benefits if they anticipate becoming unemployed or losing benefits.

In addition, general inflationary pressures may affect the costs of medical and dental care, as well as repair and replacement costs on our real and personal property lines, increasing the costs of paying claims. Inflationary pressures may also affect the costs associated with our pre-funded funeral insurance policies, particularly those that are guaranteed to grow with the CPI. Pre-funded funeral insurance provides benefits to fund the costs incurred in connection with a pre-arranged funeral contract, which is an arrangement between a funeral firm and an individual whereby the funeral firm agrees to perform a selected funeral upon the individual’s death.


	*Our actual claims losses may exceed our reserves for claims, which may require us to establish additional reserves that may materially reduce our earnings, profitability and capital.*

We maintain reserves to cover our estimated ultimate exposure for claims and claim adjustment expenses with respect to reported and unreported claims IBNR as of the end of each accounting period. Reserves, whether calculated under GAAP or SAP, do not represent an exact calculation of exposure, but instead represent our best estimates, generally involving actuarial projections at a given time, of what we expect the ultimate settlement and administration of a claim or group of claims will cost based on our assessment of facts

and circumstances then known. The adequacy of reserves will be impacted by future trends in claims severity, frequency, judicial theories of liability and other factors. These variables are affected by both external and internal events, such as: changes in the economic cycle, changes in the social perception of the value of work, emerging medical perceptions regarding physiological or psychological causes of disability, emerging health issues and new methods of treatment or accommodation, inflation, judicial trends, legislative changes and claims handling procedures.

Many of these items are not directly quantifiable, particularly on a prospective basis. Reserve estimates are refined as experience develops. Adjustments to reserves, both positive and negative, are reflected in the statement of operations of the period in which such estimates are updated. Because establishment of reserves is an inherently uncertain process involving estimates of future losses, there can be no certainty that ultimate losses will not exceed existing claims reserves. However, 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.


	We may be unable to accurately predict benefits, claims and other costs or to manage such costs through our loss limitation methods, which could have a material adverse effect on our results of operations and financial condition.

Our profitability depends in large part on accurately predicting benefits, claims and other costs, including medical and dental costs, and predictions regarding the frequency and magnitude of claims on our disability and property coverages. It also depends on our ability to manage future benefit and other costs through product design, underwriting criteria, utilization review or claims management and, in health and dental insurance, negotiation of favorable provider contracts. Utilization review is a review process designed to control and limit medical expenses, which includes, among other things, requiring certification for admission to a health care facility and cost-effective ways of handling patients with catastrophic illnesses. Claims management entails the use of a variety of means to mitigate the extent of losses incurred by insureds and the corresponding benefit cost, which includes efforts to improve the quality of medical care provided to insureds and to assist them with vocational services. The aging of the population and other demographic characteristics and advances in medical technology continue to contribute to rising health care costs. Our ability to predict and manage costs and claims, as well as our business, results of operations and financial condition may be adversely affected by: changes in health and dental care practices, inflation, new technologies, the cost of prescription drugs, clusters of high cost cases, changes in the regulatory environment, economic factors, the occurrence of catastrophes and numerous other factors affecting the cost of health and dental care and the frequency and severity of claims in all our business segments.

The judicial and regulatory environments, changes in the composition of the kinds of work available in the economy, market conditions and numerous other factors may also materially adversely affect our ability to manage claim costs. As a result of one or more of these factors or other factors, claims could substantially exceed our expectations, which could have a material adverse effect on our results of operations and financial condition.

As industry practices and legal, judicial, social and other environmental conditions change, unexpected and unintended issues relating to claims and coverage may emerge. These issues could materially adversely affect our results of operations and financial condition by either extending coverage beyond our underwriting intent or by increasing the number or size of claims or both. We may be limited in our ability to respond to such changes, by insurance regulations, existing contract terms, contract filing requirements, market conditions or other factors.


	*Our investment portfolio is subject to several risks that may diminish the value of our invested assets and affect our sales and profitability.*


	Our investment portfolio may suffer reduced returns or losses that could reduce our profitability.

Investment returns are an important part of our overall profitability and significant fluctuations in the fixed income market could impair our profitability, financial condition and/or cash flows. Our investments are

subject to market-wide risks and fluctuations, as well as to risks inherent in particular securities. In particular, volatility of claims may force us to liquidate securities prior to maturity, which may cause us to incur capital losses. If we do not structure our investment portfolio so that it is appropriately matched with our insurance liabilities, we may be forced to liquidate investments prior to maturity at a significant loss to cover such liabilities. For the year ended December 31, 2004, our net investment income was $635 million and our net realized gains on investments were $24 million, which collectively accounted for approximately 9% of our total revenues during such period. For the year ended December 31, 2003, our net investment income was $607 million and our net realized gains on investments were $2 million, which collectively accounted for approximately 9% of our total revenues during such period.


	The performance of our investment portfolio is subject to fluctuations due to changes in interest rates and market conditions.

Changes in interest rates can negatively affect the performance of some of our investments. Interest rate volatility can reduce unrealized gains or create unrealized losses in our 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, which comprised $9,478 million, or 82%, of the fair value of our total investments as of December 31, 2004 and $9,005 million, or 82%, as of December 31, 2003.

The fair market value of the fixed maturity securities in our 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. In addition, actual net investment income and/or cash flows from investments that carry prepayment risk, such as mortgage-backed and other asset-backed securities, may differ from those anticipated at the time of investment as a result of interest rate fluctuations. In periods of declining interest rates, mortgage prepayments generally increase and mortgage-backed securities, commercial mortgage obligations and bonds in our investment portfolio are more likely to be prepaid or redeemed as borrowers seek to borrow at lower interest rates, and we may be required to reinvest those funds in lower interest-bearing investments. As of December 31, 2004, mortgage-backed and other asset-backed securities represented approximately $1,677 million, or 14%, of the fair value of our total investments.

Because substantially all of our fixed maturity securities are classified as available for sale, changes in the market value of these securities are reflected in our balance sheet. Similar treatment is not available for liabilities. Therefore, interest rate fluctuations affect the value of our investments and could materially adversely affect our results of operations and financial condition.

We employ asset/ liability matching strategies to reduce the adverse effects of interest rate volatility and to ensure that cash flows are available to pay claims as they become due. Our asset/ liability matching strategies include: asset/ liability duration management, structuring our bond and commercial mortgage loan portfolios to limit the effects of prepayments and consistent monitoring of, and appropriate changes to, the pricing of our products.

However, these strategies may fail to eliminate or reduce the adverse effects of interest rate volatility, and no assurances can be given that significant fluctuations in the level of interest rates will not have a material adverse effect on our results of operations and financial condition.

In addition, Assurant PreNeed generally writes whole life insurance policies with increasing death benefits. Whole life insurance refers to a form of life insurance that provides guaranteed death benefits and guaranteed cash values to policyholders. As of December 31, 2004, approximately 83% of Assurant PreNeed’s in force insurance policy reserves related to policies that provide for death benefit growth, some of which provide for minimum death benefit growth pegged to changes in the CPI. In extended periods of declining interest rates or high inflation, there may be compression in the spread between Assurant PreNeed’s death benefit growth rates and its investment earnings or a negative spread. As a result, declining interest rates or

high inflation rates may have a material adverse effect on our results of operations and our overall financial condition.

Assurant Employee Benefits calculates reserves for long-term disability and life waiver of premium claims using net present value calculations based on current interest rates at the time claims are funded and expectations regarding future interest rates. Waiver of premium refers to a provision in a life insurance policy pursuant to which an insured with total disability that lasts for a specified period no longer has to pay premiums for the duration of the disability or for a stated period, during which time the life insurance coverage provides continued coverage. If interest rates decline, reserves for open and/or new claims would need to be calculated using lower discount rates thereby increasing the net present value of those claims and the required reserves. Depending on the magnitude of the decline, this could have a material adverse effect on our results of operations and financial condition. In addition, investment income may be lower than that assumed in setting premium rates.


	Our investment portfolio is subject to credit risk.

We are subject to credit risk in our investment portfolio, primarily from our investments in corporate bonds and preferred stocks. Defaults by third parties in the payment or performance of their obligations could reduce our investment income and realized investment gains or result in investment losses. Further, the value of any particular fixed maturity security is subject to impairment based on the creditworthiness of a given issuer. As of December 31, 2004, we held $9,178 million of fixed maturity securities, or 76% of the fair value of our total invested assets at such date. Our fixed maturity portfolio also includes below investment grade securities, which comprised 6% of the fair value of our total fixed maturity securities at December 31, 2004 and December 31, 2003. These investments generally provide higher expected returns but present greater risk and can be less liquid than investment grade securities. A significant increase in defaults and impairments on our fixed maturity securities portfolio could materially adversely affect our results of operations and financial condition. Other-than-temporary impairment losses on our available for sale securities totaled $0.6 million for the year ended December 31, 2004 and $20 million for the year ended December 31, 2003.

As of December 31, 2004, less than 1% of the fair value of our total investments was invested in common stock; however, we have had higher percentages in the past and may make more such investments in the future. Investments in common stock generally provide higher expected total returns, but present greater risk to preservation of principal than our fixed income investments.

In addition, while currently we do not utilize derivative instruments to hedge or manage our interest rate or equity risk, we may do so in the future. Derivative instruments generally present greater risk than fixed income investments or equity investments because of their greater sensitivity to market fluctuations. Effective as of August 1, 2003, we utilize derivative instruments in managing Assurant PreNeed’s exposure to inflation risk. While these instruments seek to protect a portion of Assurant PreNeed’s existing business that is tied to the CPI, a sharp increase in inflation could have a material adverse effect on our results of operations and financial condition.


	Our commercial mortgage loans and real estate investments subject us to liquidity risk.

As of December 31, 2004, commercial mortgage loans on real estate investments represented approximately 9% of the fair value of our total investments. These types of investments are relatively illiquid, thus increasing our liquidity risk. In addition, if we require extremely large amounts of cash on short notice, we may have difficulty selling these investments at attractive prices, in a timely manner, or both.


	The risk parameters of our investment portfolio may not target an appropriate level of risk, thereby reducing our profitability and diminishing our ability to compete and grow.

We seek to earn returns on our investments to enhance our ability to offer competitive rates and prices to our customers. Accordingly, our investment decisions and objectives are a function of the underlying risks and product profiles of each of our business segments. However, we may not succeed in targeting an appropriate overall risk level for our investment portfolio. As a result, the return on our investments may be insufficient to

meet our profit targets over the long term, thereby reducing our profitability. If, in response, we choose to increase our product prices to maintain profitability, we may diminish our ability to compete and grow.


	Environmental liability exposure may result from our commercial mortgage loan portfolio and real estate investments.

Liability under environmental protection laws resulting from our commercial mortgage loan portfolio and real estate investments may harm our financial strength and reduce our profitability. Under the laws of several states, contamination of a property may give rise to a lien on the property to secure recovery of the costs of the cleanup. In some states, this kind of lien has priority over the lien of an existing mortgage against the property, which would impair our ability to foreclose on that property should the related loan be in default. In addition, under the laws of some states and under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, under certain circumstances, we may be liable for costs of addressing releases or threatened releases of hazardous substances that require remedy at a property securing a mortgage loan held by us. We also may face this liability after foreclosing on a property securing a mortgage loan held by us after a loan default.


	*Catastrophe losses, including man-made catastrophe losses, could materially reduce our profitability and have a material adverse effect on our results of operations and financial condition.*

Our insurance operations expose us to claims arising out of catastrophes, particularly in our homeowners, life and other personal business lines. We have experienced, and expect in the future to experience, catastrophe losses that may materially reduce our profitability or have a material adverse effect on our results of operations and financial condition. Catastrophes can be caused by various natural events, including hurricanes, windstorms, earthquakes, hailstorms, severe winter weather, fires and epidemics, or can be man-made catastrophes, including terrorist attacks or accidents such as airplane crashes. The frequency and severity of catastrophes are inherently unpredictable. Catastrophe losses can vary widely and could significantly exceed our recent historic results. It is possible that both the frequency and severity of man-made catastrophes will increase and that we will not be able to implement exclusions from coverage in our policies or obtain reinsurance for such catastrophes.

The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Most of our catastrophe claims in the past have related to homeowners and other personal lines coverages, which for the year ended December 31, 2004 represented approximately 26% of our net earned premiums and other consideration in our Assurant Solutions segment. In addition, as of December 31, 2004, approximately 35.6% of the insurance in force in our homeowners and other personal lines related to properties located in California, Florida and Texas. As a result of our creditor-placed homeowners insurance product, which typically provides coverage against an insured’s property being destroyed or damaged by various perils, our concentration in these areas may increase in the future. This is because in our creditor-placed homeowners insurance line, we agree to provide homeowners insurance coverage automatically. If other insurers withdraw coverage in these or other states, this may lead to adverse selection and increased utilization of our creditor-placed homeowners insurance in these areas. Adverse selection refers to the process by which an applicant who believes himself to be uninsurable, or at greater than average risk, seeks to obtain an insurance policy at a standard premium rate.

Claims resulting from natural or man-made catastrophes could cause substantial volatility in our financial results for any fiscal quarter or year and could materially reduce our profitability or harm our financial condition. Our ability to write new business also could be affected. Increases in the value and geographic concentration of insured property and the effects of inflation could increase the severity of claims from catastrophes in the future.

Pre-tax catastrophe losses in excess of $1 million (before the benefits of reinsurance) that we have experienced in recent years include:


	•	total losses of approximately $10 million incurred in 2001 in connection with tropical storm Allison;

	•	total losses of approximately $12 million incurred in 2002 in connection with Arizona wildfires, Texas floods and Hurricane Lili;

	•	total losses of approximately $30 million incurred in 2003 in connection with various catastrophes caused by windstorms, hailstorms and tornadoes, Hurricane Isabel and the California wildfires; and

	•	total losses of approximately $125 million incurred through December 31, 2004 in connection with the four Florida hurricanes. Total reinsurance recoveries related to these events are anticipated to be approximately $34 million.

No liquidation in investments was required in connection with these catastrophes as the claims were paid from current cash flow, cash on hand or short-term investments.

In addition, our group life and health insurance operations could be materially impacted by catastrophes such as terrorist attacks or by an epidemic that causes a widespread increase in mortality, morbidity or disability rates or that causes an increase in the need for medical care. The mortality rate refers to the relationship of the frequency of deaths of individual members of a group to the entire group membership over a specified period of time. The morbidity rate refers to the relationship of the incidence of disease or disability contracted by individual members of a group to the entire group membership over a specified period of time. For example, the influenza epidemic of 1918 caused several million deaths. Losses due to catastrophes would not generally be covered by reinsurance and could have a material adverse effect on our results of operations and financial condition. In addition, in Assurant PreNeed the average age of policyholders is in excess of 72 years. This group is more susceptible to epidemics than the overall population, and an epidemic resulting in a higher incidence of mortality could have a material adverse effect on our results of operations and financial condition.

Our ability to manage these risks depends in part on our successful utilization of catastrophic property and life reinsurance to limit the size of property and life losses from a single event or multiple events, and life and disability reinsurance to limit the size of life or disability insurance exposure on an individual insured life. It also depends in part on state regulation that may prohibit us from excluding such risks or from withdrawing from or increasing premium rates in catastrophe-prone areas. As discussed further below, catastrophe reinsurance for our group insurance lines is not currently widely available. This means that the occurrence of a significant catastrophe could materially reduce our profitability and have a material adverse effect on our results of operations and financial condition.


	*Reinsurance may not be available or adequate to protect us against losses, and we are subject to the credit risk of reinsurers.*

As part of our overall risk and capacity management strategy, we purchase reinsurance for certain risks underwritten by our various business segments. Market conditions beyond our control determine the availability and cost of the reinsurance protection we purchase. For example, subsequent to the terrorist assaults of September 11, 2001, reinsurance for man-made catastrophes became generally unavailable due to capacity constraints and, to the limited extent available, much more expensive. The high cost of reinsurance or lack of affordable coverage could adversely affect our results. If we fail to obtain sufficient reinsurance, it could adversely affect our ability to write future business.

As part of our business, we have reinsured certain life, property and casualty and health risks to reinsurers. Although the reinsurer is liable to us to the extent of the ceded reinsurance, we remain liable as the direct insurer on all risks reinsured. As a result, ceded reinsurance arrangements do not eliminate our obligation to pay claims. We are subject to credit risk with respect to our ability to recover amounts due from reinsurers. Our reinsurers may not pay the reinsurance recoverables that they owe to us or they may not pay

such recoverables on a timely basis. A reinsurer’s insolvency, underwriting results or investment returns may affect its ability to fulfill reinsurance obligations.

Our reinsurance facilities are generally subject to annual renewal. We may not be able to maintain our current reinsurance facilities and, even where highly desirable or necessary, we may not be able to obtain other reinsurance facilities in adequate amounts and at favorable rates. If we are unable to renew our expiring facilities or to obtain new reinsurance facilities, either our net exposures would increase or, if we are unwilling to bear an increase in net exposures, we may have to reduce the level of our underwriting commitments. Either of these potential developments could materially adversely affect our results of operations and financial condition.

Historically, we have maintained reinsurance on a significant portion of our Assurant Health business, but we will not renew or replace this reinsurance effective as of December 31, 2004 and therefore, we will not be entitled to certain reinsurance recoverables to which we were previously entitled.


	*We have sold businesses through reinsurance that could again become our direct financial and administrative responsibility if the purchasing companies were to become insolvent.*

We have sold businesses through reinsurance ceded to third parties, such as our 2001 sale of the insurance operations of our FFG division to The Hartford. The assets backing the liabilities on these businesses are held in a trust, and the separate accounts relating to the FFG business are still reflected on our balance sheet. Such separate accounts represent assets allocated under certain policies and contracts that are segregated from the general account and other separate accounts. The policyholder or contractholder bears the risk of investments held in a separate account. However, we would be responsible for administering this business in the event of a default by the reinsurer. We do not have the administrative systems and capabilities to process this business today. Accordingly, we would need to obtain those capabilities in the event of an insolvency of one or more of the reinsurers of these businesses. We might be forced to obtain such capabilities on unfavorable terms, with a resulting material adverse effect on our results of operations and financial condition.


	*We are exposed to the credit risk of our agents in Assurant PreNeed and our clients in Assurant Solutions.*

We advance agents’ commissions as part of our pre-funded funeral insurance product offerings. These advances are a percentage of the total face amount of coverage as opposed to a percentage of the first-year premium paid, the formula that is more common in other life insurance markets. There is a one-year payback provision against the agency if death or lapse occurs within the first policy year. There is a very large producer within Assurant PreNeed and if it were unable to fulfill its payback obligations, it could have an adverse effect on our results of operations and financial condition. However, we have not had any loss experience with this very large producer to date. In addition, we are subject to the credit risk of the parties with which we contract in Assurant Solutions. If these parties fail to remit payments owed to us or pass on payments they collect on our behalf, it could have an adverse effect on our results of operations.


	*A further decline in the manufactured housing market may adversely affect our results of operations and financial condition.*

The manufactured housing industry has experienced a significant decline in both shipments and retail sales in the last six years. Manufactured housing shipments have decreased from approximately 350,000 in 1999 to approximately 120,000 (annualized) in 2004, representing a 66% decline. Repossessions are at an all time high, resale values have been significantly reduced and several lenders, dealers, manufacturers and vertically integrated manufactured housing companies have either ceased operations or gone bankrupt. This downturn in the industry is the result of several factors, including excess production, aggressive sales practices, reduced underwriting standards and poor lending practices. As a result of this downturn, the industry has experienced consolidation, with the leaders purchasing the weaker competitors. If these downward trends continue, our results of operations and financial condition may be adversely affected.


	The financial strength of our insurance company subsidiaries is rated by A.M. Best, Moody’s, and S&P, and a decline in these ratings could affect our standing in the insurance industry and cause our sales and earnings to decrease.

Ratings have become an increasingly important factor in establishing the competitive position of insurance companies. Most of our domestic operating insurance subsidiaries are rated by A.M. Best. Six of our domestic operating insurance subsidiaries are rated by Moody’s and seven of our domestic operating insurance subsidiaries are rated by S&P. The ratings reflect A.M. Best’s, Moody’s, and S&P’s opinions of our subsidiaries’ financial strength, operating performance, strategic position and ability to meet their obligations to policyholders. The ratings are not evaluations directed to investors and are not recommendations to buy, sell or hold our securities. These ratings are subject to periodic review by A.M. Best, Moody’s, and S&P, and we cannot assure you that we will be able to retain these ratings.

All of our domestic operating insurance subsidiaries rated by A.M. Best have financial strength ratings of A (“Excellent”), which is the second highest of ten ratings categories and the highest within the category based on modifiers (i.e., A and A- are “Excellent”) or A- (“Excellent”), which is the second highest of ten ratings categories and the lowest within the category based on modifiers.

The Moody’s financial strength rating is A2 (“Good”) for one of our domestic operating insurance subsidiaries, which is the third highest of nine ratings categories and mid-range within the category based on modifiers (i.e., A1, A2 and A3 are “Good”), and A3 (“Good”) for five of our domestic operating insurance subsidiaries, which is the third highest of nine ratings categories and the lowest within the category based on modifiers.

The S&P financial strength rating is A (“Strong”) for four of our domestic operating insurance subsidiaries, which is the third highest of nine ratings categories and mid-range within the category based on modifiers (i.e., A+, A and A- are “Strong”), and A- (“Strong”) for three of our domestic operating insurance subsidiaries, which is the third highest of nine ratings categories and the lowest within the category based on modifiers.

Rating agencies review their ratings periodically and our current ratings may not be maintained in the future. If our ratings are reduced from their current levels by A.M. Best, Moody’s, or S&P, or placed under surveillance or review with possible negative implications, our competitive position in the respective insurance industry segments could suffer and it could be more difficult for us to market our products. Rating agencies may take action to lower our ratings in the future due to, among other things: the competitive environment in the insurance industry, which may adversely affect our revenues, the inherent uncertainty in determining reserves for future claims, which may cause us to increase our reserves for claims, the outcome of pending litigation and regulatory investigations, which may adversely affect our financial position and reputation and possible changes in the methodology or criteria applied by the rating agencies.

As customers and their advisors place importance on our financial strength ratings, we may lose customers and compete less successfully if we are downgraded. In addition, ratings impact our ability to attract investment capital on favorable terms. If our financial strength ratings are reduced from their current levels by A.M. Best, Moody’s, or S&P, our cost of borrowing would likely increase, our sales and earnings could decrease and our results of operations and financial condition could be materially adversely affected.

Contracts representing approximately 22% of Assurant Solutions’ net earned premiums and fee income for the year ended December 31, 2004 contain provisions requiring the applicable subsidiaries to maintain minimum A.M. Best financial strength ratings ranging from “A” or better to “B” or better, depending on the contract. Our clients may terminate these contracts if the subsidiaries’ ratings fall below these minimum acceptable levels. Under our ten-year marketing agreement with SCI, AMLIC, one of our subsidiaries in the Assurant PreNeed segment, is required to maintain an A.M. Best financial strength rating of “B” or better throughout the term of the agreement. If AMLIC fails to maintain this rating for a period of 180 days, SCI may terminate the agreement. In our Assurant Health and Assurant Employee Benefits segments, we do not have any material contracts that permit termination in the case of a ratings downgrade.


	*The failure to effectively maintain and modernize our information systems could adversely affect our business.*

Our business is dependent upon our ability to keep up to date with technological advances. This is particularly important in Assurant Solutions, where our systems, including our ability to keep our systems integrated with those of our clients, are critical to the operation of our business. Our failure to update our systems to reflect technological advancements or to protect our systems may adversely affect our relationships and ability to do business with our clients.

During the year ended December 31, 2004, we have spent approximately $118 million in Assurant Solutions, $81 million in Assurant Health, $67 million in Assurant Employee Benefits and $5 million in Assurant PreNeed to maintain, upgrade and consolidate our information systems. In 2005, we plan to spend for these purposes approximately $126 million in Assurant Solutions, $89 million in Assurant Health, $62 million in Assurant Employee Benefits and $5 million in Assurant PreNeed.

In addition, our business depends significantly on effective information systems, and we have many different information systems for our various businesses. We must commit significant resources to maintain and enhance our existing information systems and develop new information systems in order to keep pace with continuing changes in information processing technology, evolving industry and regulatory standards and changing customer preferences. As a result of our acquisition activities, we have acquired additional information systems. Our failure to maintain effective and efficient information systems, or our failure to efficiently and effectively consolidate our information systems to eliminate redundant or obsolete applications, could have a material adverse effect on our results of operations and financial condition. If we do not maintain adequate systems we could experience adverse consequences, including: inadequate information on which to base pricing; underwriting and reserving decisions; the loss of existing customers; difficulty in attracting new customers; customer, provider and agent disputes; regulatory problems, such as failure to meet prompt payment obligations; litigation exposure; or increases in administrative expenses.

Our management information, internal control and financial reporting systems may need further enhancements and development to satisfy the financial and other reporting requirements of being a public company.


	*Efforts to comply with the Sarbanes-Oxley Act will entail significant expenditure; non-compliance with the Sarbanes-Oxley Act may adversely affect us.*

The Sarbanes-Oxley Act of 2002 that became law in July 2002 and rules subsequently implemented by the SEC and the NYSE require changes to some of our accounting and corporate governance practices, including the requirement that we issue a report on our internal controls as required by Section 404 of the Sarbanes-Oxley Act. We are required to comply with Section 404 of the Sarbanes-Oxley Act by December 31, 2005. We expect these new rules and regulations to continue to increase our accounting, legal and other costs, and to make some activities more difficult, time consuming and/or costly. In the event that we are unable to maintain or achieve compliance with the Sarbanes-Oxley Act and related rules, it may have a material adverse effect on us.


	*Failure to protect our clients’ confidential information and privacy could result in the loss of customers, reduction to our profitability and/or subject us to fines and penalties.*

A number of our businesses are subject to privacy regulations and to confidentiality obligations. For example, the collection and use of patient data in our Assurant Health segment is the subject of national and state legislation, including the HIPAA, and certain of the activities conducted by our Assurant Solutions segment are subject to the privacy regulations of the Gramm-Leach-Bliley Act. We also have contractual obligations to protect certain confidential information we obtain from our existing vendors and clients. These obligations generally include protecting such confidential information in the same manner and to the same extent as we protect our own confidential information. The actions we take to protect such confidential information vary by business segment and may include among other things: training and educating our employees regarding our obligations relating to confidential information; actively monitoring our record

retention plans and any changes in state or federal privacy and compliance requirements; drafting appropriate contractual provisions into any contract that raises proprietary and confidentiality issues; maintaining secure storage facilities for tangible records; and limiting access to electronic information and maintaining a “clean desk policy” aimed at safeguarding certain current information.

In addition, we must develop, implement and maintain a comprehensive written information security program with appropriate administrative, technical and physical safeguards to protect such confidential information. If we do not properly comply with privacy regulations and protect confidential information we could experience adverse consequences, including loss of clients and related revenue, regulatory problems, loss of reputation and client litigation.

See “Risks Related to Our Industry — Cost of compliance with privacy laws could adversely affect our business and results of operations.”


	*We may not find suitable acquisition candidates or new insurance ventures and even if we do, we may not successfully integrate any such acquired companies or successfully invest in such ventures.*

From time to time, we evaluate possible acquisition transactions and the start-up of complementary businesses, and at any given time, we may be engaged in discussions with respect to possible acquisitions and new ventures. While our business model is not dependent upon acquisitions or new insurance ventures, the time frame for achieving or further improving upon our desired market positions can be significantly shortened through opportune acquisitions or new insurance ventures. Historically, acquisitions and new insurance ventures have played a significant role in achieving desired market positions in some, but not all, of our businesses. We cannot assure you that we will be able to identify suitable acquisition transactions or insurance ventures, that such transactions will be financed and completed on acceptable terms or that our future acquisitions or ventures will be successful. The process of integrating any companies we do acquire or investing in new ventures could have a material adverse effect on our results of operations and financial condition.

In addition, implementation of an acquisition strategy entails a number of risks, including among other things: inaccurate assessment of undisclosed liabilities; difficulties in realizing projected efficiencies, synergies and cost savings; failure to achieve anticipated revenues, earnings or cash flow; an increase in our indebtedness; and a limitation in our ability to access additional capital when needed.

Our failure to adequately address these acquisition risks could materially adversely affect our results of operations and financial condition. Although we believe that most of our acquisitions have been successful and have not had a material adverse impact on our financial condition, we did recognize a goodwill impairment of $1,261 million in 2002 related to an earlier acquisition.


	*The inability of our subsidiaries to pay dividends to us in sufficient amounts could harm our ability to meet our obligations and pay future stockholder dividends.*

As a holding company whose principal assets are the capital stock of our subsidiaries, we rely primarily on dividends and other statutorily permissible payments from our subsidiaries to meet our obligations for payment of interest and principal on outstanding debt obligations, dividends to stockholders (including any dividends on our common stock) and corporate expenses. The ability of our subsidiaries to pay dividends and to make such other payments in the future will depend on their statutory surplus, future statutory earnings and regulatory restrictions. Except to the extent that we are a creditor with recognized claims against our subsidiaries, claims of the subsidiaries’ creditors, including policyholders, have priority with respect to the assets and earnings of the subsidiaries over the claims of our creditors. If any of our subsidiaries should become insolvent, liquidate or otherwise reorganize, our creditors and stockholders will have no right to proceed against the assets of that subsidiary or to cause the liquidation, bankruptcy or winding-up of the subsidiary under applicable liquidation, bankruptcy or winding-up laws. The applicable insurance laws of the jurisdiction where each of our insurance subsidiaries is domiciled would govern any proceedings relating to that subsidiary. The insurance authority of that jurisdiction would act as a liquidator or rehabilitator for the subsidiary. Both creditors and policyholders of the subsidiary would be entitled to payment in full from the subsidiary’s assets before we, as a stockholder, would be entitled to receive any distribution from the subsidiary.

The payment of dividends to us by any of our operating subsidiaries in excess of a certain amount (i.e., extraordinary dividends) must be approved by the subsidiary’s domiciliary state department of insurance. Ordinary dividends, for which no regulatory approval is generally required, are limited to amounts determined by formula, which varies by state. The formula for the majority of the states in which our subsidiaries are domiciled is the lesser of (i) 10% of the statutory surplus as of the end of the prior year or (ii) the prior year’s statutory net income. In some states, the formula is the greater amount of clauses (i) and (ii). Some states, however, have an additional stipulation that dividends may only be paid out of earned surplus. If insurance regulators determine that payment of an ordinary dividend or any other payments by our insurance subsidiaries to us (such as payments under a tax sharing agreement or payments for employee or other services) would be adverse to policyholders or creditors, the regulators may block such payments that would otherwise be permitted without prior approval. No assurance can be given that there will not be further regulatory actions restricting the ability of our insurance subsidiaries to pay dividends. Based on the dividend restrictions under applicable laws and regulations, the maximum amount of dividends that our subsidiaries could pay to us in 2005 without regulatory approval is approximately $364 million. Dividends paid by our subsidiaries totaled $361.7 million through December 31, 2004. We may seek approval of regulators to pay dividends in excess of any amounts that would be permitted without such approval. However, there can be no assurance that we would seek such approval or would obtain such approval. If the ability of insurance subsidiaries to pay dividends or make other payments to us is materially restricted by regulatory requirements, it could adversely affect our ability to pay any dividends on our common stock and/or service our debt and pay our other corporate expenses.

Our credit facilities also contain limitations on our ability to pay dividends to our shareholders if we are in default or such dividend payments would cause us to be in default of the credit facilities.

Risks Related to Our Industry


	*Our business is subject to risks related to litigation and regulatory actions.*

In addition to the occasional employment-related litigation to which businesses are subject, we are a defendant in actions arising out of, and are involved in, various regulatory investigations and examinations relating to, our insurance and other related business operations. We may from time to time be subject to a variety of legal and regulatory actions relating to our current and past business operations, including, but not limited to:


	•	disputes over coverage or claims adjudication;

	•	disputes regarding sales practices, disclosures, premium refunds, licensing, regulatory compliance and compensation arrangements;

	•	disputes with our agents, producers or network providers over compensation and termination of contracts and related claims;

	•	disputes concerning past premiums charged by companies acquired by us for coverage that may have been based on factors such as race;

	•	disputes relating to customers regarding the ratio of premiums to benefits in our various business segments;

	•	disputes alleging packaging of credit insurance products with other products provided by financial institutions;

	•	disputes relating to certain excess of loss programs in the London market;

	•	disputes with taxing authorities regarding our tax liabilities; and

	•	disputes relating to certain businesses acquired or disposed of by us.

The outcome of these actions cannot be predicted, and no assurances can be given that such actions or any litigation would not materially adversely affect our results of operations and financial condition. In

addition, if we were to experience difficulties with our relationship with a regulatory body in a given jurisdiction, it could have a material adverse effect on our ability to do business in that jurisdiction.

In addition, plaintiffs continue to bring new types of legal claims against insurance and related companies. Current and future court decisions and legislative activity may increase our exposure to these types of claims. Multiparty or class action claims may present additional exposure to substantial economic, non-economic or punitive damage awards. The loss of even one of these claims, if it resulted in a significant damage award or a judicial ruling that was otherwise detrimental, could have a material adverse effect on our results of operations and financial condition. This risk of potential liability may make reasonable settlements of claims more difficult to obtain. We cannot determine with any certainty what new theories of recovery may evolve or what their impact may be on our businesses.

Recently, the insurance industry has experienced substantial volatility as a result of current litigation, investigations and regulatory activity by various insurance, governmental and enforcement authorities concerning certain practices within the insurance industry. These practices include the payment of contingent commissions by insurance companies to insurance brokers and agents and the extent to which such compensation has been disclosed, the solicitation and provision of fictitious or inflated quotes and the use of inducements to brokers or companies in the sale of group insurance products. In accordance with a long-standing and widespread industry practice, we have paid and may continue to pay contingent commissions to insurance brokers and agents, primarily in our Assurant Employee Benefits segment. We purchase reinsurance, including but not limited to reinsurance agreements that share risks and profits with certain clients in our Assurant Solutions segment on business produced by these clients. These clients include mortgage lenders and servicers, financial institutions and retailers. We have received inquiries and informational requests from insurance departments in certain states in which our insurance subsidiaries operate. We have conducted an internal review under the supervision of outside counsel to confirm that our employees have not provided inflated or fictitious quotes or used improper inducements in the sale of group insurance products in our Assurant Employee Benefits segment. Another focus of regulators has been the accounting treatment for finite reinsurance or other non-traditional or loss mitigation insurance products. One of our reinsurers thinks we should have been accounting for premiums ceded to them as a loan instead of as an expense. Management believes that the difference in treatment would be immaterial to the Company’s financial position or results of operations. In 2004, 2003 and 2002, premiums ceded to this reinsurer were $2.6 million, $1.5 million and $0.5 million, respectively, and losses ceded were $10 million, $0, and $0, respectively. We cannot predict at this time the effect that current litigation, investigations and regulatory activity will have on the insurance industry or our business. Given our prominent position in the insurance industry, it is possible that we will become subject to further investigations and have lawsuits filed against us. Our involvement in any investigations and lawsuits would cause us to incur legal costs and, if we were found to have violated any laws, we could be required to pay fines and damages, perhaps in material amounts. In addition, we could be materially adversely affected by the negative publicity for the insurance industry related to these proceedings, and by any new industry-wide regulations or practices that may result from these proceedings. See “Item 1 — Business — Regulation.”


	*We face significant competitive pressures in our businesses, which may reduce premium rates and prevent us from pricing our products at rates that will allow us to be profitable.*

In each of our lines of business, we compete with other insurance companies or service providers, depending on the line and product, although we have no single competitor who competes against us in all of the business lines in which we operate. Assurant Solutions has numerous competitors in its product lines, but we believe no other company participates in all of the same lines or offers comprehensive capabilities. Competitors include insurance companies and financial institutions. In Assurant Health, we believe the market is characterized by many competitors, and our main competitors include health insurance companies, HMO and the Blue Cross/ Blue Shield plans in the states in which we write business. In Assurant Employee Benefits, commercial competitors include benefits and life insurance companies as well as not-for-profit Delta Dental plans. In Assurant PreNeed, our main competitors are two pre-need life insurance companies with nationwide representation, Forethought Financial Services and Homesteaders Life Company, and several small regional insurers. While we are among the largest competitors in terms of market share in many of our business lines, in some cases there are one or more major market players in a particular line of business.

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Competition in our businesses is based on many factors, including quality of service, product features, price, scope of distribution, scale, financial strength ratings and name recognition. We compete, and will continue to compete, for customers and distributors with many insurance companies and other financial services companies. We compete not only for business and individual customers, employer and other group customers, but also for agents and distribution relationships. Some of our competitors may offer a broader array of products than our specific subsidiaries with which they compete in particular markets, may have a greater diversity of distribution resources, may have better brand recognition, may from time to time have more competitive pricing, may have lower cost structures or, with respect to insurers, may have higher financial strength or claims paying ratings. Some may also have greater financial resources with which to compete. As a result of judicial developments and changes enacted by the Office of the Comptroller of the Currency, financial institutions are now able to offer a substitute product similar to credit insurance as part of their basic loan agreement with customers without being subject to insurance regulations. Credit insurance is insurance issued to cover the life, unemployment or disability of a debtor or borrower for an outstanding loan. Also, as a result of the Gramm-Leach-Bliley Act, which was enacted in November 1999, financial institutions are now able to affiliate with other insurance companies to offer services similar to our own. This has resulted in new competitors with significant financial resources entering some of our markets. Moreover, some of our competitors may have a lower target for returns on capital allocated to their business than we do, which may lead them to price their products and services lower than we do. In addition, from time to time, companies enter and exit the markets in which we operate, thereby increasing competition at times when there are new entrants. For example, several large insurance companies have recently entered the market for individual health insurance products. We may lose business to competitors offering competitive products at lower prices, or for other reasons, which could materially adversely affect our results of operations and financial condition.

In certain markets, we compete with organizations that have a substantial market share. In addition, with regard to Assurant Health, organizations with sizable market share or provider-owned plans may be able to obtain favorable financial arrangements from health care providers that are not available to us. Without our own similar arrangements, we may not be able to compete effectively in such markets.

New competition could also cause the supply of insurance to change, which could affect our ability to price our products at attractive rates and thereby adversely affect our underwriting results. Although there are some impediments facing potential competitors who wish to enter the markets we serve, the entry of new competitors into our markets can occur, affording our customers significant flexibility in moving to other insurance providers.


	*The insurance industry is cyclical, which may impact our results.*

The insurance industry is cyclical. Although no two cycles are the same, insurance industry cycles have typically lasted for periods ranging from two to six years. The segments of the insurance markets in which we operate tend not to be correlated to each other, with each segment having its own cyclicality. Periods of intense price competition due to excessive underwriting capacity, periods when shortages of underwriting capacity permit more favorable rate levels, consequent fluctuations in underwriting results and the occurrence of other losses characterize the conditions in these markets. Historically, insurers have experienced significant fluctuations in operating results due to volatile and sometimes unpredictable developments, many of which are beyond the direct control of the insurer, including competition, frequency of occurrence or severity of catastrophic events, levels of capacity, general economic conditions and other factors. This may cause a decline in revenue at times in the cycle if we choose not to reduce our product prices in order to maintain our market position, because of the adverse effect on profitability of such a price reduction. We can be expected therefore to experience the effects of such cyclicality and changes in customer expectations of appropriate premium levels, the frequency or severity of claims or other loss events or other factors affecting the insurance industry that generally could have a material adverse effect on our results of operations and financial condition.

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	*The insurance and related businesses in which we operate may be subject to periodic negative publicity, which may negatively impact our financial results.*

The nature of the market for the insurance and related products and services we provide is that we interface with and distribute our products and services ultimately to individual consumers. There may be a perception that these purchasers may be unsophisticated and in need of consumer protection. Accordingly, from time to time, consumer advocate groups or the media may focus attention on our products and services, thereby subjecting our industries to the possibility of periodic negative publicity. We may also be negatively impacted if another company in one of our industries or in a related industry engages in practices resulting in increased public attention to our businesses. Negative publicity may result in increased regulation and legislative scrutiny of industry practices as well as increased litigation, which may further increase our costs of doing business and adversely affect our profitability by impeding our ability to market our products and services, requiring us to change our products or services or increasing the regulatory burdens under which we operate.


	*We are subject to extensive governmental laws and regulations, which increases our costs and could restrict the conduct of our business.*

Our operating subsidiaries are subject to extensive regulation and supervision in the jurisdictions in which they do business. Such regulation is generally designed to protect the interests of policyholders, as opposed to stockholders and other investors. To that end, the laws of the various states establish insurance departments with broad powers with respect to such things as:


	•	licensing companies to transact business;

	•	authorizing lines of business;

	•	mandating capital and surplus requirements;

	•	regulating underwriting limitations;

	•	imposing dividend limitations;

	•	regulating changes in control;

	•	licensing agents and distributors of insurance products;

	•	placing limitations on the minimum and maximum size of life insurance contracts;

	•	restricting companies’ ability to enter and exit markets;

	•	admitting statutory assets;

	•	mandating certain insurance benefits;

	•	restricting companies’ ability to terminate or cancel coverage;

	•	requiring companies to provide certain types of coverage;

	•	regulating premium rates, including the ability to increase premium rates;

	•	approving policy forms;

	•	regulating trade and claims practices;

	•	imposing privacy requirements;

	•	establishing reserve requirements and solvency standards;

	•	restricting certain transactions between affiliates;

	•	regulating the content of disclosures to debtors in the credit insurance area;

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	•	regulating the type, amounts and valuation of investments;

	•	mandating assessments or other surcharges for guaranty funds;

	•	regulating market conduct and sales practices of insurers and agents; and

	•	restricting contact with consumers, such as the recently created national “do not call” list, and imposing consumer protection measures.

Assurant Health is also required by some jurisdictions to provide coverage to persons who would not otherwise be considered eligible by insurers. Each of these jurisdictions dictates the types of insurance and the level of coverage that must be provided to such involuntary risks. Our share of these involuntary risks is mandatory and generally a function of our respective share of the voluntary market by line of insurance in each jurisdiction. Assurant Health is exposed to some risk of losses in connection with mandated participation in such schemes in those jurisdictions in which they are still effective. In addition, HIPAA imposed insurance reform provisions as well as requirements relating to the privacy of individuals. HIPAA requires certain guaranteed issuance and renewability of health insurance coverage for individuals and small groups (generally 50 or fewer employees) and limits exclusions based on pre-existing conditions. Most of the insurance reform provisions of HIPAA became effective for plan years beginning July 1, 1997. See also “Risks Related to Our Industry — Costs of compliance with privacy laws could adversely affect our business and results of operations.”

If regulatory requirements impede our ability to raise premium rates, utilize new policy forms or terminate, deny or cancel coverage in any of our businesses, our results of operations and financial condition could be materially adversely affected. The capacity for an insurance company’s growth in premiums is in part a function of its statutory surplus. Maintaining appropriate levels of statutory surplus, as measured by SAP and procedures, is considered important by insurance regulatory authorities and the private agencies that rate insurers’ claims-paying abilities and financial strength. Failure to maintain certain levels of statutory surplus could result in increased regulatory scrutiny and enforcement, action by regulatory authorities or a downgrade by rating agencies.

We may be unable to maintain all required licenses and approvals and our business may not fully comply with the wide variety of applicable laws and regulations or the relevant authority’s interpretation of the laws and regulations. Also, some regulatory authorities have relatively broad discretion to grant, renew or revoke licenses and approvals. If we do not have the requisite licenses and approvals or do not comply with applicable regulatory requirements, the insurance regulatory authorities could preclude or temporarily suspend us from carrying on some or all of our activities or monetarily penalize us. That type of action could materially adversely affect our results of operations and financial condition. See “Item 1 — Business-Regulation.”


	*Changes in regulation may reduce our profitability and limit our growth.*

Legislative or regulatory changes that could significantly harm us and our subsidiaries include, but are not limited to:


	•	legislation that holds insurance companies or managed care companies liable for adverse consequences of medical or dental decisions;

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	•	limitations on premium levels or the ability to raise premiums on existing policies;

	•	increases in minimum capital, reserves and other financial viability requirements;

	•	impositions of fines, taxes or other penalties for improper licensing, the failure to “promptly” pay claims, however defined, or other regulatory violations;

	•	increased licensing requirements;

	•	prohibitions or limitations on provider financial incentives and provider risk-sharing arrangements;

	•	imposition of more stringent standards of review of our coverage determinations;

	•	new benefit mandates;

	•	increased regulation relating to the use of associations and trusts in the sale of individual health insurance;

	•	limitations on our ability to build appropriate provider networks and, as a result, manage health care and utilization due to “any willing provider” legislation, which requires us to take any provider willing to accept our reimbursement;

	•	limitations on the ability to manage health care and utilization due to direct access laws that allow insureds to seek services directly from specialty medical providers without referral by a primary care provider; and

	•	restriction of solicitation of pre-funded funeral insurance consumers by funeral board laws.

State legislatures regularly enact laws that alter and, in many cases, increase state authority to regulate insurance companies and insurance holding companies. Further, state insurance regulators regularly reinterpret existing laws and regulations and the NAIC regularly undertakes regulatory projects, all of which can affect our operations. In recent years, the state insurance regulatory framework has come under increased federal scrutiny and some state legislatures have considered or enacted laws that may alter or increase state authority to regulate insurance companies and insurance holding companies. Further, the NAIC and state insurance regulators are re-examining existing laws and regulations, specifically focusing on modifications to holding company regulations, interpretations of existing laws and the development of new laws.

Although the U.S. federal government does not directly regulate the insurance business, changes in federal legislation and administrative policies in several areas, including changes in the Gramm-Leach-Bliley Act, financial services regulation and federal taxation, could significantly impact the insurance industry and us. Federal legislation and administrative policies in areas such as employee benefit plan regulation, financial services regulation and federal taxation can reduce our profitability. In addition, state legislatures and the U.S. Congress continue to focus on health care issues. The U.S. Congress is considering Patients’ Bill of Rights legislation, which, if adopted, would permit health plans to be sued in state court for coverage determinations and could fundamentally alter the treatment of coverage decisions under ERISA. There recently have been legislative attempts to limit ERISA’s preemptive effect on state laws. For example, the U.S. Congress has, from time to time, considered legislation relating to changes in ERISA to permit application of state law remedies, such as consequential and punitive damages, in lawsuits for wrongful denial of benefits, which, if adopted, could increase our liability for damages in future litigation. Additionally, there have been attempts by the NAIC and several states to limit the use of discretionary clauses in policy forms. The elimination of discretionary clauses could increase our liability under our health insurance policies. New interpretations of existing laws and the passage of new legislation may harm our ability to sell new policies and increase our claims exposure on policies we issued previously.

A number of legislative proposals have been made at the federal level over the past several years that could impose added burdens on Assurant Health. These proposals would, among other things, mandate benefits with respect to certain diseases or medical procedures, require plans to offer an independent external review of certain coverage decisions and establish a national health insurance program. Any of these proposals, if implemented, could adversely affect our results of operations or financial condition. Federal changes in

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Medicare and Medicaid that reduce provider reimbursements could have negative implications for the private sector due to cost shifting. When the government reduces reimbursement rates for Medicare and Medicaid, providers often try to recover shortfalls by raising the prices charged to privately insured customers. State small employer group and individual health insurance market reforms to increase access and affordability could also reduce profitability by precluding us from appropriately pricing for risk in our individual and small employer group health insurance policies.

In addition, the U.S. Congress and some federal agencies from time to time investigate the current condition of insurance regulation in the United States to determine whether to impose federal regulation or to allow an optional federal incorporation, similar to banks. Bills have been introduced in the U.S. Congress from time to time that would provide for a federal scheme of chartering insurance companies or an optional federal charter for insurance companies. Meanwhile, the federal government has granted charters in years past to insurance-like organizations that are not subject to state insurance regulations, such as risk retention groups. See “Item 1 — Business — Regulation — United States — Federal Regulation — Legislative Developments.” Thus, it is hard to predict the likelihood of a federal chartering scheme and its impact on the industry or on us.

We cannot predict with certainty the effect any proposed or future legislation, regulations or NAIC initiatives may have on the conduct of our business. In addition, the insurance laws or regulations adopted or amended from time to time may be more restrictive or may result in materially higher costs than current requirements. See “Item 1 — Business — Regulation.”

It is difficult to predict the effect of the current investigations in connection with insurance industry practices. See “— Our business is subject to risks related to litigation and regulatory actions.”


	*Costs of compliance with privacy laws could adversely affect our business and results of operations.*

The privacy of individuals has been the subject of recent state and federal legislation. State privacy laws, particularly those with “opt-in” clauses, can affect the pre-funded funeral insurance business and Solutions business. These laws make it harder to share information for marketing purposes, such as generating new sales leads. Similarly, the recently created “do not call” list would restrict our ability to contact customers and, in Assurant Solutions, has lowered our expectations for growth in our direct-marketed consumer credit insurance products in the United States.

HIPAA and the implementing regulations that have thus far been adopted impose new obligations for issuers of health and dental insurance coverage and health and dental benefit plan sponsors. HIPAA also establishes new requirements for maintaining the confidentiality and security of individually identifiable health information and new standards for electronic health care transactions. The Department of Health and Human Services promulgated final HIPAA regulations in 2002. The privacy regulations required compliance by April 2003, the electronic transactions regulations by October 2003 and the security regulations by April 2005. As have other entities in the health care industry, we have incurred substantial costs in meeting the requirements of these HIPAA regulations and expect to continue to incur costs to achieve and to maintain compliance. However, there can be no assurances that we will achieve such compliance with all of the required transactions or that other entities with which we interact will take appropriate action to meet the compliance deadlines. Moreover, as a consequence of these new standards for electronic transactions, we may see an increase in the number of health care transactions that are submitted to us in paper format, which could increase our costs to process medical claims.

In addition, the Gramm-Leach-Bliley Act requires that we deliver a notice regarding our privacy policy both at the delivery of the insurance policy and annually thereafter. Certain exceptions are allowed for sharing of information under joint marketing agreements. However, certain state laws may require individuals to opt in

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to information sharing instead of being immediately included. This could significantly increase costs of doing business. Additionally, when final U.S. Treasury Department regulations are promulgated in connection with the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and USA PATRIOT Act, we will likely have to expend additional resources to tailor our existing anti-fraud efforts to the new rules.

Risks Related to Our Relationship with Fortis


	*Fortis will continue to have representation on our board of directors and influence our affairs for as long as it remains a significant stockholder.*

As of March 4, 2005, Fortis owned 22,999,130 shares, or approximately 16%, of our outstanding common stock. We have entered into a shareholders’ agreement with Fortis pursuant to which Fortis has the right to nominate designees to our board of directors and, subject to limited exceptions, our board of directors will nominate those designees as follows: (i) so long as Fortis owns less than 50% but at least 10% of our outstanding shares of common stock, two designees (out of a maximum of 12 directors); and (ii) so long as Fortis owns less than 10% but at least 5% of our outstanding shares of common stock, one designee. Currently, Fortis has two designees on our board of directors. However, we agreed with Fortis to terminate the shareholders’ agreement effective upon the closing of the secondary offering, at which time other corporate governance arrangements will come into effect. These arrangements include that, if at any time while there are no vacancies on our 12-member board of directors, our board of directors, or a committee thereof, adopts a resolution (i) recommending to our shareholders that a particular candidate be elected to our board of directors to replace one of the Fortis designees or (ii) appointing to our board of directors a new member, then Fortis will cause one of the Fortis designees to resign from our board of directors promptly following the adoption of such resolution. In addition, if at any time Fortis ceases to own more than 5% of our outstanding common stock, Fortis will promptly cause any remaining Fortis designees to resign from our board of directors.

See “Item 13 — Certain Relationships and Related Transactions” for additional information on related party transactions between our Company and Fortis.

In addition, our certificate of incorporation provides that for so long as Fortis continues to own less than 50% but at least 10% of our outstanding shares of common stock, our board of directors will consist of no more than 12 directors (including at least seven independent directors).

Pursuant to our shareholders’ agreement with Fortis, Fortis has the right to nominate two designees to our board of directors (out of a maximum of 12 directors), and the shareholders’ agreement and our by-laws provide that, subject to limited exceptions, our board of directors will nominate those designees. However, we agreed with Fortis to terminate the shareholders’ agreement effective upon the closing of the secondary offering, at which time other corporate governance arrangements will come into effect. See “Certain Relationships and Related Transactions — Corporate Governance Arrangements.”

Fortis’ sale of the exchangeable bonds concurrently with the closing of the secondary offering will not affect Fortis’ board rights unless the exchangeable bonds are exchanged for shares of our common stock. The exchangeable bonds and the 22,999,130 shares of Assurant common stock into which they are exchangeable have not been and will not be registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

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	*Because Fortis will control us, conflicts of interest between Fortis and us could be resolved in a manner unfavorable to us.*

Various conflicts of interest between Fortis and us could arise which may be resolved in a manner that is unfavorable to us, including, but not limited to, the following areas:

Stock Ownership. Our shareholders’ agreement provides that for as long as Fortis owns at least 10% of our outstanding shares of common stock, the following actions may only be taken with the approval of Fortis, as stockholder:


	•	any recapitalization, reclassification, spin-off or combination of any of our securities or any of those of our principal subsidiaries; or

	•	any liquidation, dissolution, winding up or commencement of voluntary bankruptcy or insolvency proceedings with respect to us or our subsidiaries.

For more information regarding the shareholders’ agreement, see “Item 13 — Certain Relationships and Related Transactions — Shareholders’ Agreement.”

However, under our new corporate governance arrangements with Fortis, which became effective upon the closing of the secondary offering, we will no longer be required to obtain Fortis’ approval for such corporate actions, but Fortis will agree to vote its shares of our common stock in favor of any such corporate action if, at any time while at least one Fortis designee remains on our board of directors, our board of directors, including any Fortis designee, votes in favor of such corporate action. For more information regarding these matters, see “Certain Relationships and Related Transactions.”

The exchangeable bonds and the shares of Assurant common stock into which they are exchangeable have not been and will not be registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Cross-Directorships. Michel Baise and Gilbert Mittler are directors of our Company who are also currently directors and/or officers of Fortis or the Fortis Group. Service as both a director of our Company and as a director or officer of Fortis or the Fortis Group or ownership interests of directors or officers of our Company in the stock of Fortis Group could create or appear to create potential conflicts of interest when directors and officers are faced with decisions that could have different implications for the two companies. Our directors who are also directors or officers of Fortis or the Fortis Group will have obligations to both companies and may have conflicts of interest with respect to matters potentially or actually involving or affecting us. For example, these decisions could relate to:


	•	disagreement over the desirability of a potential acquisition or disposition opportunity; or

	•	corporate finance decisions.

Allocation of Business Opportunities. Although we do not expect Fortis Group to compete with us in the near term, there may be business opportunities that are suitable for both Fortis Group and us. Fortis designees may direct such opportunities to Fortis and we may have no recourse against the Fortis designees or the Fortis Group. We have no formal mechanisms for allocating business opportunities.


	*Because Fortis Bank operates U.S. branch offices, we are subject to regulation and oversight by the Federal Reserve Board under the BHCA.*

Fortis Bank S.A./N.V. (Fortis Bank), which is a company in the Fortis Group, obtained approval in 2002 from state banking authorities and the Board of Governors of the Federal Reserve System (Federal Reserve) to establish branch offices in Connecticut and New York. By virtue of the opening of these offices, the Fortis Group’s operations and investments (including the Fortis Group’s investment in us) became subject to the nonbanking prohibitions of Section 4 of the BHCA. Except to the extent that a BHCA exemption or authority is available, Section 4 of the BHCA does not permit foreign banking organizations with U.S. branches to own more than 5% of any class of voting shares or otherwise to control any company that conducts commercial activities, such as manufacturing, distribution of goods or real estate development.

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	•	insuring, guaranteeing or indemnifying against loss, harm, damage, illness, disability or death, or providing and issuing annuities; and

	•	acting as principal, agent or broker for purposes of the foregoing.

If the Federal Reserve does not grant an extension of the exemption period for any one-year period or if Fortis holds more than 5% of any class of our voting shares after December 2, 2007, without the consent or acquiescence of the Federal Reserve, and the Federal Reserve determined that certain of our activities are nonfinancial, the Fortis Group may be required (i) to rely on another provision of the BHCA, (ii) to close the U.S. branches of Fortis Bank, or (iii) to divest any of our shares exceeding 5% of any class of our voting shares and to divest any control over us for purposes of the BHCA.

Risks Related to Our Common Stock


	*Applicable laws and our certificate of incorporation and by-laws may discourage takeovers and business combinations that our stockholders might consider in their best interests.*

State laws and our certificate of incorporation and by-laws may delay, defer, prevent or render more difficult a takeover attempt that our stockholders might consider in their best interests. For instance, they may

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prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future.

State laws and our certificate of incorporation and by-laws may also make it difficult for stockholders to replace or remove our directors. These provisions may facilitate directors entrenchment, which may delay, defer or prevent a change in our control, which may not be in the best interests of our stockholders.

The following provisions in our certificate of incorporation and by-laws have anti-takeover effects and may delay, defer or prevent a takeover attempt that our stockholders might consider in their best interests. In particular, our certificate of incorporation and by-laws:


	•	permit our board of directors to issue one or more series of preferred stock;

	•	divide our board of directors into three classes;

	•	limit the ability of stockholders to remove directors;

	•	except for Fortis, prohibit stockholders from filling vacancies on our board of directors;

	•	prohibit stockholders from calling special meetings of stockholders and from taking action by written consent;

	•	impose advance notice requirements for stockholder proposals and nominations of directors to be considered at stockholder meetings;

	•	subject to limited exceptions, require the approval of at least two-thirds of the voting power of our outstanding capital stock entitled to vote on the matter to approve mergers and consolidations or the sale of all or substantially all of our assets; and

	•	require the approval by the holders of at least two-thirds of the voting power of our outstanding capital stock entitled to vote on the matter for the stockholders to amend the provisions of our by-laws and certificate of incorporation described in the second through seventh bullet points above and this supermajority provision.

In addition, Section 203 of the General Corporation Law of the State of Delaware may limit the ability of an “interested stockholder” to engage in business combinations with us. An interested stockholder is defined to include persons owning 15% or more of our outstanding voting stock.


	*Applicable insurance laws may make it difficult to effect a change of control of our Company.*

Before a person can acquire control of a U.S. insurance company, prior written approval must be obtained from the insurance commissioner of the state where the domestic insurer is domiciled. Generally, state statutes provide that control over a domestic insurer is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, 10% or more of the voting securities of the domestic insurer. However, the State of Florida, in which certain of our insurance subsidiaries are domiciled, defines control as 5% or more. Because a person acquiring 5% or more of our common stock would indirectly control the same percentage of the stock of our Florida subsidiaries, the insurance change of control laws of Florida would apply to such transaction and at 10%, the laws of many other states would likely apply to such a transaction. Prior to granting approval of an application to acquire control of a domestic insurer, a state insurance commissioner will typically consider such factors as the financial strength of the applicant, the integrity of the applicant’s board of directors and executive officers, the applicant’s plans for the future operations of the domestic insurer and any anti-competitive results that may arise from the consummation of the acquisition of control.

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	*Our stock and the stocks of other companies in the insurance industry are subject to stock price and trading volume volatility.*

From time to time, the stock price and the number of shares traded of companies in the insurance industry experience periods of significant volatility. Company-specific issues and developments generally in the insurance industry and in the regulatory environment may cause this volatility. Our stock price may fluctuate in response to a number of events and factors, including:


	•	quarterly variations in operating results;

	•	natural disasters and terrorist attacks;

	•	changes in financial estimates and recommendations by securities analysts;

	•	operating and stock price performance of other companies that investors may deem comparable;

	•	press releases or publicity relating to us or our competitors or relating to trends in our markets;

	•	regulatory changes;

	•	sales of stock by insiders; and

	•	changes in our financial strength ratings.

In addition, broad market and industry fluctuations may adversely affect the trading price of our common stock, regardless of our actual operating performance.


Item 7A.	*Quantitative and Qualitative Disclosures About Market Risk*

As a provider of insurance products, effective risk management is fundamental to our ability to protect both our customers’ and stockholders’ interests. We are exposed to potential loss from various market risks, in particular interest rate risk and credit risk. Additionally we are exposed to inflation risk and to a small extent to foreign currency risk.

Interest rate risk is the possibility the fair value of liabilities will change more or less than the market value of investments in response to changes in interest rates, including changes in the slope or shape of the yield curve and changes in spreads due to credit risks and other factors.

Credit risk is the possibility that counterparties may not be able to meet payment obligations when they become due. We assume counterparty credit risk in many forms. A counterparty is any person or entity from which cash or other forms of consideration are expected to extinguish a liability or obligation to us. Primarily, our credit risk exposure is concentrated in our fixed income investment portfolio and, to a lesser extent, in our reinsurance recoverables.

Inflation risk is the possibility that a change in domestic price levels produces an adverse effect on earnings. This typically happens when only one of invested assets or liabilities is indexed to inflation.

Foreign exchange risk is the possibility that changes in exchange rates produce an adverse effect on earnings and equity when measured in domestic currency. This risk is largest when assets backing liabilities payable in one currency are invested in financial instruments of another currency. Our general principle is to invest in assets that match the currency in which we expect the liabilities to be paid.


	*Interest Rate Risk*

Interest rate risk arises as we invest substantial funds in interest-sensitive fixed income assets, such as fixed maturity investments, mortgage-backed and asset-backed securities and commercial mortgage loans, primarily in the United States and Canada. There are two forms of interest rate risk — price risk and reinvestment risk. Price risk occurs when fluctuations in interest rates have a direct impact on the market valuation of these investments. As interest rates rise, the market value of these investments falls, and conversely, as interest rates fall, the market value of these investments rises. Reinvestment risk occurs when fluctuations in interest rates have a direct impact on expected cash flows from mortgage-backed and asset-

110

backed securities. As interest rates fall, an increase in prepayments on these assets results in earlier than expected receipt of cash flows forcing us to reinvest the proceeds in an unfavorable lower interest rate environment, and conversely as interest rates rise, a decrease in prepayments on these assets results in later than expected receipt of cash flows forcing us to forgo reinvesting in a favorable higher interest rate environment. As of December 31, 2004, we held $9,178 million of fixed maturity securities at fair market value and $1,054 million of commercial mortgages at amortized cost for a combined total of 84% of total invested assets. As of December 31, 2003, we held $8,729 million of fixed maturity securities at fair market value and $933 million of commercial mortgages at amortized cost for a combined total of 85% of total invested assets.

We expect to manage interest rate risk by selecting investments with characteristics such as duration, yield, currency and liquidity tailored to the anticipated cash outflow characteristics of our insurance and reinsurance liabilities.

Our group long-term disability reserves are also sensitive to interest rates. Group long-term disability and group term life waiver of premium reserves are discounted to the valuation date at the valuation interest rate. The valuation interest rate is determined by taking into consideration actual and expected earned rates on our asset portfolio, with adjustments for investment expenses and provisions for adverse deviation.

The interest rate sensitivity of our fixed maturity security assets is assessed using hypothetical test scenarios that assume several positive and negative parallel shifts of the underlying yield curves. We have assumed that both the United States and Canadian yield curves have a 100% correlation and, therefore, move together. The individual securities are repriced under each scenario using a valuation model. For investments such as mortgage-backed and asset-backed securities, a prepayment model was used in conjunction with a valuation model. Our actual experience may differ from the results noted below particularly due to assumptions utilized or if events occur that were not included in the methodology. The following table summarizes the results of this analysis for bonds, mortgage-backed and asset-backed securities held in our investment portfolio:

Interest Rate Movement Analysis

of Market Value of Fixed Maturity Securities Investment Portfolio

As of December 31, 2004


	(100)			(50)			0			50			100

	(In millions)
Total market value	$	9,751		$	9,460		$	9,178		$	8,907		$	8,649
% Change in market value from base case		6.24	%		3.08	%		0.00	%		(2.95	)%		(5.77	)%
$ Change in market value from base case	$	573		$	282		$	0		$	(271	)	$	(528	)


	*Credit Risk*

We have exposure to credit risk primarily as a holder of fixed income securities and by entering into reinsurance cessions.

Our risk management strategy and investment policy is to invest in debt instruments of high credit quality issuers and to limit the amount of credit exposure with respect to any one issuer. We attempt to limit our credit exposure by imposing fixed maturity portfolio limits on individual issuers based upon credit quality. Currently our portfolio limits are 1.5% for issuers rated AA-and above, 1% for issuers rated A- to A+, 0.75% for issuers rated BBB- to BBB+ and 0.38% for issuers rated BB- to BB+. These portfolio limits are further reduced for certain issuers with whom we have credit exposure on reinsurance agreements. We use the lower of Moody’s or Standard & Poor’s ratings to determine an issuer’s rating. See “Item 1 — Business — Investments.”

111

The following table presents our fixed maturity investment portfolio by ratings of the nationally recognized securities rating organizations as of December 31, 2004:


			Percentage of
Rating	Fair Value		Total

	(In millions)
Aaa/Aa/A	$	6,142		67%
Baa		2,493		27%
Ba		416		5%
B and lower		127		1%

Total	$	9,178		100%

We are also exposed to the credit risk of our reinsurers. When we reinsure, we are still liable to our insureds regardless of whether we get reimbursed by our reinsurer. As part of our overall risk and capacity management strategy, we purchase reinsurance for certain risks underwritten by our various business segments as described above under “— Reinsurance.”

For at least 50% of our $4,133 million of reinsurance recoverables at December 31, 2004, we are protected from the credit risk by using some type of risk mitigation mechanism such as a trust, letter of credit or by withholding the assets in a modified coinsurance or co-funds-withheld arrangement. For example, reserves of $1,507 million and $882 million as of December 31, 2004 relating to two large coinsurance arrangements with The Hartford and John Hancock, respectively, related to sales of businesses. If the value of the assets in these trusts falls below the value of the associated liabilities, The Hartford and John Hancock, as the case may be, will be required to put more assets in the trusts. We may be dependent on the financial condition of The Hartford and John Hancock, whose A.M. Best ratings are currently A+ and A++, respectively. For recoverables that are not protected by these mechanisms, we are dependent solely on the credit of the reinsurer. Occasionally, the credit worthiness of the reinsurer becomes questionable. See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Factors — Risks Related to Our Company — Reinsurance may not be available or adequate to protect us against losses, and we are subject to the credit risk of reinsurers.” We believe that a majority of our reinsurance exposure has been ceded to companies rated “A-“or better by A.M. Best.


	*Inflation Risk*

Inflation risk arises as we invest substantial funds in nominal assets, which are not indexed to the level of inflation, whereas the underlying liabilities are indexed to the level of inflation. Approximately 12% of Assurant PreNeed’s insurance policies with reserves of approximately $398 million as of December 31, 2004 have death benefits that are guaranteed to grow with the CPI. In times of rapidly rising inflation, the credited death benefit growth on these liabilities increases relative to the investment income earned on the nominal assets resulting in an adverse impact on earnings. We have partially mitigated this risk by purchasing a contract with payments tied to the CPI. See “— Derivatives.”

In addition, we have inflation risk in our individual and small employer group health insurance businesses to the extent that medical costs increase with inflation, and we have not been able to increase premiums to keep pace with inflation.


	*Foreign Exchange Risk*

We are exposed to some foreign exchange risk arising from our international operations mainly in Canada. We also have limited foreign exchange risk exposure to currencies other than the Canadian dollar, primarily the British pound and Danish krone. Total invested assets denominated in these other currencies were less than 2% of our total invested assets at December 31, 2004.

Foreign exchange risk is mitigated by matching our liabilities under insurance policies that are payable in foreign currencies with investments that are denominated in such currency. We have not established any hedge to our foreign currency exchange rate exposure.

112


	*Derivatives*

Derivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, financial indices or the prices of securities or commodities. Derivative financial instruments may be exchange-traded or contracted in the over-the-counter market and include swaps, futures, options and forward contracts.

Under insurance statutes, our insurance companies may use derivative financial instruments to hedge actual or anticipated changes in their assets or liabilities, to replicate cash market instruments or for certain income-generating activities. These statutes generally prohibit the use of derivatives for speculative purposes. We generally do not use derivative financial instruments.

On August 1, 2003, we purchased a contract to partially hedge the inflation risk exposure inherent in some of our pre-funded funeral insurance policies.

In 2003 we determined that the modified coinsurance agreement with The Hartford contained an embedded derivative. In accordance with DIG B36, we bifurcated the contract into its debt host and embedded derivative (total return swap) and recorded the embedded derivative at fair value on the balance sheet. Contemporaneous with the adoption of DIG B36, we reclassified the invested assets related to this modified coinsurance agreement from fixed maturities available for sale to trading securities, included in other investments in the December 31, 2003 and 2004 consolidated balance sheet. The combination of the two aforementioned transactions has no net impact in the consolidated statements of operations for all periods presented. See Note 2 of the Notes to the Consolidated Financial Statements.


Item 8.	*Financial Statements and Supplementary Data.*

The consolidated financial statements and financial statement schedules in Part IV, Item 15(a) 1 and 2 of this report are incorporated by reference into this Item 8.


Item 9.	*Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.*

There have been no disagreements with accountants on accounting and financial disclosure.


Item 9A.	*Controls and Procedures.*

Under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2004. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of that date in providing a reasonable level of assurance that information we are required to disclose in reports we file or furnish under the Exchange Act is recorded, processed, summarized and reported within the time periods in SEC rules and forms. Further, our disclosure controls and procedures were effective in providing a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.


Item 9B.	*Other Information.*

None.

PART III


Item 10.	*Directors and Executive Officers of the Registrant*

The information regarding executive officers in the 2005 Proxy Statement dated April 26, 2005 (2005 Proxy Statement), under the caption “Executive Officers” is incorporated herein by reference. The information regarding directors in the 2005 Proxy Statement, under the caption, “Election of Directors” in “Proposal One” is incorporated herein by reference.

113

Code of Ethics.

We have adopted The Assurant Guidelines on Business Conduct — Our Code of Ethics that applies to all directors, officers and employees of Assurant. Our Code of Ethics and our Corporate Governance Guidelines are posted on the “Corporate Governance” subsection of the “Investor Relations” section of our website atwww.assurant.com. We intend to post any amendments to or waivers from Our Code of Ethics that apply to our executive officers or directors at this location on our website. We may elect to also disclose the amendment or waiver in a report on Form 8-K filed with the SEC.


Item 11.	*Executive Compensation*

The information in the 2005 Proxy Statement under the caption “Compensation of Directors and named Executive Officers” is incorporated herein by reference.


Item 12.	*Security Ownership of Certain Beneficial Owners and Management*

The information in the 2005 Proxy Statement under the captions “Security Ownership of Certain Beneficial Owners and Security Ownership of Management” is incorporated herein by reference.


Item 13.	*Certain Relationships and Related Transactions*

The information in the 2005 Proxy Statement under the caption “Certain Relationships and Related Transactions” is incorporated herein by reference.


Item 14.	*Principal Accountant Fees and Services*

The information in the 2005 Proxy Statement under the caption “Fees of Principal Accountants” in “Audit Committee Matters” is incorporated herein by reference.

PART IV


Item 15.	*Exhibits and Financial Statement Schedules*

(a)1. Consolidated Financial Statements

The following consolidated financial statements of Assurant, Inc., incorporated by reference into Item 8, are attached hereto:


	Page(s)

Consolidated Financial Statements of Assurant, Inc.
Report of Independent Registered Public Accounting Firm		F-1
Assurant, Inc. and Subsidiaries Consolidated Balance Sheets at December 31, 2004, and 2003		F-2
Assurant, Inc. and Subsidiaries Consolidated Statements of Operations Years Ended December 31, 2004, 2003 and 2002		F-3
Assurant, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity Years Ended December 31, 2004, 2003 and 2002		F-4
Assurant, Inc. and Subsidiaries Consolidated Statements of Cash Flows Years Ended December 31, 2004, 2003 and 2002		F-5
Assurant, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002		F-6

(a)2. Consolidated Financial Statement Schedules

114

The following consolidated financial statement schedules of Assurant, Inc. are attached hereto:


	Schedule I — Summary of Investments other than Investments in Related Parties

	Schedule II — Parent Only Condensed Financial Statements

	Schedule III — Supplementary Insurance Information

	Schedule IV — Reinsurance

	Schedule V — Valuation and Qualifying Accounts


*	All other schedules are omitted because they are not applicable, not required, or the information is included in the financial statements or the notes thereto.

(a)3. Exhibits

The following exhibits either (a) are filed with this report or (b) have previously been filed with the SEC and are incorporated herein by reference to those prior filings. Exhibits are available upon request at the investor relations section of our website, located at www.assurant.com.


Exhibit
Number			Exhibit Description

	3	.1	Restated Certificate of Incorporation of the Registrant (incorporated by reference from Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1/ A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

	3	.2	Amended and Restated By-Laws of the Registrant (incorporated by reference from Exhibit 3.2 to the Registrant’s Registration Statement on Form S-1/ A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

	3	.3	Termination and Amendment Agreement between Assurant, Inc. and Fortis Insurance N.V. (incorporated by reference from Exhibit 3.5 to Assurant, Inc.’s Registration Statement on Form S-1/A (File No. 333-121820) and amendments thereto, originally filed on January 10, 2005).

	3	.4	Letter Agreement between Assurant, Inc. and Fortis Insurance N.V. (incorporated by reference from Exhibit 3.6 to Assurant, Inc.’s Registration Statement on Form S-1/ A (File No. 333-121820) and amendments thereto, originally filed on January 10, 2005).

	4	.1	Shareholders’ Agreement between the Registrant and Fortis Insurance N.V. (incorporated by reference from Exhibit 3.3 to the Registrant’s Registration Statement on Form S-1/ A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

	4	.2	Registration Rights Agreement between the Registrant and Fortis Insurance N.V. (incorporated by reference from Exhibit 3.4 to the Registrant’s Registration Statement on Form S-1/ A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

	4	.3	Specimen Common Stock Certificate (incorporated by reference from Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1/ A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

	4	.4	Senior Debt Indenture dated as of February 18, 2004 between Assurant, Inc. and SunTrust Bank, as Trustee (incorporated by reference from Exhibit 10.27 to Registrant’s Form 10-K, originally filed on March 30, 2004).

	10	.1	Cooperation Agreement, among the Registrant, Fortis Insurance N.V., Fortis SA/ NV and Fortis N.V. (incorporated by reference from Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1/ A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

	10	.2	Stock Option Plan (incorporated by reference from Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-109984) and amendments thereto, originally filed on October 24, 2003).

	10	.3	Assurant 2004 Long-Term Incentive Plan (incorporated by reference from Exhibit 10.3 to the Registrant’s Registration Statement on Form S-1/ A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

115


Exhibit
Number			Exhibit Description

	10	.4	Supplemental Executive Retirement Plan, as amended (incorporated by reference from Exhibit 10.4 to the Registrant’s Registration Statement on Form S-1 (File No. 333-109984) and amendments thereto, originally filed on October 24, 2003).

	10	.5	Executive Pension and 401(k) Plan (incorporated by reference from Exhibit 10.5 to the Registrant’s Registration Statement on Form S-1 (File No. 333-109984) and amendments thereto, originally filed on October 24, 2003).

	10	.6	Change in Control Severance Agreement with J. Kerry Clayton (incorporated by reference from Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1 (File No. 333-121820) and amendments thereto, originally filed on January 3, 2005).

	10	.7	Change in Control Severance Agreement with Robert B. Pollock (incorporated by reference from Exhibit 10.9 to the Registrant’s Registration Statement on Form S-1 (File No. 333-121820) and amendments thereto, originally filed on January 3, 2005).

	10	.8	Change in Control Severance Agreement with Philip Bruce Camacho (incorporated by reference from Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1 (File No. 333-121820) and amendments thereto, originally filed on January 3, 2005).

	10	.9	Change in Control Severance Agreement with Lesley Silvester (incorporated by reference from Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1 (File No. 333-121820) and amendments thereto, originally filed on January 3, 2005).

	10	.10	Letter Agreement, dated October 17, 1997, between Fortis, Inc. and Philip Bruce Camacho (incorporated by reference from Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1/ A (File No. 333-109984) and amendments thereto, originally filed on December 10, 2003).

	10	.11	Assurant Directors Compensation Plan (incorporated by reference from Exhibit 10.12 to the Registrant’s Registration Statement on Form S-1/ A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

	10	.12	Assurant 2004 Employee Stock Purchase Plan (incorporated by reference from Exhibit 10.13 to the Registrant’s Registration Statement on Form S-1/ A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

	10	.13	Assurant Executive Management Incentive Plan (incorporated by reference from Exhibit 10.16 to the Registrant’s Registration Statement on Form S-1 (File No. 333-109984) and amendments thereto, originally filed on October 24, 2003).

	10	.14	Administrative Services Agreement, dated as of November 13, 1997, among United Family Life Insurance Company, Liberty Insurance Services Corporation, Fortis, Inc. and The Liberty Corporation (Certain portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. The symbol “XXX” has been inserted in place of the portions so omitted.) (incorporated by reference from Exhibit 10.15 to the Registrant’s Registration Statement on Form S-1/ A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

	10	.15	Assurant Appreciation Incentive Rights Plan (incorporated by reference from Exhibit 10.17 to the Registrant’s Registration Statement on Form S-1 (File No. 333-109984) and amendments thereto, originally filed on October 24, 2003).

	10	.16	Investment Plan (incorporated by reference from Exhibit 10.18 to the Registrant’s Registration Statement on Form S-1 (File No. 333-109984) and amendments thereto, originally filed on October 24, 2003).

	10	.17	Assurant Deferred Compensation Plan.

	10	.18	Consulting, Non-Compete and Payments Agreement, dated July 19, 1999, among Fortis, Inc., Allen R. Freedman and Fortis Insurance N.V. (incorporated by reference from Exhibit 10.19 to the Registrant’s Registration Statement on Form S-1 (File No. 333-109984) and amendments thereto, originally filed on October 24, 2003).

116


Exhibit
Number			Exhibit Description


	10	.19	Retirement Agreement, dated July 19, 1999, among Fortis, Inc., Allen R. Freedman and Fortis Insurance N.V., as amended (incorporated by reference from Exhibit 10.20 to the Registrant’s Registration Statement on Form S-1 (File No. 333-109984) and amendments thereto, originally filed on October 24, 2003).

	10	.20	Credit Agreement, dated as of December 19, 2003, by and among Fortis, Inc., as the borrower, certain banks and financial institutions, as the lenders, Morgan Stanley Senior Funding, Inc. (“MSFF”), as bookrunner and lead arranger, Merrill Lynch Capital Corp., as syndication agent, Credit Suisse First Boston, as documentation agent, and MSFF, as administrative agent for the lenders (incorporated by reference from Exhibit 10.20 to the Registrant’s Registration Statement on Form S-1/ A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

	10	.21	Parent Guaranty, dated as of December 19, 2003, by Fortis N.V. and Fortis SA/ NV, in favor of Morgan Stanley Senior Funding, Inc., as administrative agent for and representative of the lenders (incorporated by reference from Exhibit 10.21 to the Registrant’s Registration Statement on Form S-1/ A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

	10	.22	Credit Agreement, dated as of December 19, 2003, by and among Fortis, Inc., as the borrower, certain banks and financial institutions, as the lenders, Citigroup Global Markets Inc. (“CGMI”) and Morgan Stanley Senior Funding, Inc. (“MSSF”), as joint bookrunners, CGMI, MSSF and Banc One Capital Markets, Inc., as joint lead arrangers, MSSF, as syndication agent, Citicorp North America Inc., as documentation agent, and Bank One, NA, as administrative agent for the lenders (incorporated by reference from Exhibit 10.22 to the Registrant’s Registration Statement on Form S-1/ A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

	10	.23	Parent Guaranty, dated as of December 19, 2003, by Fortis N.V. and Fortis SA/ NV, in favor of Bank One, NA, as administrative agent for and representative of the lenders (incorporated by reference from Exhibit 10.23 to the Registrant’s Registration Statement on Form S-1/ A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

	10	.24	Lease Agreement, dated October 1, 2000, between Fortis Benefits Insurance Company and Fortis, Inc., as amended (incorporated by reference from Exhibit 10.24 to the Registrant’s Registration Statement on Form S-1/ A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

	10	.25	Agreement, dated September 1, 2003, between Fortis Insurance Company and its affiliates Fortis Benefits Insurance Company and John Alden Life Insurance Company and National Administration Company, Inc. (incorporated by reference from Exhibit 10.25 to the Registrant’s Registration Statement on Form S-1/ A (File No. 333-109984) and amendments thereto, originally filed on December 10, 2003).

	10	.26	Three Year Credit Agreement, dated as of January 30, 2004, by and among Assurant, Inc., as the borrower, certain banks and financial institutions, as the lenders, Bank One, NA, as administrative agent for the lenders, Citigroup North America Inc., as syndication agent, and Morgan Stanley Senior Funding, Inc. and JP Morgan Chase Bank, as co-documentation agents (incorporated by reference from Exhibit 10.26 to the Registrant’s Registration Statement on form S-1/ A (File No. 333-109984) and amendments thereto, originally filed on February 3, 2004).

	10	.27	Amendment No. 1 To the Amended and Restated 2004 Employee Stock Purchase Agreement (incorporated by reference from Exhibit 10.1 to Registrant’s Form 10-Q, originally filed November 12, 2004).

	10	.28	Amendment No. 1 To the Executive Pension and 401K Plan (incorporated by reference from Exhibit 10.2 to Registrant’s Form 10-Q, originally files November 12, 2004).

	10	.29	Amendment No. 2 To the Supplemental Executive Retirement Plan (incorporated by reference from Exhibit 10.3 to Registrant’s Form 8-K, originally filed on October 15, 2004).

	14		Assurant Guidelines on Business Conduct — Our Code of Ethics (incorporated by reference from Exhibit 14 to Registrant’s Form 8-K, originally filed on October 15, 2004).

	21	.1	Subsidiaries of the Registrant. (Incorporate by reference from exhibit 21.1 to the Registrant’s Registration Statement on Form S-1/ A (File No. 333-121820) and amendments thereto, originally filed on January 3, 2005).

117


Exhibit
Number			Exhibit Description


	23	.1	Consent of PricewaterhouseCoopers LLP.

	24	.1	Power of Attorney.

	31	.1	Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.

	31	.2	Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.

	32	.1	Certification of Chief Executive Officer of Assurant, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	32	.2	Certification of Chief Financial Officer of Assurant, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

118

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized March 31, 2005.


	ASSURANT, INC.


	By:	/s/J. Kerry Clayton



	Name: J. Kerry Clayton


	Title:	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated on March 31, 2005.


Signature				Title


/s/ J. Kerry Clayton J. Kerry Clayton				President and Chief Executive Officer and Director (Principal Executive Officer)

/s/ Robert B. Pollock Robert B. Pollock				Executive Vice President and Chief Financial Officer (Principal Financial Officer)

/s/ John A. Sondej John A. Sondej				Senior Vice President and Controller (Principal Accounting Officer)

* John Michael Palms				Director

* Michel Baise				Director

* Robert J. Blendon				Director

* Beth L. Bronner				Director

* Howard L. Carver				Director

* Allen R. Freedman				Director

* H. Carroll Mackin				Director

* Gilbert Mittler				Director

119


Signature		Title


* Michele Coleman Mayes		Director


*By:	/s/ Robert B. Pollack Robert B. Pollack Attorney-in-Fact

120

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of Assurant, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related statements of operations, of changes in stockholders’ equity and of cash flows present fairly, in all material respects, the financial position of Assurant, Inc. and its subsidiaries (formerly Fortis, Inc. and subsidiaries) at December 31, 2004, and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion the accompanying financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and the financial statements schedules are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, effective January 1, 2002, the Company adopted Statement of Financial Accounting Standard No. 142,Goodwill and Other Intangible Assets.

/s/ PricewaterhouseCoopers LLP

New York, New York

March 31, 2005

F-1

Assurant, Inc. and Subsidiaries

Consolidated Balance Sheets

At December 31, 2004, and 2003


			December 31,			December 31,

			2004			2003

			(In thousands except number
			of shares)
ASSETS
Investments:
	Fixed maturities available for sale, at fair value (amortized cost — $8,680,430 in 2004 and $8,229,861 in 2003)		$	9,177,938		$	8,728,838
	Equity securities available for sale, at fair value (cost — $512,948 in 2004 and $436,823 in 2003)			526,951			456,440
	Commercial mortgage loans on real estate at amortized cost			1,053,872			932,791
	Policy loans			64,886			68,185
	Short-term investments			300,093			275,878
	Collateral held under securities lending			535,331			420,783
	Other investments			488,975			461,473

		Total investments		12,148,046			11,344,388
Cash and cash equivalents				807,082			958,197
Premiums and accounts receivable, net				435,457			468,766
Reinsurance recoverables				4,133,660			4,376,521
Accrued investment income				127,583			135,267
Tax receivable				—			26,499
Deferred acquisition costs				1,647,654			1,384,827
Property and equipment, at cost less accumulated depreciation				277,088			283,762
Deferred income taxes, net				—			60,321
Goodwill				823,054			828,523
Value of business acquired				170,663			191,929
Other assets				216,460			195,958
Assets held in separate accounts				3,717,149			3,805,058

		Total assets	$	24,503,896		$	24,060,016


LIABILITIES
Future policy benefits and expenses			$	6,412,688		$	6,235,140
Unearned premiums				3,354,299			3,133,847
Claims and benefits payable				3,614,949			3,471,567
Commissions payable				313,501			350,732
Reinsurance balances payable				58,161			82,561
Funds held under reinsurance				132,320			200,384
Deferred gain on disposal of businesses				329,720			387,353
Obligation under securities lending				535,331			420,783
Accounts payable and other liabilities				1,328,483			1,370,104
Deferred income taxes, net				4,224			—
Tax payable				71,869			—
Debt				971,611			1,750,000
Mandatorily redeemable preferred securities				—			196,224
Mandatorily redeemable preferred stock				24,160			24,160
Liabilities related to separate accounts				3,717,149			3,805,058

		Total liabilities	$	20,868,465		$	21,427,913

Commitments and contingencies (Note 27)			$	—		$	—

Stockholders’ equity
Common stock, par value $.01 per share, 800,000,000 shares authorized, 142,263,299 and 109,222,276 shares issued, 139,766,177 and 109,222,276 shares outstanding at December 31, 2004 and 2003, respectively			$	1,423		$	1,092
Additional paid-in capital				2,790,476			2,063,763
Retained earnings				569,605			248,721
Unamortized restricted stock compensation; 51,996 shares				(608	)		—
Accumulated other comprehensive income				338,163			318,527
Treasury stock, at cost; 2,445,126 shares				(63,628	)		—

Total stockholders’ equity				3,635,431			2,632,103

		Total liabilities and stockholders’ equity	$	24,503,896		$	24,060,016

See the accompanying notes to the consolidated financial statements

F-2

Assurant, Inc. and Subsidiaries

Consolidated Statements of Operations

Years Ended December 31, 2004, 2003 and 2002


				Years Ended December 31,

				2004			2003		2002

				(In thousands except number of shares and per share
				amounts)
Revenues
Net earned premiums and other considerations				$	6,482,871		$	6,156,772	$	5,681,596
Net investment income					634,749			607,313		631,828
Net realized gain/(loss) on investments					24,308			1,868		(118,372	)
Amortization of deferred gain on disposal of businesses					57,632			68,277		79,801
(Loss)/gain on disposal of businesses					(9,232	)		—		10,672
Fees and other income					213,136			231,983		246,675

			Total revenues		7,403,464			7,066,213		6,532,200
Benefits, losses and expenses
Policyholder benefits					3,839,769			3,657,763		3,435,175
Amortization of deferred acquisition costs and value of business acquired					862,568			863,647		732,010
Underwriting, general and administrative expenses					2,106,618			1,965,491		1,876,222
Interest expense					56,418			1,175		—
Distributions on mandatorily redeemable preferred securities					2,163			112,958		118,396
Interest premiums on redemption of mandatorily redeemable preferred securities					—			205,822		—

			Total benefits, losses and expenses		6,867,536			6,806,856		6,161,803
Income before income taxes and cumulative effect of change in accounting principle					535,928			259,357		370,397
Income taxes					185,368			73,705		110,657

Net income before cumulative effect of change in accounting principle					350,560			185,652		259,740
Cumulative effect of change in accounting principle (Note 20)					—			—		(1,260,939	)

		Net income (loss)		$	350,560		$	185,652	$	(1,001,199	)

Earnings per share:
Basic and Diluted
Net income before cumulative effect of change in accounting principle				$	2.53		$	1.70	$	2.38
Cumulative effect of change in accounting principle (Note 20)					—			—		(11.55	)

Net income (loss)				$	2.53		$	1.70	$	(9.17	)

Dividends per share				$	0.21		$	1.66	$	0.38

Share Data:
	Weighted average shares outstanding used in basic per share calculations				138,358,767			109,222,276		109,222,276
	Plus: Dilutive securities				108,797			—		—

	Weighted average shares used in diluted per share calculations				138,467,564			109,222,276		109,222,276

See the accompanying notes to the consolidated financial statements

F-3

Assurant, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

Years Ended December 31, 2004, 2003 and 2002


						Additional					Unamortized			Accumulated Other									Shares of
				Common		Paid-In		Retained			Restricted Stock			Comprehensive			Treasury						Common
				Stock		Capital		Earnings			Compensation			Income (Loss)			Stock			Total			Stock Issued

				(In thousands except number of shares)
Balance, January 1, 2002				$	1,092	$	2,063,763	$	1,289,346		$	—		$	98,204		$	—		$	3,452,405			109,222,276
	Dividends on common stock				—		—		(41,876	)		—			—			—			(41,876	)		—
	Other				—		—		(1,052	)		—			—			—			(1,052	)		—
	Comprehensive income (loss):
		Net loss			—		—		(1,001,199	)		—			—			—			(1,001,199	)		—
		Net change in unrealized gains on securities			—		—		—			—			173,699			—			173,699			—
		Foreign currency translation			—		—		—			—			8,332			—			8,332			—
		Pension under- funding, net of income tax benefit of $18,980			—		—		—			—			(35,250	)		—			(35,250	)		—

		Total comprehensive (loss)																			(854,418	)

Balance, December 31, 2002					1,092		2,063,763		245,219			—			244,985			—			2,555,059			109,222,276
	Dividends on common stock				—		—		(181,187	)		—			—			—			(181,187	)		—
	Other				—		—		(963	)		—			—			—			(963	)		—
	Comprehensive income:
		Net income			—		—		185,652			—			—			—			185,652			—
		Net change in unrealized gains on securities			—		—		—			—			51,775			—			51,775			—
		Foreign currency translation			—		—		—			—			21,767			—			21,767			—

			Total comprehensive income																		259,194

Balance, December 31, 2003					1,092		2,063,763		248,721			—			318,527			—			2,632,103			109,222,276
	Issuance of common stock				330		725,161		—			—			—			—			725,491			32,976,854
	Issuance of Restricted Shares				1		1,552		—			(1,553	)		—			—			—			64,169
	Dividends				—		—		(29,676	)		—			—			—			(29,676	)		—
	Acquistion of Treasury Shares				—		—		—			—			—			(63,628	)		(63,628	)		—
	Amortization of restricted stock compensation				—		—		—			945			—			—			945			—
	Comprehensive income (loss):
		Net income			—		—		350,560			—			—			—			350,560			—
		Net change in unrealized gains on securities			—		—		—			—			3,362			—			3,362			—
		Pension under- funding, net of income tax benefit of $1,250			—		—		—			—			(2,321	)		—			(2,321	)		—
		Foreign currency translation			—		—		—			—			18,595			—			18,595			—

			Total comprehensive income																		370,196

Balance, December 31, 2004				$	1,423	$	2,790,476	$	569,605		$	(608	)	$	338,163		$	(63,628	)	$	3,635,431			142,263,299

See the accompanying notes to the consolidated financial statements

F-4

Assurant, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended December 31, 2004, 2003 and 2002


		Years Ended December 31,

		2004			2003			2002

		(In thousands)
Operating activities
Net income (loss)		$	350,560		$	185,652		$	(1,001,199	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Cumulative effect of change in accounting principle		—			—			1,260,939
	Change in reinsurance recoverable		249,936			273,394			101,745
	Change in premiums and accounts receivables		32,280			(74,475	)		(16,847	)
	Depreciation and amortization on property and equipment		45,675			48,117			46,867
	Change in deferred acquisition costs and value of businesses acquired		(228,933	)		(57,732	)		(130,091	)
	Change in accrued investment income		8,139			(8,162	)		(20,600	)
	Change in insurance policy reserves and expenses		495,780			394,708			325,894
	Change in accounts payable and other liabilities		(41,923	)		81,767			(138,108	)
	Change in commissions payable		(40,839	)		23,900			(20,878	)
	Change in reinsurance balances payable		(28,957	)		(85,082	)		33,994
	Change in funds held under reinsurance		(69,175	)		16,546			(31,976	)
	Amortization of deferred gain on disposal of businesses		(57,632	)		(69,594	)		(79,801	)
	Change in income taxes		168,757			3,133			(108,050	)
	Change in other invested assets		(33,813	)		—			—
	Net realized (gains)/losses on investments		(24,308	)		(1,868	)		118,372
	Loss/(gain) on disposal of businesses		9,232			—			(10,672	)
	Other		(614	)		10,924			35,374

Net cash provided by operating activities		$	834,165		$	741,228		$	364,963

Investing activities
Sales of:
	Fixed maturities available for sale	$	1,742,518		$	1,164,749		$	3,616,416
	Equity securities available for sale		119,406			133,923			113,866
	Property and equipment		8,817			2,982			10,488
Maturities, prepayments, and scheduled redemption of:
	Fixed maturities available for sale		851,343			1,131,461			858,142
Purchase of:
	Fixed maturities available for sale		(2,980,088	)		(3,093,768	)		(4,780,009	)
	Equity securities available for sale		(194,849	)		(305,449	)		(131,775	)
	Property and equipment		(58,409	)		(81,751	)		(74,667	)
Change in commercial mortgage loans on real estate			(119,048	)		(87,228	)		26,814
Change in short term investments			(24,300	)		415,452			(57,623	)
Change in other invested assets			3,969			7,054			28,064
Change in policy loans			3,380			1,350			(1,141	)
Net cash received related to sale of business			3,536			—			12,000

Net cash (used in) investing activities		$	(643,725	)	$	(711,225	)	$	(379,425	)

Financing activities
Repayment of mandatorily redeemable preferred securities		$	(196,224	)	$	(1,249,850	)	$	—
Redemption of mandatorily redeemable preferred stock			—			(500	)		(500	)
Issuance of Debt from Fortis			—			74,991			—
Repayment of Debt from Fortis			—			(74,991	)		—
Issuance of Debt			971,537			2,400,000			—
Repayment of Debt			(1,750,000	)		(650,000	)		—
Issuance of common stock			725,491			—			—
Purchase of treasury stock			(63,628	)		—			—
Dividends paid			(29,676	)		(181,187	)		(41,876	)
Other			945			(963	)		(1,052	)

Net cash provided by (used in) financing activities		$	(341,555	)	$	317,500		$	(43,428	)

Change in cash and cash equivalents			(151,115	)		347,503			(57,890	)
Cash and cash equivalents at beginning of period			958,197			610,694			668,584

Cash and cash equivalents at end of period		$	807,082		$	958,197		$	610,694

Supplemental information:
	Income taxes paid (net of refunds)	$	9,931		$	62,857		$	215,866
	Interest premiums on redemption of mandatorily redeemable preferred securities paid	$	66,734		$	137,000		$	—
	Distributions on mandatorily redeemable preferred securities and interest paid	$	37,709		$	128,694		$	117,114

See the accompanying notes to the consolidated financial statements

F-5

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2004, 2003 and 2002

(In thousands except number of shares and per share amounts)


1.	Nature of Operations

Assurant, Inc. (formerly Fortis, Inc.) (the “Company”) is a holding company provider of specialized insurance products and related services in North America and selected international markets. Prior to the Initial Public Offering (“the IPO”) Fortis, Inc. was incorporated in Nevada and was indirectly wholly owned by Fortis N.V. of the Netherlands and Fortis SA/ NV of Belgium (collectively, “Fortis”) through their affiliates, including their wholly owned subsidiary, Fortis Insurance N.V. (see Note 12).

On February 5, 2004, Fortis sold approximately 65% of its ownership interest in Assurant, Inc. via the IPO and retained approximately 35% of its ownership (50,199,130 shares). In connection with the IPO, Fortis, Inc. was merged into Assurant, Inc., a Delaware corporation, which was formed solely for the purpose of the redomestication of Fortis, Inc. After the merger, Assurant, Inc. became the successor to the business, operations and obligations of Fortis, Inc. Assurant, Inc. is traded on the New York Stock Exchange under the symbol AIZ.

The following events occurred in connection with the merger: each share of the existing Class A Common Stock of Fortis, Inc. was exchanged for 10.75882039 shares of Common Stock of Assurant, Inc.; the automatic conversion of the shares of Class B Common Stock and Class C Common Stock into an aggregate of 25,841,418 shares of Common Stock of Assurant, Inc.; each share of the existing Series B Preferred Stock of Fortis, Inc. was exchanged for one share of Series B Preferred Stock of Assurant, Inc.; each share of the existing Series C Preferred Stock of Fortis, Inc. was exchanged for one share of Series C Preferred Stock of Assurant, Inc..

The following events occurred in connection with the Company’s IPO: (1) redeemed the outstanding $196,224 of mandatorily redeemable preferred securities in January 2004 (see Note 8), (2) issued 68,976 shares of Common Stock of Assurant, Inc. to certain officers of the Company, and (3) issued 32,976,854 shares of Common Stock of Assurant, Inc. to Fortis Insurance N.V. simultaneously with the closing of the IPO in exchange for a $725,500 capital contribution based on the public offering price of the Company’s common stock. The Company used the proceeds of the capital contribution to repay the $650,000 of outstanding indebtedness under the $650,000 senior bridge credit facility (see Note 9) and $75,500 of outstanding indebtedness under the $1,100,000 senior bridge credit facility. The Company repaid a portion of the $1,100,000 senior bridge credit facility with $49,500 in cash. On February 18, 2004, the Company refinanced $975,000 of the remaining $1,100,000 senior bridge credit facility with the proceeds of the issuance of two senior long-term notes. (see Note 9).

On January 21, 2005, Fortis owned approximately 36% (50,199,130 shares) of the Company based on the number of shares outstanding that day and sold 27,200,000 of those shares in a secondary offering to the public. The Company did not receive any of the proceeds from the sale of shares of common stock by Fortis. Fortis received all net proceeds from the sale. Fortis concurrently sold exchangeable bonds, due January 26, 2008, that are mandatorily exchangeable for their remaining 22,999,130 shares of Assurant. Fortis may elect, prior to the maturity date of the bonds, a cash settlement alternative and pay the bondholders an amount of cash equal to the applicable market value of the Company’s common stock. The exchangeable bonds and the shares of the Company’s common stock into which they are exchangeable have not been and will not be registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Through its operating subsidiaries, the Company provides creditor-placed homeowners insurance, manufactured housing homeowners insurance, debt protection administration, credit insurance, warranties and extended service contracts, individual health and small employer group health insurance, group dental insurance, group disability insurance, group life insurance and pre-funded funeral insurance.

F-6

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)


2.	Summary of Significant Accounting Policies


	*Basis of Presentation*

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates when recording transactions resulting from business operations based on information currently available. The most significant items on the Company’s balance sheet that involve accounting estimates and actuarial determinations are the value of business acquired (“VOBA”), goodwill, reinsurance recoverables, valuation of investments, deferred acquisition costs (“DAC”), liabilities for future policy benefits and expenses, taxes and claims and benefits payable. The accounting estimates and actuarial determinations are sensitive to market conditions, investment yields, mortality, morbidity, commissions and other acquisition expenses, and terminations by policyholders. As additional information becomes available or actual amounts are determinable, the recorded estimates will be revised and reflected in operating results. Although some variability is inherent in these estimates, the Company believes the amounts provided are reasonable and adequate.

Dollar amounts are presented in U.S. dollars and all amounts are in thousands except for number of shares and per share amounts.


	*Principles of Consolidation*

The consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries. All significant inter-company transactions and balances are eliminated in consolidation. See Note 3 for dispositions of businesses.


	*Comprehensive Income*

Comprehensive income is comprised of net income and other comprehensive income, which includes foreign currency translation, unrealized gains and losses on securities classified as available for sale and direct charges for additional minimum pension liability, less deferred income taxes.


	*Reclassifications*

Certain prior period amounts have been reclassified to conform to the 2004 presentation.


	*Cash and Cash Equivalents*

The Company considers cash on hand, all operating cash and working capital cash to be cash equivalents. These amounts are carried principally at cost, which approximates fair value. Cash balances are reviewed at the end of each reporting period to determine if negative cash balances exist. If negative cash balances do exist, the cash accounts are netted with other positive cash accounts of the same bank providing the right of offset exists between the accounts. If the right of offset does not exist, the negative cash balances are reclassified to accounts payable.


	*Investments*

The Company’s investment strategy is developed based on many factors including appropriate insurance asset and liability management, rate of return, maturity, credit risk, tax considerations and regulatory requirements.

Fixed maturities and equity securities are classified as available-for-sale and reported at fair value. If the fair value is higher than the amortized cost for debt securities or the purchase cost for equity securities, the

F-7

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

excess is an unrealized gain; and if lower than cost, the difference is an unrealized loss. The net unrealized gains and losses, less deferred income taxes are included in accumulated other comprehensive income.

Commercial mortgage loans on real estate are reported at unpaid balances, adjusted for amortization of premium or discount, less allowance for losses.

Policy loans are reported at unpaid principal balances, which do not exceed the cash surrender value of the underlying policies.

Short-term investments include all investment cash and short maturity investments. These amounts are carried principally at cost, which approximates fair value.

Other investments consist primarily of investments in joint ventures, partnerships, invested assets associated with a modified coinsurance arrangement and invested assets associated with the Company’s Assurant Investment Plan (“AIP”). The joint ventures and partnerships are valued according to the equity method of accounting. The invested assets related to a modified coinsurance arrangements and the AIP are classified as trading securities and are reported at fair value. Any changes in the fair value are recorded as net realized gains and losses in the statement of operations.

The Company regularly monitors its investment portfolio to determine that investments that may be other than temporarily impaired are identified in a timely fashion and properly valued, and that any impairments are charged against earnings in the proper period. The Company’s methodology to identify potential impairments requires professional judgment.

Changes in individual security values are monitored on a regular basis in order to identify potential credit problems. In addition, securities whose market price is equal to 85% or less of their original purchase price are added to the impairment watchlist, which is discussed at monthly meetings attended by members of the Company’s investment, accounting and finance departments. Any security whose price decrease is deemed other-than-temporary is written down to its then current market level with the amount of the writedown reflected as a realized loss in the Statement of Operations for that period. Assessment factors include, but are not limited to, the financial condition and rating of the issuer, any collateral held and the length of time the market value of the security has been below cost.

Inherently, there are risks and uncertainties involved in making these judgments. Changes in circumstances and critical assumptions such as a continued weak economy, a more pronounced economic downturn or unforeseen events which affect one or more companies, industry sectors or countries could result in additional write downs in future periods for impairments that are deemed to be other-than-temporary.

Realized gains and losses on sales of investments and declines in value judged to be other-than-temporary are recognized on the specific identification basis.

Investment income is recorded as earned net of investment expenses.

The Company anticipates prepayments of principal in the calculation of the effective yield for mortgage-backed securities and structured securities. The majority of the Company’s mortgage-backed securities and structured securities are of high credit quality. Therefore, the retrospective method is used to adjust the effective yield.


	*Reinsurance*

F-8

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

in the consolidated balance sheets. The cost of reinsurance related to long-duration contracts is accounted for over the life of the underlying reinsured policies. The ceding of insurance does not discharge the Company’s primary liability to insureds. An estimated allowance for doubtful accounts is recorded on the basis of periodic evaluations of balances due from reinsurers, reinsurer solvency, management’s experience, and current economic conditions.


	*Deferred Acquisition Costs*

The costs of acquiring new business that vary with and are primarily related to the production of new business are deferred to the extent that such costs are deemed recoverable from future premiums or gross profits. Acquisition costs primarily consist of commissions, policy issuance expenses, and certain direct marketing expenses.

Loss recognition testing is performed annually and reviewed quarterly. Such testing involves the use of best estimate assumptions including the anticipation of interest income to determine if anticiapted future policy premiums are adequate to recover all DAC and related claims, benfits and expenses. To the extent a premium deficiency exists, it is recognized immediately by a charge to the statement of operations and a corresponding reduction in DAC. If the premium deficiency is greater than unamortized DAC, a liability will be accrued for the excess deficiency.


	Short Duration Contracts

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

Acquisition costs on individual medical contracts issued in most jurisdictions after 2002 and small group medical consist primarily of commissions to agents and brokers and compensation to representatives. These contracts are considered short duration because the terms of the contract are not fixed at issue and they are not guaranteed renewable. As a result, these costs are not deferred but rather they are recorded in the consolidated statement of operations in the period in which they are incurred.


	Long Duration Contracts

For pre-funded funeral investment type annuities, universal life insurance policies and investment-type annuities no longer offered, DAC is amortized in proportion to the present value of estimated gross margins or 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 individual medical contracts issued prior to 2003 and currently in a limited number of jurisdictions are deferred and amortized over the estimated average terms of the underlying

F-9

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

contracts. These acquisition costs relate to commissions and policy issuance expenses. Commissions represent the majority of deferred costs and result from commission schedules that pay significantly higher rates in the first year. The majority of deferred policy issuance expenses are the costs of separately underwriting each individual medical contract.

Acquisition costs on the Fortis Financial Group (“FFG”) and Long-Term Care (“LTC”) disposed businesses were written off when the businesses were sold.


	*Property and Equipment*

Property and equipment are reported at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over estimated useful lives with a maximum of 39.5 years for buildings, 7 years for furniture and 5 years for equipment. Expenditures for maintenance and repairs are charged to income as incurred. Expenditures for improvements are capitalized and depreciated over the remaining useful life of the asset.


	*Goodwill*

Goodwill represents the excess of acquisition costs over the net fair values of identifiable assets acquired and liabilities assumed in a business combination. The Company adopted Statement of Financial Accounting Standards No. 142 (“FAS 142”),Goodwill and Other Intangible Assets, as of January 1, 2002. Pursuant to FAS 142, goodwill is deemed to have an indefinite life and should not be amortized, but rather tested at least annually for impairment. The goodwill impairment test has two steps. The first identifies potential impairments by comparing the fair value of a reporting unit with its book value, including goodwill. If the fair value of the reporting unit exceeds the carrying amount, goodwill is not impaired and the second step is not required. If the carrying value exceeds the fair value, the second step calculates the possible impairment loss by comparing the implied fair value of goodwill with the carrying amount. If the implied goodwill is less than the carrying amount, a write down is recorded. Prior to the adoption of FAS 142, goodwill was amortized over 20 years. Upon the adoption of FAS 142, the Company ceased amortizing goodwill, and recognized a $1,260,939 impairment charge as the cumulative effect of a change in accounting principle. The measurement of fair value was determined based on a valuation report prepared by an independent valuation firm. The valuation was based on an evaluation of ranges of future discounted earnings, public company trading multiples and acquisitions of similar companies. Certain key assumptions considered include forecasted trends in revenues, operating expenses and effective tax rates. The Company performs a goodwill impairment test annually and has not recognized an impairment charge since adoption.


	*Value of Businesses Acquired*

VOBA is the identifiable intangible asset representing the value of the insurance businesses acquired. The amount is determined using best estimates for mortality, lapse, maintenance expenses and investment returns at date of purchase. The amount determined represents the purchase price paid to the seller for producing the business. Similar to the amortization of DAC, the amortization of VOBA is over the premium payment period for traditional life insurance policies and a small block of limited payment policies. For the remaining limited payment policies, pre-funded funeral life insurance policies, all universal life policies and annuities, the amortization of VOBA is over the expected lifetime of the policies.

VOBA is tested for recoverability annually. If it is determined that future policy premiums and investment income or gross profits are not adequate to cover related losses or loss expenses, then VOBA is charged to current earnings.

F-10

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)


	*Separate Accounts*

Assets and liabilities associated with separate accounts relate to premium and annuity considerations for variable life and annuity products for which the contract-holder, rather than the Company, bears the investment risk. Separate account assets are reported at fair value. Revenues and expenses related to the separate account assets and liabilities, to the extent of benefits paid or provided to the separate account policyholders, are excluded from the amounts reported in the accompanying consolidated statements of operations.

Prior to April 2, 2001, FFG had issued variable insurance products registered as securities under the Securities Act of 1933. These products featured fixed premiums, a minimum death benefit, and policyholder returns linked to an underlying portfolio of securities. The variable insurance products issued by FFG have been 100% reinsured with The Hartford Financial Services Group Inc. (“The Hartford”). The balance of reserve ceded for the variable insurance products issued by FFG was $1,507,228 and $1,536,568 as of December 31, 2004 and 2003, respectively.


	*Income Taxes*

Current federal income taxes are charged to operations based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year. Deferred income taxes are recognized for temporary differences between the financial reporting basis and income tax basis of assets and liabilities, based on enacted tax laws and statutory tax rates applicable to the periods in which we expect the temporary differences to reverse. The Company would establish a valuation allowance for any portion of the deferred tax assets that management believes will not be realized. In the opinion of management, it is more likely than not that the Company will realize the benefit of the deferred tax assets and, therefore, no such valuation allowance has been established.


	*Other Assets*

Other assets include prepaid items and intangible assets. Identifiable intangible assets with finite lives, including costs capitalized relating to developing software for internal use, are amortized on a straight-line basis over their estimated useful lives. The Company tests the intangible assets for impairment whenever circumstances warrant, but at least annually. If impairment exists, then excess of the unamortized balance over the fair value of the intangible assets will be charged to earnings at that time. Other assets also include the Company’s approximately 38% interest in Private Health Care Systems, Inc. (“PHCS”). The Company was a co-founder of PHCS, a provider network, and increased its’ investment in PHCS by 15% in 2004. The Company accounts for PHCS according to the equity method.


	*Foreign Currency Translation*

For those foreign affiliates where the foreign currency is the functional currency, unrealized foreign exchange gains (losses) net of income taxes have been reflected in Stockholders’ Equity under the caption “Accumulated other comprehensive income.”


	*Premiums*


	Short Duration Contracts

The Company’s short duration contracts are those on which the Company recognizes revenue on a pro-rata basis over the contract term. The Company’s short duration contracts primarily include group term life, group disability, medical and dental, property and warranty, credit life and disability, and extended service contracts and individual medical contracts after 2002 in most jurisdictions.


	Long Duration Contracts

Currently, the Company’s long duration contracts being sold are pre-funded funeral life insurance and investment type annuities. The pre-funded funeral life insurance policies include provisions for death benefit

F-11

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

growth that is either pegged to the changes in the Consumer Price Index (the “CPI CAP”) or determined periodically at the discretion of management. For pre-funded funeral life insurance policies, revenues are recognized when due from policyholders. For pre-funded funeral investment-type annuity contracts, revenues consist of charges assessed against policy balances.

For individual medical contracts sold prior to 2003, individual medical contracts currently sold in a limited number of jurisdictions and traditional life insurance contracts previously sold by the PreNeed segment but no longer offered, revenue is recognized when due from policyholders.

For universal life insurance and investment-type annuity contracts previously sold by the Solutions segment but no longer offered, revenues consist of charges assessed against policy balances.


	Reinsurance Assumed

Reinsurance premiums assumed are calculated based upon payments received from ceding companies together with accrual estimates, which are based on both payments received and in force policy information received from ceding companies. Any subsequent differences arising on such estimates are recorded in the period in which they are determined.


	*Fee Income*

The Company primarily derives income from fees received from providing administrative services. Fee income is earned when services are performed.

Dealer obligor service contracts are sales in which the retailer/dealer is designated as the obligor (administrative service-only plans). For these contracts sales, the Company recognizes administrative fee revenue on a straight pro-rata basis over the terms of the service contract.

Administrator obligor service contracts are sales in which the Company is designated as the obligor. For these contract sales, the Company recognizes revenues in accordance with Financial Accounting Standards Board Technical Bulletin 90-1 (“TB 90-1”),Accounting for Separately Priced Extended Warranty and Product Maintenance Contracts, and Statement of Financial Accounting Standards No. 60, Accounting and Reporting by Insurance Enterprises (“FAS 60”). Administration fees related to these contracts are generally recognized as earned on the same basis as the premium is recognized or on a straight-line pro-rata basis. Administration fees related to the unexpired portion of the contract term are deferred. Acquisition costs related to these contracts are also deferred. Both the deferred administration fees and acquisition costs are amortized over the term of the contracts. Deferred administration fees at December 31, 2004, 2003 and 2002 were $49,701, $27,328, and $28,845, respectively. Amortization income recognized in fees and other income for 2004, 2003 and 2002 as $28,827, $23,183 and $26,463, respectively.


	*Reserves*

Reserves are established according to GAAP, using generally accepted actuarial methods and are based on a number of factors. These factors include experience derived from historical claim payments and actuarial assumptions to arrive at loss development factors. Such assumptions and other factors include trends, the incidence of incurred claims, the extent to which all claims have been reported, and internal claims processing charges. The process used in computing reserves cannot be exact, particularly for liability coverages, since actual claim costs are dependent upon such complex factors as inflation, changes in doctrines of legal liabilities and damage awards. The methods of making such estimates and establishing the related liabilities are periodically reviewed and updated.

F-12

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)


	Short Duration Contracts

For short duration contracts, claims and benefits payable reserves are recorded when insured events occur. The liability is based on the expected ultimate cost of settling the claims. The claims and benefits payable reserves include (1) case reserves for known but unpaid claims as of the balance sheet date; (2) incurred but not reported (“IBNR”) reserves for claims where the insured event has occurred but has not been reported to the Company as of the balance sheet date; and (3) loss adjustment expense reserves for the expected handling costs of settling the claims.

For group disability, the case reserves and the IBNR are recorded at an amount equal to the net present value of the expected claims future payments. Group long-term disability and group term life waiver of premiums reserves are discounted to the valuation date at the valuation interest rate. The valuation interest rate is reviewed quarterly by taking into consideration actual and expected earned rates on our asset portfolio, with adjustments for investment expenses and provisions for adverse deviation. Group long term disability and group term life reserve adequacy studies are performed annually, and morbidity and mortality assumptions are adjusted where appropriate.

Unearned premium reserves are maintained for the portion of the premiums on short duration contracts that is related to the unexpired period of the policies.

The Company has exposure to asbestos, environmental and other general liability claims arising from its participation in various reinsurance pools from 1971 through 1983. This exposure arose from a short duration contract that the company discontinued writing many years ago. The Company carried case reserves for these liabilities as recommended by the various pool managers and bulk reserves for claims incurred but not yet reported of $49,968 (before reinsurance) and $38,905 (after reinsurance) in the aggregate at December 31, 2004. Any estimation of these liabilities is subject to greater than normal variation and uncertainty due to the general lack of sufficient detailed data, reporting delays, and absence of generally accepted actuarial methodology for determining the exposures. There are significant unresolved industry legal issues, including such items as whether coverage exists and what constitutes an occurrence. In addition, the determination of ultimate damages and the final allocation of losses to financially responsible parties are highly uncertain.


	Long Duration Contracts

Future policy benefits and expense reserves on LTC, life insurance policies and annuity contracts that are no longer offered, individual medical policies issued prior to 2003 or issued in a limited number of jurisdictions and the traditional life insurance contracts within FFG are recorded at the present value of future benefits to be paid to policyholders and related expenses less the present value of the future net premiums. These amounts are estimated and include assumptions as to the expected investment yield, inflation, mortality, morbidity and withdrawal rates as well as other assumptions that are based on the Company’s experience. These assumptions reflect anticipated trends and include provisions for possible unfavorable deviations.

Future policy benefits and expense reserves for pre-funded funeral investment-type annuities, universal life insurance policies and investment-type annuity contracts no longer offered, and the variable life insurance and investment-type annuity contracts in FFG consist of policy account balances before applicable surrender charges and certain deferred policy initiation fees that are being recognized in income over the terms of the policies. Policy benefits charged to expense during the period include amounts paid in excess of policy account balances and interest credited to policy account balances.

F-13

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

these contracts which represents the balance of the excess of gross premiums over net premiums that is still to be recognized in future years’ income in a constant relationship to insurance in force.

Changes in the estimated liabilities are charged or credited to operations as the estimates are revised.


	*Business Combinations*

The Company follows Statement of Financial Accounting Standards No. 141,Business Combinations(“FAS 141”), which requires that all business combinations initiated after June 30, 2001 be accounted for under the purchase method of accounting and establishes specific criteria for the recognition of intangible assets separately from goodwill.


	*Recent Accounting Pronouncements*

In April 2003, the Financial Accounting Standards Board (“the FASB”) issued Statement of Financial Accounting Standards No. 149,Amendment of Statement 133 on Derivative Instruments and Hedging Activities (“FAS 149”). This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under Statement of Financial Accounting Standards No. 133,Accounting for Derivative Instruments and Hedging Activities. This Statement is effective prospectively for contracts entered into or modified after June 30, 2003 and prospectively for hedging relationships designated after June 30, 2003. The Company has assessed that the adoption of this standard did not have a material impact on the Company’s financial position or the results of operations.

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150,Accounting For Certain Financial Instruments with Characteristics of Both Liabilities and Equity(“FAS 150”). This statement improves the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity, and requires that these instruments be classified as liabilities in the consolidated balance sheets. This statement is effective prospectively for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. This statement shall be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the statement and still existing at the beginning of the interim period of adoption. The Company has adopted this standard and has reclassified mandatorily redeemable preferred securities of subsidiary trusts and mandatorily redeemable preferred stock from mezzanine to liabilities.

On July 7, 2003, the Accounting Standards Executive Committee (“AcSEC”) of the American Institute of Certified Public Accountants (“AICPA”) issued Statement of Position 03-1,Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long Duration Contracts and for Separate Accounts (“SOP 03-1”). SOP 03-1 provides guidance on a number of topics unique to insurance enterprises, including separate account presentation, interest in separate accounts, gains and losses on the transfer of assets from the general account to a separate account, liability valuation, returns based on a contractually referenced pool of assets or index, accounting for contracts that contain death or other insurance benefit features, accounting for reinsurance and other similar contracts, accounting for annuitization benefits and sales inducements to contract holders. SOP 03-1 effective for the Company’s financial statements on January 1, 2004. The Company assessed this statement and determined that the adoption of this statement did not have a material impact on the Company’s financial position or the results of operations.

In December 2003, the FASB issued Statement of Financial Accounting Standards No. 132 (Revised 2003),Employers’ Disclosure about Pensions and Other Postretirement Benefits(“FAS 132” — Revised 2003). This statement revises employers’ disclosure about pension plans and other postretirement benefit plans. This statement does not change the measurement or recognition of those plans required by Statement of

F-14

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Financial Accounting Standards No. 87,Employers’ Accounting for Pensions, No. 88,Employers’ Accounting for Settlement and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, and Statement of Financial Accounting Standards No. 106,Employers’ Accounting for Postretirement Benefits Other Than Pensions. This statement retains the disclosure requirements contained in FAS 132, Employers’ Disclosure about Pensions and Other Postretirement Benefits, which it replaces. It requires additional disclosure to that found in FAS 132 about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans and was effective for fiscal year ending after December 15, 2003. The Company fully adopted this statement. See Note 18.

In March 2004, the Emerging Issues Task Force (“EITF”) reached a final consensus on Issue 03-1,“The Meaning of Other Than Temporary Impairment and Its Application to Certain Investments” (“EITF 03-1”). EITF 03-1 provides guidance on the disclosure requirements for other than temporary impairments of debt and marketable equity investments that are accounted for under Financial Accounting Standard 115 (“FAS 115”). EITF 03-1 also provides guidance for evaluating whether an investment is other than temporarily impaired. The adoption of EITF 03-1 required the Company to include certain quantitative and qualitative disclosures for debt and marketable equity securities classified as available-for-sale or held-to-maturity under FAS 115 that are impaired at the balance sheet date but for which an other than temporary impairment has not been recognized. The disclosures were effective for financial statements for fiscal years ending after December 15, 2003. The Company adopted the disclosure requirements of EITF 03-1 at December 31, 2003. The guidance for evaluating whether an investment is other than temporarily impaired is effective for reporting periods beginning after June 15, 2004; however, the FASB issued two new proposed Staff Positions. EITF 03-1a which would defer the June 15, 2004 effective date of the requirement to record impairment losses caused by the effect of increases in interest rates or sector spreads on debt securities subject to paragraph 16 of EITF 03-1 until further guidance is provided and EITF 03-1b, which would exclude minor impairments from the requirement. Both Staff Positions are still in the comment period phase. The Company is continuing to evaluate the impact of adoption of this issue given the fact that portions of the issue are still in the comment period. The Company currently follows the guidance on other than temporary impairments provided by Staff Accounting Bulletin (“SAB”) 59,Accounting for Noncurrent Marketable Equity Securities.

In May 2004, the FASB issued FASB Staff Position (“FSP”) FAS 106-2,Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003(“FAS 106-2”), which provides guidance on accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (“the Act”). The Act introduces (1) a prescription drug benefit under Medicare and (2) a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least “actuarially equivalent” to Medicare Part D. The FASB concluded that the subsidy should be treated as an actuarial gain pursuant to Statement of Financial Accounting Standards No. 106,Employers’ Accounting for Postretirement Benefits Other Than Pensions(“FAS 106”). FAS 106-2 is effective for the first interim period or annual period beginning after June 15, 2004. Since the effects of the Act were not considered a significant event, the effects of the Act were incorporated in the next measurement of plan assets and obligations, December 31, 2004. The Company believes that it will be entitled to the subsidy. The adoption of this statement did not have a material impact on the Company’s financial position or the results of operations.

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004),Share-Based Payment(“FAS 123R” — Revised 2003) which replaces Statement of Financial Accounting Standards No. 123 and supersedes APB Opinion No. 25,Accounting for Stock Issued to Employees. FAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values beginning with the first interim period after June 15, 2005. The pro forma disclosures previously permitted under FAS 123 no longer will be an alternative to financial statement recognition. The Company is required to adopt FAS 123R by the third quarter of 2005. Under FAS 123R, the company must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method

F-15

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

to be used at date of adoption. The permitted transition methods include either retrospective or prospective adoption. Under the retrospective option, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The prospective method requires that compensation expense be recorded for all unvested stock options at the beginning of the first quarter of adoption of FAS 123R, while the retrospective methods would record compensation expense for all unvested stock options beginning with the first period presented. The Company is currently evaluating the requirements of FAS 123R. The Company has not yet determined the method of adoption or the effect of adopting FAS 123R. See stock-based compensation plans in Note 4.

In February 2005, the EITF issued EITF Issue 04-8,The Effect of Contingently Convertible Instruments on Diluted Earnings per Share(“EITF 04-8”). EITF 04-8 was effective for periods ending after December 15, 2004 and requires certain contingently convertible instruments be included in diluted earnings per share. The adoption of EITF 04-8 did not change the methods of or results of the calculation of the Company’s earnings per share.


3.	Dispositions

Our results of operations were affected by the following material dispositions, including:


	*Workability Division of Core, Inc. (“Core”)*

On May 3, 2004, the Company sold the assets of its Workability division of Core. The Company recorded a pre-tax loss on sale of $9,232.


	*Neighborhood Health Partnership (“NHP”)*

On June 28, 2002, the Company sold its 50% ownership in NHP to NHP Holding LLC for $12,000. NHP is a Florida Health Maintenance Organization. The Company recorded a pre-tax gain on sale of $10,672.


4.	Stock Based Compensation


	*2004 Long-Term Incentive Plan*

The 2004 Long-Term Incentive Plan authorizes the granting of awards to employees, officers, and directors. There are 10,000,000 shares reserved and available for issuance under this plan. Upon closing of the IPO, the Company issued 68,976 restricted shares of Common Stock of Assurant, Inc. to certain officers and directors of the Company. The Board of Directors received 9,546 of those shares, which are fully vested. The remaining 59,430 shares have a three year vesting period and are expensed over the vesting period. The Company, in accounting for the restricted shares, set up a contra equity account called “Unamortized Restricted Stock Compensation” in the stockholders’ equity section of the balance sheet for $1,553. The $1,553 will be expensed over the vesting period of the shares. The expense recorded for the year ended December 31, 2004 was $945.

Changes in the number of restricted shares outstanding were as follows:


		2004(1)

Shares outstanding, beginning			—
	Grants		70,341
	Vests		(12,173	)
	Forfeitures		(6,172	)

Shares outstanding, ending			51,996


(1)	Includes grants and vests subsequent to the IPO.

F-16

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)


	*Executive 401K Plan*

The Executive 401K Plan is offered to employees who meet certain eligibility requirements. The requirements include being regularly scheduled to work 20 or more hours per week, having completed one year of service, and earning eligible pay in excess of the IRS limits ($205,000 for 2004). The Company contributes an amount equal to 7% of an employee’s eligible pay in excess of the IRS limit to the plan. This expense is not material to the Company’s financial statements. No employee contribution is permitted to the plan. Employees are 100% vested in these contributions after a three year vesting period. Employees who are vested receive their account balance in cash upon termination of their employment.

Effective May 18, 2004, the Company added an “Assurant Stock Fund” to the plan’s investment option. During 2004, the Company purchased 33,626 Treasury shares for $842 via a Rabbi Trust which was allocated to the Assurant Stock Fund. See Note 13 for further information.


	*Employee Stock Purchase Plan*

The Company established an Employee Stock Purchase Plan (“ESPP”) which went into effect on July 1, 2004. The ESPP allows employees to purchase shares of the Company’s stock at a 10% discount with funds contributed through payroll deductions. Participants can contribute 1% to 15% of their base compensation to purchase Company shares up to a maximum of $6,000 per offering period. There are two offering periods during the year (January 1 through June 30 and July 1 through December 31). Shares are purchased at the end of the offering period at 90% of the lower of the closing price of Company’s stock on the first or last day of the offering period. Participants must be employed on the last day of the offering period in order to purchase Company shares under the ESPP.

The ESPP is offered to individuals who are scheduled to work at least 20 hours per week and at least five months per year, have been continuously employed for at least six months by the start of the offering period, not temporary employees (employed less than 12 months), and have not been on a leave of absence for more than 90 days immediately preceding the offering period.

In January 2005, the Company issued 71,860 shares to employees relating to the ESPP at a price of $23.67 for the offering period of July 1 through December 31, 2004.

The Company accounts for the ESPP in accordance with Accounting Principles Board Opinion No. 25,“Accounting for Stock Issued to Employees”(“APB 25”), and accordingly does not record any compensation expense. The following pro forma information of net income and net income per share amounts were determined as if the Company had accounted for the ESPP under the fair value method of FAS 123.


	For the Year
	Ended
	December 31, 2004

Net income as reported	$	350,560
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(179	)

Pro forma net income	$	350,381

Earnings per share as reported:
Basic	$	2.53
Diluted	$	2.53
Pro forma earnings per share:
Basic	$	2.53
Diluted	$	2.53

F-17

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)


5.	Investments

The amortized cost and fair value of fixed maturities and equity securities at December 31, 2004 were as follows:


			Cost or		Gross		Gross
			Amortized		Unrealized		Unrealized
			Cost		Gains		Losses			Fair Value

Fixed maturities
Bonds:
	United States Government and government agencies and authorities		$	1,498,473	$	30,745	$	(4,613	)	$	1,524,605
	States, municipalities and political subdivisions			197,730		20,211		(76	)		217,865
	Foreign governments			510,745		17,556		(873	)		527,428
	Public utilities			1,003,349		79,990		(615	)		1,082,724
	All other corporate bonds			5,470,133		362,530		(7,347	)		5,825,316

		Total fixed maturities	$	8,680,430	$	511,032	$	(13,524	)	$	9,177,938

Equity securities
Common stocks:
	Public utilities		$	13	$	—	$	(1	)	$	12
	Banks, trusts and insurance companies			1,037		189		(46	)		1,180
	Industrial, miscellaneous and all other			840		60		(24	)		876
Non-redeemable preferred stocks:
	Non-sinking fund preferred stocks			511,058		15,987		(2,162	)		524,883

		Total equity securities	$	512,948	$	16,236	$	(2,233	)	$	526,951

The amortized cost and fair value of fixed maturities and equity securities at December 31, 2003 were as follows:


			Cost or		Gross		Gross
			Amortized		Unrealized		Unrealized
			Cost		Gains		Losses			Fair Value

Fixed maturities
Bonds:
	United States Government and government agencies and authorities		$	1,646,782	$	39,431	$	(4,467	)	$	1,681,746
	States, municipalities and political subdivisions			187,539		16,181		(41	)		203,679
	Foreign governments			306,554		11,748		(554	)		317,748
	Public utilities			910,810		73,711		(380	)		984,141
	All other corporate bonds			5,178,176		371,215		(7,867	)		5,541,524

		Total fixed maturities	$	8,229,861	$	512,286	$	(13,309	)	$	8,728,838

Equity securities
Common stocks:
	Public utilities		$	13	$	—	$	—		$	13
	Banks, trusts and insurance companies			1,037		1,461		—			2,498
	Industrial, miscellaneous and all other			1,310		248		(2	)		1,556
Non-redeemable preferred stocks:
	Non-sinking fund preferred stocks			434,463		18,640		(730	)		452,373

		Total equity securities	$	436,823	$	20,349	$	(732	)	$	456,440

F-18

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The amortized cost and fair value of fixed maturities at December 31, 2004 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.


		Amortized
		Cost		Fair Value

Due in one year or less		$	385,656	$	391,417
Due after one year through five years			1,799,069		1,863,871
Due after five years through ten years			2,297,379		2,423,520
Due after ten years			2,543,815		2,821,813

	Total		7,025,919		7,500,621
Mortgage and asset backed securities			1,654,511		1,677,317

	Total	$	8,680,430	$	9,177,938

Proceeds from sales of available for sale securities were $1,861,924, $1,298,672 and $3,730,282 during 2004, 2003 and 2002 respectively. Gross gains of $53,611, $49,083, and $117,612 and gross losses of $20,424, $15,176 and $150,951 were realized on dispositions in 2004, 2003 and 2002, respectively.

Major categories of net investment income were as follows:


		Years Ended December 31,

		2004			2003			2002

Fixed maturities		$	494,152		$	472,717		$	510,121
Equity securities			35,596			27,030			22,674
Commercial mortgage loans on real estate			79,334			70,988			77,913
Policy loans			3,832			3,920			3,511
Short-term investments			3,158			6,758			8,510
Other investments			36,003			46,538			19,546
Cash and cash equivalents			6,942			3,158			9,079
Investment expenses			(24,268	)		(23,796	)		(19,526	)

	Net investment income	$	634,749		$	607,313		$	631,828

The net realized gains (losses) recorded in income for 2004, 2003 and 2002 are summarized as follows:


		Years Ended December 31,

		2004			2003			2002

Fixed maturities		$	31,489		$	12,554		$	(120,939	)
Equity securities			1,098			1,084			2,305

Total marketable securities			32,587			13,638			(118,634	)
Real estate			(580	)		563			80
Other			(7,699	)		(12,333	)		182

	Total	$	24,308		$	1,868		$	(118,372	)

The Company recorded $600, $20,271 and $85,295 of pre-tax realized losses in 2004, 2003 and 2002, respectively, associated with other-than-temporary declines in value of available for sale securities. The Company recorded $4,217, $11,125 and zero of pre-tax realized losses in 2004, 2003 and 2002, respectively, associated with other investments.

F-19

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The investment category and duration of the Company’s gross unrealized losses on fixed maturities and equity securities at December 31, 2004 were as follows:


			Less Than 12 Months					12 Months or More					Total

					Unrealized					Unrealized					Unrealized
			Fair Value		Losses			Fair Value		Losses			Fair Value		Losses

Fixed maturities
Bonds:
	United States Government and government agencies and authorities		$	303,164	$	(3,353	)	$	43,814	$	(1,260	)	$	346,978	$	(4,613	)
	States, municipalities and political subdivisions			20,818		(40	)		683		(36	)		21,501		(76	)
	Foreign governments			54,225		(244	)		24,710		(628	)		78,935		(872	)
	Public utilities			91,626		(602	)		3,422		(13	)		95,048		(615	)
	All other corporate bonds			552,615		(6,195	)		39,126		(1,153	)		591,741		(7,348	)

		Total fixed maturities	$	1,022,448	$	(10,434	)	$	111,755	$	(3,090	)	$	1,134,203	$	(13,524	)

Equity securities
Common stocks:
	Public utilities		$	—	$	—		$	12	$	(1	)	$	12	$	(1	)
	Banks, trusts and insurance companies			8		(43	)		—		(3	)		8		(46	)
	Industrial, miscellaneous and all other			383		(18	)		8		(6	)		391		(24	)
Non-redeemable preferred stocks:														-		—
	Non-sinking fund preferred stocks			88,132		(1,536	)		6,589		(626	)		94,721		(2,162	)

		Total equity securities	$	88,523	$	(1,597	)	$	6,609	$	(636	)	$	95,132	$	(2,233	)

The total unrealized losses represent less than 2% of the aggregate fair value of the related securities. Approximately 77% of these unrealized losses have been in a continuous loss position for less than twelve months. The total unrealized losses are comprised of 474 individual securities with 92% of the individual securities having an unrealized loss of less than $100. The total unrealized losses on securities that were in a continuous unrealized loss position for longer than six months but less than 12 months were approximately $7,872 with no security with a book value of greater than $1,000 having a market value below 86% of book value.

As part of the Company’s ongoing monitoring process, the Company regularly reviews its investment portfolio to ensure that investments that may be other than temporarily impaired are identified on a timely basis and that any impairment is charged against earnings in the proper period. The Company has reviewed these securities and concluded that there were no additional other than temporary impairments as of December 31, 2004. Due to issuers’ continued satisfaction of the securities’ obligations in accordance with their contractual terms and their continued expectations to do so, as well as the Company’s evaluation of the fundamentals of the issuers’ financial condition, the Company believes that the securities in an unrealized loss status are not impaired and intends to hold them until recovery.

The Company has made commercial mortgage loans, collateralized by the underlying real estate, on properties located throughout the United States. At December 31, 2004, approximately 41% of the outstanding principal balance of commercial mortgage loans was concentrated in the states of California, New York, and Pennsylvania. Although the Company has a diversified loan portfolio, an economic downturn could have an adverse impact on the ability of its debtors to repay their loans. The outstanding balance of commercial mortgage loans range in size from $27 to $12,962 at December 31, 2004. The mortgage loan valuation allowance for losses, was $17,955 and $18,854 at December 31, 2004 and 2003, respectively.

F-20

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

At December 31, 2004, loan commitments outstanding totaled approximately $32,300. Furthermore, at December 31, 2004, the Company is committed to fund additional capital contributions of $14,549 to joint ventures and $14,155 to certain investments in limited partnerships.

The Company has short term investments and fixed maturities carried at $676,583 and $560,794 at December 31, 2004 and 2003, respectively, on deposit with various governmental authorities as required by law.


	*Security Lending*

The Company engages in transactions in which fixed maturities, especially bonds issued by the United States Government, agencies, 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 held by a custodian bank for the benefit of the Company. 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 in the investment of cash collateral. At December 31, 2004 and 2003, securities with a fair value of $516,778 and $417,533, respectively, were on loan to select brokers and are included in the Company’s sale available for sale investments. At December 31, 2004 and 2003, collateral with a fair value of $535,331 and $420,783, respectively, is included in the Company’s assets with offsetting liabilities. The Company had a revision on classification in the 2003 balance sheet to reflect the collateral held under securities lending.


6.	Property and Equipment

Property and equipment consists of the following:


		As of December 31,

		2004			2003

Land		$	10,831		$	10,781
Buildings and improvements			193,586			187,375
Furniture, fixtures and equipment			355,248			341,474

	Total		559,665			539,630
Less accumulated depreciation			(282,577	)		(255,868	)

	Total	$	277,088		$	283,762

Depreciation expense for 2004, 2003 and 2002 amounted to $45,675, $48,117, and $46,867, respectively. Depreciation expense is included in underwriting, general and administrative expenses in the consolidated statements of operations.


7.	Premiums and Accounts Receivable

Receivables are reported at the estimated amounts collectible net of an allowance for uncollectible items. A summary of such items is as follows:


		As of December 31,

		2004			2003

Insurance premiums receivable		$	317,198		$	356,278
Other receivables			143,077			141,804
Allowance for uncollectible items			(24,818	)		(29,316	)

	Total	$	435,457		$	468,766

F-21

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)


8.	Mandatorily Redeemable Preferred Securities

Mandatorily redeemable preferred securities consisted of the following as of December 31:


Security		Interest Rate			Maturity		2004		2003

1997 Capital Securities I			8.40	%		05/30/27	$	—	$	150,000
1997 Capital Securities II			7.94	%		07/31/27		—		46,224

	Total						$	—	$	196,224


	*1997 Capital Securities I & II*

In May 1997, Fortis Capital Trust, a trust declared and established by the Company and other parties, issued 150,000 8.40% capital securities (the “1997 Capital Securities I”) to purchasers and 4,640 8.40% common securities (the “1997 Common Securities I”) to the Company, in each case with a liquidation amount of $1,000 per security. Fortis Capital Trust used the proceeds from the sale of the 1997 Capital Securities I and the 1997 Common Securities I to purchase $154,640 of the Company’s 8.40% junior subordinated debentures due 2027 (the “1997 Junior Subordinated Debentures I”). These debentures are the sole assets of Fortis Capital Trust.

In July 1997, Fortis Capital Trust II, a trust declared and established by the Company and other parties, issued 50,000 7.94% capital securities (the “1997 Capital Securities II” and, together with the 1997 Capital Securities, the “1997 Capital Securities”) to purchasers and 1,547 7.94% common securities (the “1997 Common Securities II”) to the Company, in each case with a liquidation amount of $1,000 per security. Fortis Capital Trust II used the proceeds from the sale of the 1997 Capital Securities II and the 1997 Common Securities II to purchase $51,547 of the Company’s 7.94% junior subordinated debentures due 2027 (the “1997 Junior Subordinated Debentures II” and, together with the 1997 Junior Subordinated Debentures I, the “1997 Junior Subordinated Debentures”). These debentures are the sole assets of Fortis Capital Trust II.

In early January 2004, the Company redeemed 100% of the outstanding $196,224 of 1997 Capital Securities. In December 2003 the Company sent an irrevocable notice of redemption for the 1997 capital securities; therefore, the Company accrued interest premiums of $66,734 in 2003. The interest premiums are included in the interest premiums on redemption of mandatorily redeemable preferred securities line in the statement of operations. See Note 1 – for further detail on the extinguishment of these securities.


9.	Debt

In December 2003, the Company entered into two senior bridge credit facilities of $650,000 and $1,100,000. The aggregate indebtedness of $1,750,000 under the facility was in connection with the extinguishment of the Company’s Mandatorily Redeemable Preferred Securities. See Note 8 for a detail description of these securities and the repayment terms. The $1,750,000 aggregate indebtedness under the senior bridge credit facility was paid in full in January 2004.

In February 2004, the Company issued two series of senior notes with an aggregate principal amount of $975,000. The Company received net proceeds from this transaction of $971,537, which represents the principal amount less the discount. The discount will be amortized over the life of the notes. The first series is $500,000 in principal amount, bears interest at 5.63% per year and is payable in a single installment due February 15, 2014 and was issued at a 0.11% discount. The second series is $475,000 in principal amount, bears interest at 6.75% per year and is payable in a single installment due February 15, 2034 and was issued at a 0.61% discount. Interest on the senior notes is payable semi-annually on February 15 and August 15 of each year, commencing August 15, 2004. The senior notes are unsecured obligations and rank equally with all of

F-22

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

the Company’s other senior unsecured indebtedness. The senior notes are not redeemable prior to maturity. The Company filed a registration statement under the Securities Act of 1933 on May 4, 2004 to permit the exchange of the senior notes for registered notes having identical terms. This registration statement was declared effective on May 12, 2004. The exchange offer expired on June 15, 2004 and all of the holders exchanged their notes for the new, registered notes.

The interest expense incurred for the year ended December 31, 2004 relating to the senior notes was $52,163.

In March 2004, the Company established a $500,000 commercial paper program, which is available for working capital and other general corporate purposes. The Company’s subsidiaries do not maintain commercial paper or other borrowing facilities at their level. This program is backed up by a $500,000 senior revolving credit facility with a syndicate of banks arranged by Banc One Capital Markets, Inc. and Citigroup Global Markets, Inc., which was established on January 30, 2004. The revolving credit facility is unsecured and is available until February 2007, so long as the Company is in compliance with all the covenants. This facility is also available for general corporate purposes, but to the extent used thereto, would be unavailable to back up the commercial paper program. On June 1, 2004, August 9, 2004, and October 18, 2004 the Company used $20,000, $40,000, and $40,000, respectively, from the commercial paper program for general corporate purposes, which was repaid on June 15, 2004, August 20, 2004, and October 29, 2004, respectively. There were no amounts relating to the commercial paper program outstanding at December 31, 2004. The Company did not use the revolving credit facility during the year ended December 31, 2004 and no amounts are currently outstanding.

The revolving credit facility contains restrictive covenants. The terms of the revolving credit facility also require that the Company maintain certain specified minimum ratio and thresholds. The Company is in compliance with all covenants and the Company maintains all specified minimum ratios and thresholds.


10.	Income Taxes

The Company and the majority of its subsidiaries are subject to U.S. tax and file a U.S. consolidated federal income tax return. Information about current and deferred tax expense follows:


			Years Ended December 31,

			2004			2003			2002

Current expense:
	Federal		$	110,516		$	6,335		$	11,688
	Foreign			7,748			8,814			8,910

		Total current expense		118,264			15,149			20,598
Deferred expense (benefit)
	Federal			68,227			59,313			92,209
	Foreign			(1,123	)		(757	)		(2,150	)

		Total deferred expense		67,104			58,556			90,059

		Total income tax expense	$	185,368		$	73,705		$	110,657

The provision for foreign taxes includes amounts attributable to income from U.S. possessions that are considered foreign under U.S. tax laws. International operations of the Company are subject to income taxes imposed by the jurisdiction in which they operate.

F-23

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

A reconciliation of the federal income tax rate to the Company’s effective income tax rate follows:


		December 31,

		2004			2003			2002

Federal income tax rate:			35.0	%		35.0	%		35.0	%
Reconciling items:
	Tax exempt interest		(0.3	)		(0.6	)		(0.5	)
	Dividends received deduction		(1.0	)		(1.3	)		(0.2	)
	Permanent nondeductible expenses		0.2			(0.8	)		0.2
	Change in reserve for prior year taxes		(1.9	)		—			—
	Tax on Jobs Act repatriation		3.5			—			—
	Goodwill		0.1			0.4			—
	Foreign earnings		0.6			(1.7	)		(2.2	)
	Foreign tax credit		(1.5	)		(0.9	)		(1.1	)
	Low-income housing credit		(0.6	)		(1.7	)		(1.3	)
	Low-income housing adjustments		0.3			1.1			—
	Other		0.2			(1.1	)		—

Effective income tax rate:			34.6	%		28.4	%		29.9	%

In December 2004, pursuant to the American Jobs Creation Act of 2004 (“Jobs Act”), the Company repatriated $110,066 from its Puerto Rico subsidiaires and incurred $18,887 of tax expense. In accordance with proposed tax legislation, the Company anticipates that $5,300 of this expense will be recaptured as a tax benefit when the proposed legislation becomes enacted. In addition, during the fourth quarter of 2004, an analysis of our Federal Tax Liability resulted in a $10,000 reduction of our tax liability.

The tax effects of temporary differences that result in significant deferred tax assets and deferred tax liabilities are as follows:


		December 31,

		2004			2003

Deferred tax assets:
	Policyholder and separate account reserves	$	642,012		$	545,699
	Accrued liabilities		191,891			159,356
	Investment adjustments		11,493			52,056

	Gross deferred tax assets	$	845,396		$	757,111

Deferred tax liabilities:
	Deferred acquisition costs	$	419,195		$	349,829
	Other assets		254,392			168,168
	Unrealized gains on fixed maturities and equities		176,033			178,793

	Gross deferred tax liabilities	$	849,620		$	696,790

Net deferred income tax (liability)/asset		$	(4,224	)	$	60,321

Deferred taxes have not been provided on the undistributed earnings of wholly owned foreign subsidiaries, including the Puerto Rico subsidiaries, since the Company intends to indefinitely reinvest these earnings. The cumulative amount of undistributed earnings for which the Company has not provided deferred income taxes

F-24

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

is approximately $71,600. Upon distribution of such earnings in a taxable event, the Company would incur additional U.S. income taxes of approximately $19,400 net of anticipated foreign tax credits.

Under pre-1984 life insurance company income tax laws, a portion of a life insurance company’s “gain from operations” was not subject to current income taxation but was accumulated, for tax purposes, in a memorandum account designated as “policyholders’ surplus account.” Amounts in this account only become taxable upon the occurrence of certain events. The approximate amount in this account was $95,200 at December 31, 2004 and 2003. Deferred taxes have not been provided on amounts in this acccount since the Company neither comtemplates any action nor foresees any events occuring that would create such tax. The Company anticipates designating dividends in the amount of $95,200 over the next two years to be taken from this account. In accordance with the Jobs Act, there will be no federal income tax on these amounts.

At December 31, 2004, the Company and its subsidiaries had capital loss carryforwards for U.S. federal income tax purposes. Capital loss carryforwards total $40,183 and will expire if unused as follows:


Expiration Year		Amount

2005		$	4
2006			166
2007			35,518
2008			4,455
2009			40

	Total	$	40,183


11.	Mandatorily Redeemable Preferred Stocks

The carrying value equals the redemption value for all classes of preferred stock. The Company’s board of directors has the authority to issue up to 200,000,000 shares of preferred stock, par value $1.00 per share, in one or more series and to fix the powers, preferences, rights and qualifications, limitations or restrictions thereof, which may include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and the number of shares constituting any series or the designations of the series.

Information about the preferred stock is as follows:


			December 31,

			2004		2003

Preferred stock, par value $1.00 per share:
	Series B: 30,000 shares authorized, 19,160 shares issued and outstanding in 2004 and 2003, respectively		$	19,160	$	19,160
	Series C: 5,000 shares authorized, issued and outstanding			5,000		5,000

		Total	$	24,160	$	24,160

There was no change in the outstanding shares of Series C for the years ended December 31, 2004, 2003 and 2002. Changes in the number of Series B shares outstanding are as follows:


	For the Years Ended
	December 31,

	2004		2003			2002

Shares outstanding, beginning		19,160		19,660			20,160
Shares redeemed		—		(500	)		(500	)

Shares outstanding, ending		19,160		19,160			19,660

F-25

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

All shares have a liquidation price of $1,000 per share and rank senior to common stock with respect to rights to receive dividends and to receive distributions upon the liquidation, dissolution or winding up of the Company.

Holders of the Series B Preferred Stock are entitled to receive cumulative dividends at the rate of 4.0% per share per annum, multiplied by the $1,000 per share liquidation price, and holders of the Series C Preferred Stock are entitled to receive dividends at the rate of 4.5% per share per annum multiplied by the $1,000 per share liquidation price. All dividends are payable in arrears on a quarterly basis. Any dividend that is not paid on a specified dividend payment date with respect to a share of such Preferred Stock shall be deemed added to the liquidation price of such share for purposes of computing the future dividends on such share, until such delinquent dividend has been paid.

Holders of the Series B Preferred Stock may elect to have any or all of their shares redeemed by the Company at any time after April 1, 2002, and the Company must redeem all shares of the Series B Preferred Stock no later than July 1, 2017. Holders of the Series C Preferred Stock may elect to have any or all of their shares redeemed by the Company any time after April 1, 2022, and the Company must redeem all shares of the Series C Preferred Stock no later than July 1, 2027. The Company also has the right and the obligation to redeem the Series B Preferred Stock and Series C Preferred Stock upon the occurrence of certain specified events. The redemption price in all cases shall equal the $1,000 per share liquidation price plus all accumulated and unpaid dividends. The Company is not required to establish any sinking fund or similar funds with respect to such redemptions. None of the shares of Series B Preferred Stock or Series C Preferred Stock are convertible into common stock or any other equity security of the Company. However, holders of the Series B Preferred Stock and Series C Preferred Stock are entitled to one vote per share owned of record on all matters voted upon by the Company stockholders, voting with the holders of common stock as a single class, and not as a separate class or classes. The shares of Series B Preferred Stock and Series C Preferred Stock are subject to certain restrictions on transferability, and the Company has the right of first refusal to acquire the shares if any holder thereof desires to make a transfer not otherwise permitted by the terms thereof.


12.	Common Stock

At December 31, 2003 the Company had three classes of common stock, Class A, B and C. There were 40,000,000 shares authorized, 7,750,000 shares issued and outstanding of Class A common stock; 150,001 shares authorized, issued and outstanding of Class B common stock; 400,001 shares authorized, issued and outstanding of Class C common stock.

In connection with the merger of Fortis, Inc. and Assurant, Inc., each share of Fortis, Inc. Class A common stock was exchanged for 10.75882039 shares of common stock of Assurant, Inc., which totaled 83,380,858 shares. Also, the Class B common stock and Class C common stock outstanding were converted into an aggregate of 25,841,418 shares of common stock of Assurant, Inc. These events resulted in 109,222,276 shares of common stock outstanding.

Changes in the number of common stock shares outstanding during 2004 are as follows:


		December 31,

		2004

Shares outstanding, beginning			109,222,276
	Issuance to Fortis in connection with IPO (Note 1)		32,976,854
	Vested Restricted Shares (Note 4)		12,173
	Shares repurchased as part of buy-back program (Note 13)		(2,411,500	)
	Shares repurchased as part of Executive 401k plan (Note 13)		(33,626	)

Shares outstanding, ending			139,766,177

F-26

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The Company is authorized to issue 800,000,000 shares of common stock. The 150,001 shares of Class B and 400,001 shares of Class C common stock, per the Restated Certificate of Incorporation of Assurant, Inc., are still authorized but have not been retired and it is management intent not to reissue these shares.


13.	Stock Repurchase

The following table shows the shares repurchased during the periods indicated:


					Total Number of Shares
					Purchased as Part of
	Number of		Average Price		Publicly Announced
Period in 2004	Shares Purchased		Paid per Share		Plans or Programs

April		—	$	—		—
May		28,626		24.75		—
June		3,500		25.65		—
July		—		—		—
August		896,300		25.74		896,300
September		458,900		26.51		458,800
October		953,500		25.99		953,500
November		104,200		26.92		102,900
December		100		29.81		—

		2,445,126	$	26.02		2,411,500

On August 2, 2004, the Company’s Board of Directors approved a share repurchase program under which the Company may repurchase up to 10% of its outstanding common stock as of that date. As of December 31, 2004, the Company repurchased 2,411,500 shares of the Company’s outstanding common stock at a cost of $62,786. The total remaining number of shares that can be purchased pursuant to the repurchase program at December 31, 2004 was 11,815,311 shares.

There were 33,626 shares repurchased for $842 that were not part of the Company’s repurchase program. The shares were repurchased pursuant to the Company’s Executive 401K Plan. See Note 4 —Stock Based Compensation — for a detailed description of the Executive 401K Plan.


14.	Statutory Information

The Company’s insurance subsidiaries prepare financial statements on the basis of statutory accounting practices (“SAP”) prescribed or permitted by the insurance departments of their states of domicile. Prescribed SAP includes the Accounting Practices and Procedures Manual of the National Association of Insurance Commissioners (“NAIC”) as well as state laws, regulations and administrative rules.

The principal differences between SAP and GAAP are: 1) policy acquisition costs are expensed as incurred under SAP, but are deferred and amortized under GAAP; 2) the value of business acquired is not capitalized under SAP but is under GAAP; 3) amounts collected from holders of universal life-type and annuity products are recognized as premiums when collected under SAP, but are initially recorded as contract deposits under GAAP, with cost of insurance recognized as revenue when assessed and other contract charges recognized over the periods for which services are provided; 4) the classification and carrying amounts of investments in certain securities are different under SAP than under GAAP; 5) the criteria for providing asset valuation allowances, and the methodologies used to determine the amounts thereof, are different under SAP than under GAAP; 6) the timing of establishing certain reserves, and the methodologies used to determine the amounts thereof, are different under SAP than under GAAP; 7) certain assets are not admitted for purposes of determining surplus under SAP; 8) methodologies used to determine the amounts of deferred taxes and

F-27

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

goodwill are different under SAP than under GAAP; and 9) the criteria for obtaining reinsurance accounting treatment is different under SAP than under GAAP.

The combined statutory net income and capital and surplus of the insurance subsidiaries follow:


	Years Ended and at December 31,

	2004		2003		2002

Statutory Net Income	$	675,358	$	430,586	$	387,639

Statutory Capital and Surplus	$	2,099,843	$	2,126,190	$	1,939,616

Insurance enterprises are required by state insurance departments to adhere to minimum risk-based capital (“RBC”) requirements developed by the NAIC. All of the Company’s insurance subsidiaries exceed minimum RBC requirements.

The payment of dividends to the Company by the Company’s insurance subsidiaries in excess of a certain amount (i.e., extraordinary dividends) must be approved by the subsidiaries’ domiciliary state department of insurance. Ordinary dividends, for which no regulatory approval is generally required, are limited to amounts determined by formula, which varies by state. The formula for the majority of the states in which the Company’s subsidiaries are domiciled is the lesser of (i) 10% of the statutory surplus as of the end of the prior year or (ii) the prior year’s statutory net income. In some states the formula is the greater amount of clauses (i) and (ii). Some states, however, have an additional stipulation that dividends may only be paid out of earned surplus. If insurance regulators determine that payment of an ordinary dividend or any other payments by the Company’s insurance subsidiaries to the Company (such as payments under a tax sharing agreement or payments for employee or other services) would be adverse to policyholders or creditors, the regulators may block such payments that would otherwise be permitted without prior approval. As part of the regulatory approval process for the acquisition of American Bankers Insurance Group (“ABIG”) in 1999, the Company entered into an agreement with the Florida Insurance Department pursuant to which American Bankers Insurance Company and American Bankers Life Assurance Company have agreed to limit the amount of ordinary dividends they would pay to the Company to an amount no greater than 50% of the amount otherwise permitted under Florida law. This agreement expired in August 2004. In addition, the Company entered into an agreement with the New York Insurance Department as part of the regulatory approval process for the merger of Bankers American Life Assurance Company, one of the Company’s New York-domiciled insurance subsidiaries, into First Fortis Life Insurance Company (“FFLIC”) in 2001, pursuant to which FFLIC agreed not to pay any dividends to the Company until fiscal year 2004. No assurance can be given that there will not be further regulatory actions restricting the ability of the Company’s insurance subsidiaries to pay dividends. Based on the dividend restrictions under applicable laws and regulations, the maximum amount of dividends that the Company’s subsidiaries could pay to the Company in 2005 without regulatory approval is approximately $364,000.

F-28

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)


15.	Reinsurance

In the ordinary course of business, the Company is 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:


		2004		2003

Ceded future policy holder benefits and expense		$	2,504,029	$	2,550,566
Ceded unearned premium			767,124		971,315
Ceded claims and benefits payable			720,292		746,973
Ceded paid losses			142,215		107,667

	Total	$	4,133,660	$	4,376,521

The effect of reinsurance on premiums earned and benefits incurred was as follows:


		Years Ended December 31,

		2004									2003									2002

		Long			Short						Long			Short						Long			Short
		Duration			Duration			Total			Duration			Duration			Total			Duration			Duration			Total

Gross earned
	Premiums and other considerations	$	1,554,923		$	6,810,838		$	8,365,761		$	1,858,132		$	6,259,482		$	8,117,614		$	1,963,026		$	5,850,512		$	7,813,538
	Premiums assumed		49,204			342,081			391,285			31,282			426,677			457,959			73,117			400,548			473,665
	Premiums ceded		(493,655	)		(1,780,520	)		(2,274,175	)		(525,960	)		(1,892,841	)		(2,418,801	)		(665,366	)		(1,940,241	)		(2,605,607	)

Net earned premiums and other considerations		$	1,110,472		$	5,372,399		$	6,482,871		$	1,363,454		$	4,793,318		$	6,156,772		$	1,370,777		$	4,310,819		$	5,681,596

Gross policyholder
	benefits	$	1,710,025		$	3,369,451		$	5,079,476		$	1,988,529		$	2,964,306		$	4,952,835		$	2,032,310		$	2,771,755		$	4,804,065
	benefits assumed		35,257			276,495			311,752			25,615			289,862			315,477			72,577			309,927			382,504
	benefits ceded		(833,101	)		(718,358	)		(1,551,459	)		(952,145	)		(658,404	)		(1,610,549	)		(1,054,583	)		(696,811	)		(1,751,394	)

Net policyholder benefits		$	912,181		$	2,927,588		$	3,839,769		$	1,061,999		$	2,595,764		$	3,657,763		$	1,050,304		$	2,384,871		$	3,435,175

The Company had $676,136 and $624,044, respectively, of invested assets held in trusts or by custodians as of December 31, 2004 and 2003 for the benefit of others related to certain reinsurance arrangements.

The Company utilizes ceded reinsurance for loss protection and capital management, business dispositions, and in the Solutions’ segment, for client risk and profit sharing.


	*Loss Protection and Capital Management*

As part of the Company’s overall risk and capacity management strategy, the Company purchases reinsurance for certain risks underwritten by the Company’s various segments, including significant individual or catastrophic claims, and to free up capital to enable the Company to write additional business.

For those product lines where there is exposure to catastrophes, the Company closely monitors and manages the aggregate risk exposure by geographic area and the Company has entered into reinsurance treaties to manage exposure to these types of events.

Under indemnity reinsurance transactions in which the Company is the ceding insurer, the Company remains liable for policy claims if the assuming company fails to meet its obligations. To limit this risk, the Company has control procedures in place to evaluate the financial condition of reinsurers and to monitor the concentration of credit risk to minimize this exposure. The selection of reinsurance companies is based on

F-29

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

criteria related to solvency and reliability and, to a lesser degree, diversification as well as on developing strong relationships with the Company’s reinsurers for the sharing of risks.


	*Business Divestitures*

The Company has used reinsurance to exit certain businesses, such as the disposals of FFG and LTC. Reinsurance was used in these cases to facilitate the transactions because the businesses shared legal entities with business segments that the Company retained. Assets backing liabilities ceded related to these businesses are held in trusts for the benefit of the Company and the separate accounts relating to FFG are still reflected in the Company’s balance sheet.

The reinsurance recoverable from The Hartford was $1,507,228 and $1,536,568 as of December 31, 2004 and 2003, respectively. The reinsurance recoverable from John Hancock was $882,394 and $873,477 as of December 31, 2004 and 2003, respectively. The Company would be responsible for administering this business in the event of a default by reinsurers. In addition, under the reinsurance agreement, The Hartford is obligated to contribute funds to increase the value of the separate account assets relating to Modified Guaranteed Annuity business sold if such value declines below the value of the associated liabilities. If The Hartford fails to fulfill these obligations, the Company will be obligated to make these payments. As of December 31, 2004 there have been no default events by The Hartford or John Hancock and the Company has not been obligated to fulfill any of the reinsurers’ obligations.


	*Solutions’ Segment Client Risk and Profit Sharing*

A substantial portion of Assurant Solutions’ reinsurance activities are related to agreements to reinsure premiums generated by certain clients to the clients’ own captive insurance companies or to reinsurance subsidiaries in which the clients have an ownership interest. Collateral is generally obtained in amounts equal to the outstanding reserves when captive companies are not authorized to operate in the Company’s insurance subsidiary’s state of domicile as required by statutory accounting principles.

The Company’s reinsurance agreements do not relieve the Company from its direct obligation to its insureds. Thus, a credit exposure exists to the extent that any reinsurer is unable to meet the obligations assumed in the reinsurance agreements. To minimize its exposure to reinsurance insolvencies, the Company evaluates the financial condition of its reinsurers and holds substantial collateral (in the form of funds, trusts, and letters of credit) as security under the reinsurance agreements.

F-30

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)


16.	Reserves

The following table provides reserve information by the Company’s major lines of business at the dates shown:


		December 31, 2004						December 31, 2003

		Future Policy				Claims and		Future Policy				Claims and
		Benefits and		Unearned		Benefits		Benefits and		Unearned		Benefits
		Expenses		Premiums		Payable		Expenses		Premiums		Payable

Long Duration Contracts:
	Pre-funded funeral life insurance policies and investment-type annuity contracts	$	2,683,950	$	3,482	$	13,826	$	2,275,887	$	2,901	$	13,943
	Life insurance no longer offered		524,612		879		2,082		688,318		1,310		3,890
	Universal life and annuities no longer offered		319,841		575		12,092		321,578		1,106		16,558
	FFG and LTC disposed businesses		2,693,775		47,574		216,322		2,744,255		47,863		176,763
	All other		190,510		52,653		123,098		205,102		57,119		150,906
Short Duration Contracts:
	Group term life		—		9,579		393,276		—		13,054		394,293
	Group disability		—		3,812		1,446,211		—		3,940		1,374,551
	Medical		—		99,830		348,515		—		66,711		266,482
	Dental		—		5,900		35,312		—		7,295		39,312
	Property and Warranty		—		1,105,214		596,714		—		1,148,941		579,886
	Credit Life and Disability		—		655,778		359,005		—		758,633		403,267
	Extended Service Contract		—		1,346,515		38,000		—		1,022,926		18,142
	Other		—		22,508		30,496		—		2,048		33,574

Total		$	6,412,688	$	3,354,299	$	3,614,949	$	6,235,140	$	3,133,847	$	3,471,567

F-31

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The following table provides a roll forward of the claims and benefits payable for the Company’s group term life, group disability, medical and property and warranty lines of business. These are the Company’s product lines with the most significant short duration claims and benefits payable balances. The majority of the Company’s credit life and disability claims and benefits payable are ceded to reinsurers. The Company’s net retained credit life and disability claims and benefits payable were $156,968, $129,406 and $134,715 at December 31, 2004, 2003 and 2002, respectively.


												Property and
			Group Term Life			Group Disability			Medical			Warranty

Balance as of January 1, 2002, gross of reinsurance			$	438,204		$	1,203,699		$	209,882		$	500,995
	Less: Reinsurance ceded and other(1)			(42	)		(33,148	)		(11,089	)		(280,175	)

	Balance as of January 1, 2002, net of reinsurance			438,162			1,170,551			198,793			220,820
	Incurred losses related to:
		Current year		243,855			353,439			757,580			429,174
		Prior Year(s)		(28,586	)		(2,896	)		(42,585	)		2,231

	Total incurred losses			215,269			350,543			714,995			431,405
	Paid losses related to:
		Current year		148,484			63,809			577,233			286,272
		Prior Year(s)		50,667			225,450			147,746			116,802

	Total paid losses			199,151			289,259			724,979			403,074
	Balance as of December 31, 2002, net of reinsurance			454,280			1,231,835			188,809			249,151
	Plus: Reinsurance ceded and other(1)			2,362			66,869			12,891			286,681

Balance as of December 31, 2002, gross of reinsurance			$	456,642		$	1,298,704		$	201,700		$	535,832
	Less: Reinsurance ceded and other(1)			(2,362	)		(66,869	)		(12,891	)		(286,681	)

	Balance as of January 1, 2003, net of reinsurance			454,280			1,231,835			188,809			249,151
	Incurred losses related to:
		Current year		228,257			374,336			860,772			529,501
		Prior Year(s)		(92,781	)		53,047			(58,369	)		(13,076	)

	Total incurred losses			135,476			427,383			802,403			516,425
	Paid losses related to:
		Current year		144,152			56,563			610,119			351,439
		Prior Year(s)		51,348			249,141			116,945			121,552

	Total paid losses			195,500			305,704			727,064			472,991
	Balance as of December 31, 2003, net of reinsurance			394,256			1,353,514			264,148			292,585
	Plus: Reinsurance ceded and other(1)			37			21,037			2,334			287,301

F-32

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)


												Property and
			Group Term Life			Group Disability			Medical			Warranty

Balance as of December 31, 2003, gross of reinsurance			$	394,293		$	1,374,551		$	266,482		$	579,886
	Less: Reinsurance ceded and other			(37	)		(21,037	)		(2,334	)		(287,301	)

	Balance as of January 1, 2004, net of reinsurance			394,256			1,353,514			264,148			292,585
	Incurred losses related to:
		Current year		218,592			428,408			1,194,371			585,750
		Prior Year(s)		(35,645	)		(12,419	)		(50,030	)		(25,458	)

	Total incurred losses			182,947			415,989			1,144,341			560,292
	Paid losses related to:
		Current year		134,602			80,705			878,765			413,613
		Prior Year(s)		49,361			259,220			183,546			146,121

	Total paid losses			183,963			339,925			1,062,311			559,734
	Balance as of December 31, 2004, net of reinsurance			393,240			1,429,578			346,178			293,143
	Plus: Reinsurance ceded and other(1)			36			16,633			2,337			303,571

Balance as of December 31, 2004, gross of reinsurance			$	393,276		$	1,446,211		$	348,515		$	596,714


(1)	The “other” in reinsurance ceded and other included $13,300 in 2002 of liability balances primarily related to Medical Savings Accounts. In 2003 Medical Savings Accounts were transferred to an external third party administrator.

The claims and benefits payable include claims in process as well as provisions for incurred but not reported claims. Such amounts are developed using actuarial principles and assumptions that consider, among other things, contractual requirements, historical utilization trends and payment patterns, benefits changes, medical inflation, seasonality, membership, product mix, legislative and regulatory environment, economic factors, disabled life mortality and claim termination rates and other relevant factors. The Company consistently applies the principles and assumptions listed above from year to year, while also giving due consideration to the potential variability of these factors.

Because claims and benefits payable include estimates developed from various actuarial methods, the Company’s actual losses incurred may be more or less than the Company’s previously developed estimates. As shown in the table above, for each of the years ended December 31, 2004, 2003 and 2002 the amounts listed on the line labeled “Incurred losses related to: Prior year” are negative (redundant) for the Group Term Life and Medical lines of business. This means that the Company’s actual losses incurred related to prior years for these lines were less than the estimates previously made by the Company. For Group Disability, the amounts listed are negative (redundant) for the years ended December 31, 2004 and 2002, and positive (deficient) for the year ended December 31, 2003. This means that for 2004 and 2002, the Company’s actual losses incurred related to prior years for this line were less than what was estimated, while for 2003, actual losses incurred related to prior years were greater than what was previously estimated by the Company. For Property and Warranty, the amounts listed are negative (redundant) for the years ended December 31, 2004 and 2003, and positive (deficient) for the year ended December 31, 2002. This means for 2004 and 2003, the Company’s losses incurred related to prior years for this line were less than expected, while for 2002, actual losses incurred related to prior year were greater than what was previously estimated by the Company.

F-33

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The Group Term Life reserve redundancy in 2003, and its related downward revision primarily reflects the results of reserves adequacy studies conducted in the third quarter of 2003. Based on the results of those studies, reserves were reduced by $59,000. The change in estimate reflects an increase in the discount rate, lower mortality rates and higher recovery rates. These changes were made to reflect current yields on invested assets, and recent mortality and recovery experience. In 2004 and 2002 the Group Term Life reserve redundancies were caused by actual mortality rates being lower than assumed in our beginning-of-year reserves and recovery rates being higher than assumed in our beginning-of-year waiver of premium reserves. The remaining redundancy and related downward revision was due to shorter-than-expected lags between incurred claim dates and paid claim dates. These amounts were offset by one less year of discounting reflected in the Company’s end-of-year waiver of premium reserves.

The Group Disability reserve deficiency in 2003, and its related upward revision reflects the result of reserve adequacy studies concluded in the third quarter of 2003. Based on the results of those studies, reserves were increased by $44,000, almost all of which was attributable to a reduction in the discount rate to reflect current yields on invested assets. The Group Disability reserve redundancies in 2004 and 2002, which were less than 1% of prior year reserves, arose as a result of our actual claim recovery rates exceeding those assumed in our beginning-of-year case reserves, after taking into account an offset of one less year of discounting reflected in the Company’s end-of-year case reserves.

The conclusion of the 2003 reserve studies determined that, in the aggregate, the reserves were redundant. The reserve discount rate on all claims was changed to reflect the continuing low interest rate environment. The net impact of these adjustments was a reduction in reserves of approximately $18,000, which includes $3,000 of reserve release relating to the group dental business.

The redundancies in our Medical line of business, and the related downward revisions in the Company’s Medical reserve estimates, were caused by the Company’s claims developing more favorably than expected. The Company’s actual claims experience reflected lower medical provider utilization and lower medical inflation than assumed in the Company’s prior-year pricing and reserving processes.

The Company’s Property and Warranty lines of business had a small deficiency in 2002 which was largely attributable to a shift in the mix of business away from the credit property and unemployment product lines. In addition, an increase in the claim frequency of unemployment contributed to additional development on the small deficiency experienced in 2002. In 2003, unemployment claim frequencies stabilized, contributing to a modest redundancy. In 2004, an improved economic environment led to lower unemployment levels, which meant that loss payments on existing claims as well as payments on new claims in our credit unemployment lines, were not as high as would have been expected. This, coupled with lower reserve levels as a result of reduced premium writings in this line, led to a redundancy. These changes reflect experience gains and losses from actual claim frequencies differing from best estimate claim frequencies, and difference in actual versus best estimate paid claim lag rates.

For the longer-tail Property and Warranty coverages (e.g. asbestos, environmental, other general liability and personal accident), there were no material changes in estimated amounts for incurred claims in prior years for all years.


	*Long Duration Contracts*

The Company’s long duration contracts are comprised of pre-funded funeral life insurance policies and annuity contracts, traditional life insurance policies no longer offered, universal life and annuities no longer offered and FFG and LTC disposed businesses. The principal products and services included in these categories are described in the summary of significant accounting polices (see Note 2).

The Company’s PreNeed segment distributes pre-funded funeral insurance products through two separate divisions, the independent division and the AMLIC division. The reserves for future policy benefits

F-34

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

and expenses for pre-funded funeral life and annuity contracts and traditional life insurance no longer offered by the PreNeed segment differ by division and are established based upon the following assumptions:


	*PreNeed Segment — Independent Division*

Interest and discount rates for pre-funded funeral life insurance are level, vary by year of issuance and product, and ranged from 5.3% to 7.3% in 2004 and from 7.0% to 7.3% in 2003 before provisions for adverse deviation, which ranged from 0.2% to 0.5% in both 2004 and 2003.

Interest and discount rates for traditional life insurance no longer offered vary by year of issuance and products and were 7.5% grading to 5.3% over 20 years in 2004 and 2003 with the exception of a block of pre-1980 business which had a level 8.8% discount rate in both 2004 and 2003.

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

Future policy benefit increases on pre-funded funeral life insurance policies ranged from 1.0% to 7.0% in 2004 and 2003. Some policies have future policy benefit increases, which are guaranteed or tied to equal some measure of inflation. The inflation assumption for these inflation-linked benefits was 3.0% in both 2004 and 2003 with the exception of most policies issued in 2004 where the assumption was 1.8%. Traditional life products issued by the PreNeed segment have level benefits.

The reserves for annuities issued by the independent division are based on assumed interest rates credited on deferred annuities, which vary by year of issue, and ranged from 2.0% to 5.5% in 2004 and 2003. Withdrawal charges, if any, generally range from 7.0% to 0% and grade to zero over a period of seven years for business issued in the United States. Canadian annuity products have a surrender charge that varies by product series and premium paying period, typically grading to zero after all premiums have been paid.


	*PreNeed Segment — AMLIC Division*

Interest and discount rates for pre-funded funeral life insurance policies issued October 2000 and beyond vary by issue year and are based on pricing assumptions and modified to allow for provisions for adverse deviation. 2004 issues used a level 5.3% discount rate, 2003 issues used a level 4.8% discount rate and 2002 issues used a level 5.8% discount rate. Pre-funded funeral life insurance policies issued prior to October 2000 and all traditional life policies issued by the AMLIC division use discount rates, which vary by issue year and product and ranged from 2.5% to 7.5% in 2004 and 2003.

Mortality assumptions for pre-funded funeral life insurance products issued in October 2000 and beyond are based upon pricing assumptions, which approximate actual experience, and modified to allow for provisions for adverse deviation. Surrender rates for pre-funded funeral life insurance products issued in October 2000 and beyond vary by product and are based upon pricing assumptions, which approximate actual experience. Mortality assumptions for all pre-funded funeral life insurance and traditional life insurance issued by the AMLIC division prior to October 2000 are based on Statutory valuation requirements with no explicit provision for lapses, which approximate GAAP.

Future policy benefit increases are based upon pricing assumptions. First-year guaranteed benefit increases range from 0.0% to 6.0% in 2004 and 2003. Renewal guaranteed benefit increases range from 0.0% to 3.0% in 2004 and 2003. For contracts with minimum benefit increases associated with an inflation index, assumed benefit increases equaled the discount rate less 3.0% in 2004 and 2003.

The reserves for annuities issued by the AMLIC division are based on assumed interest rates credited on deferred annuities and ranged from 1.0% to 6.5% in 2004 and 2003. Withdrawal charges ranged from 0.0% to 8.0% grading to zero over eight years for business issued in the United States. Canadian annuity products have a flat 35% surrender charge. Nearly all the deferred annuities contracts have a 3.0% guaranteed interest rate.

F-35

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)


	*Universal Life and Annuities — No Longer Offered*

The reserves for universal life and annuity products no longer offered in the Assurant Solutions segment have been established based on the following assumptions: Interest rates credited on annuities, which vary by product and time when funds were received, and ranged from 3.5% to 4.0% in both 2004 and 2003. Guaranteed crediting rates on annuities range from 3.5% to 4.0%. Annuities are also subject to surrender charges, which vary by contract year and grade to zero over a period no longer than seven years. Surrender values will never be less than the amount of paid-in premiums (net of prior withdrawals) regardless of the surrender charge. Credited interest rates on universal life funds vary by product and the funds received and ranged from 4.0% to 5.1% in 2004 and from 4.0% to 5.5% in 2003. Guaranteed crediting rates where present ranged from 4.0% to 4.5%. Additionally, universal life funds are subject to surrender charges that vary by product, age, sex, year of issue, risk class, face amount and grade to zero over a period not longer than 20 years.


	*FFG and LTC*

The reserves for FFG and LTC are included in the Company’s reserves in accordance with FAS 113,Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts. The Company maintains an offsetting reinsurance recoverable related to these reserves (see Note 15).


	*Short Duration Contracts*

The Company’s short duration contracts are comprised of group term life, group disability, medical and dental, property, credit, warranty and all other. The principal products and services included in these categories are described in the summary of significant accounting polices (see Note 2).

The Company’s disability products are short duration contracts that include short and long term disablility coverage. Claims and benefits payable for long-term disability have been discounted at 5.25% in 2004. The December 31, 2004 and 2003 liabilities include $1,390,081 and $1,318,186, respectively, of such reserves. The amount of discounts deducted from outstanding reserves as of December 31, 2004 and 2003 are $455,506 and $440,460, respectively.


17.	Fair Value Disclosures

Statement of Financial Accounting Standards No. 107,Disclosures About Fair Value of Financial Instruments(“FAS 107”) requires disclosure of fair value information about financial instruments, as defined therein, for which it is practicable to estimate such fair value. These financial instruments may or may not be recognized in the consolidated balance sheets. In the measurement of the fair value of certain financial instruments, if quoted market prices were not available other valuation techniques were utilized. These derived fair value estimates are significantly affected by the assumptions used. Additionally, FAS 107 excludes certain financial instruments including those related to insurance contracts.

In estimating the fair value of the financial instruments presented, the Company used the following methods and assumptions:

Cash, cash equivalents and short-term investments: the carrying amount reported approximates fair value because of the short maturity of the instruments.

Fixed maturity securities: the fair value for fixed maturity securities, which includes both public and 144A securities, is based on quoted market prices, where available. For fixed maturity securities not actively traded, fair values are estimated using values obtained from independent pricing services or, in the case of private placements, excluding 144A securities, are estimated by discounting expected future cash flows using a current market rate applicable to the yield, credit quality, and maturity of the investments.

F-36

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Equity securities: fair value of equity securities and non-sinking fund preferred stocks is based upon quoted market prices.

Commercial mortgage loans and policy loans: the fair values of mortgage loans are estimated using discounted cash flow analyses, based on interest rates currently being offered for similar loans to borrowers with similar credit ratings. Mortgage loans with similar characteristics are aggregated for purposes of the calculations. The carrying amounts of policy loans reported in the balance sheets approximate fair value.

Other investments: the fair values of joint ventures are calculated based on fair market value appraisals. The invested assets related to a modified coinsurance arrangement and the AIP are classified as trading securities and are reported at fair value. The carrying amounts of the remaining other investments approximate fair value.

Policy reserves under investment products: the fair values for the Company’s policy reserves under the investment products are determined using cash surrender value.

Collateral and obligations under securities lending: The fair values of securities lending assets and liabilities are based on quoted market prices.

Separate account assets and liabilities: separate account assets and liabilities are reported at their estimated fair values in the balance sheet.


	December 31, 2004				December 31, 2003

	Carrying Value		Fair Value		Carrying Value		Fair Value

Financial assets
Cash and cash equivalents	$	807,082	$	807,082	$	958,197	$	958,197
Fixed maturities		9,177,938		9,177,938		8,728,838		8,728,838
Equity securities		526,951		526,951		456,440		456,440
Commercial mortgage loans on real estate		1,053,872		1,180,402		932,791		1,035,138
Policy loans		64,886		64,886		68,185		68,185
Short-term investments		300,093		300,093		275,878		275,878
Other investments		488,975		549,361		461,473		505,466
Collateral held under securities lending		535,331		535,331		420,783		420,783
Assets held in separate accounts		3,717,149		3,717,149		3,805,058		3,805,058
Financial liabilities
Policy reserves under investment products (Individual and group annuities, subject to discretionary withdrawal)	$	809,863	$	800,500	$	789,743	$	780,746
Obligations under securities lending		535,331		535,331		420,783		420,783
Liabilities related to separate accounts		3,717,149		3,717,149		3,805,058		3,805,058

The fair value of the Company’s liabilities for insurance contracts other than investment-type contracts are not required to be disclosed. However, the fair values of liabilities under all insurance contracts are taken into consideration in the Company’s overall management of interest rate risk, such that the Company’s exposure to changing interest rates is minimized through the matching of investment maturities with amounts due under insurance contracts.


18.	Retirement and Other Employee Benefits

The Company and its subsidiaries participate in a noncontributory defined benefit pension plan covering substantially all of their employees. Benefits are based on certain years of service and the employee’s compensation during certain such years of service. The Company’s funding policy is to contribute amounts to the plan sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974, plus such additional amounts as the Company may determine to be appropriate from

F-37

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

time to time up to the maximum permitted. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future. The Company also has noncontributory, nonqualified supplemental programs covering certain employees.

In addition, the Company provides certain life and healthcare benefits for retired employees and their dependents. Substantially all employees of the Company may become eligible for these benefits depending on age and years of service. The Company has the right to modify or terminate these benefits.

Summarized information on the Company’s qualified pension benefits and postretirement plans for the years ended December 31 is as follows:


	Pension Benefits									Retirement Health Benefits

	2004			2003			2002			2004			2003			2002

Change in benefit obligation
Benefit obligation at beginning of year	$	(324,184	)	$	(269,959	)	$	(236,500	)	$	(51,029	)	$	(46,405	)	$	(37,763	)
Service cost		(16,980	)		(15,269	)		(12,166	)		(2,172	)		(2,311	)		(1,913	)
Interest cost		(19,413	)		(17,945	)		(16,806	)		(2,937	)		(3,144	)		(2,847	)
Amendments		—			(115	)		—			—			—			—
Actuarial loss		(15,027	)		(36,010	)		(18,141	)		722			(340	)		(3,785	)
Acquisition		—			—			—			—			—			(1,297	)
Benefits paid (including admin. expenses)		15,849			15,114			13,654			1,201			1,171			1,200

Benefit obligation at end of year		(359,755	)		(324,184	)		(269,959	)		(54,215	)		(51,029	)		(46,405	)

Change in plan assets
Fair value of plan assets at beginning of year		263,966			174,601			178,966			6,536			—			—
Actual return on plan assets		28,889			46,684			(24,961	)		704			578			—
Employer contributions		26,000			58,558			35,000			6,601			7,130			1,201
Benefits paid		(16,543	)		(15,877	)		(14,404	)		(1,213	)		(1,172	)		(1,201	)

Fair value of plan assets at end of year		302,312			263,966			174,601			12,628			6,536			—

Funded status at end of year		(57,443	)		(60,218	)		(95,358	)		(41,587	)		(44,493	)		(46,405	)
Unrecognized actuarial loss (gain)		95,075			91,531			84,215			809			1,684			1,777
Unrecognized prior service cost		11,876			21,360			17,743			12,123			13,130			14,438

Net amount recognized	$	49,508		$	52,673		$	6,600		$	(28,655	)	$	(29,679	)	$	(30,190	)

Amounts recognized in the statement of financial position consist of:
Accrued benefit cost	$	(5,577	)	$	(13,551	)	$	(59,624	)	$	(28,655	)	$	(29,679	)	$	(30,190	)
Intangible asset		11,876			17,743			17,743			—			—			—
Accumulated other comprehensive income		43,209			48,481			48,481			—			—			—

Net amount recognized	$	49,508		$	52,673		$	6,600		$	(28,655	)	$	(29,679	)	$	(30,190	)

The Company’s nonqualified plans are unfunded. At December 31, 2004, 2003 and 2002 the nonqualified plans had projected benefit obligations of $85,158, $71,634 and $64,118 respectively, and accumulated benefit obligations of $72,939, $62,176 and $53,511, respectively. A pre-tax minimum pension liability of $14,592,

F-38

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

$5,750 and $5,750 was also recorded for these plans in accumulated other comprehensive income in 2004, 2003 and 2002, respectively.

Information for Pension Plans with an accumulated benefit obligation in excess of plan assets were as follows:


	Pension Benefits

	2004		2003		2002

Projected benefit obligation	$	359,755	$	324,184	$	269,959
Accumulated benefit obligation		307,889		277,455		234,225
Fair value of plan assets		302,312		263,966		174,601

Components of net pension cost for the year ended December 31 were as follows:


		Pension Benefits									Retirement Health Benefits

		2004			2003			2002			2004			2003			2002

Service cost		$	16,980		$	15,269		$	12,166		$	2,172		$	2,311		$	1,913
Interest cost			19,413			17,945			16,805			2,937			3,144			2,847
Expected return on plan assets			(22,331	)		(19,433	)		(17,606	)		(539	)		(143	)		—
Amortization of prior service cost			3,022			2,960			2,946			1,307			1,307			1,343
Amortization of net (gain) loss			5,619			2,207			—			—			—			—

	Net periodic benefit cost	$	22,703		$	18,948		$	14,311		$	5,877		$	6,619		$	6,103

Determination of the projected benefit obligation was based on the following weighted average assumptions at December 31:


										Retirement
	Pension Benefits									Health Benefits

	2004			2003			2002			2004			2003			2002

Discount rate		5.80	%		6.20	%		6.75	%		5.80	%		6.20	%		6.75	%

Determination of the net periodic benefit cost was based on the following weighted average assumptions for the year ended December 31:


										Retirement
	Pension Benefits									Health Benefits

	2004			2003			2002			2004			2003			2002

Discount rate		6.20	%		6.75	%		7.40	%		6.20	%		6.75	%		7.40	%
Expected long-term return on plan assets		8.25	%		8.25	%		8.25	%		8.25	%		8.25	%		8.25	%

To develop the expected long-term rate of return on assets assumption, the Company considered the current level of expected returns on risk free investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based on the targeted asset allocation to develop the expected long-term rate of return on asset assumptions for the portfolio. This resulted in the selection of the 8.25% assumption for the fiscal year 2004, 2003 and 2002.

F-39

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Assumed health care cost trend rates at December 31:


		Retirement
		Health Benefits

		2004			2003			2002

Health care cost trend rate assumed for next year:
	Pre-65 Non-reimbursement Plan		11.0	%		10.0	%		11.0	%
	Post-65 Non-reimbursement Plan		15.0	%		10.0	%		11.0	%
	Reimbursement Plan		8.0	%		10.0	%		11.0	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)			5.0	%		5.0	%		5.0	%
Year that the rate reaches the ultimate trend rate			2013			2008			2008

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects:


	Retirement
	Health Benefits

	2004			2003			2002

One percentage point increase in health care cost trend rate
Effect on total of service and interest cost components	$	58		$	57		$	50
Effect on postretirement benefit obligation		1,036			783			712
One percentage point decrease in health care cost trend rate
Effect on total of service and interest cost components		(60	)		(55	)		(48	)
Effect on postretirement benefit obligation		(1,028	)		(745	)		(677	)

The Company’s pension plans and other post retirement benefit plans weighted-average asset allocation at December 31 by asset category are as follows:


											Retirement
		Pension Benefits									Health Benefits

		2004			2003			2002			2004			2003			2002

Assets Category
Equity securities			77	%		78	%		62	%		77	%		78	%		0	%
Debt securities			20	%		21	%		19	%		20	%		21	%		0	%
Real estate			0	%		0	%		0	%		0	%		0	%		0	%
Other			3	%		1	%		19	%		3	%		1	%		100	%

	Total		100	%		100	%		100	%		100	%		100	%		100	%

The goals of the asset strategy are to determine if the growth in the value of the fund over the long-term, both in real and nominal terms, manage (control) risk exposure. Risk is managed by investing in a broad range of asset classes, and within those asset classes, a broad range of individual securities.

The Investment Committee that oversees the investment of the plan assets conducted a review of the Investment Strategies and Policies of the Plan in the 4th quarter of 2001. This included a review of the strategic asset allocation, including the relationship of the Plan liabilities and portfolio structure. As a result of this review, the Investment Committee has adopted a target asset allocation and modified the ranges:


	Low			Target			High

Debt securities		20	%		25	%		30	%
Equity securities		65	%		75	%		85	%

F-40

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The equity securities category includes both domestic and foreign equity securities. The target asset equity security allocation of U.S. and foreign securities is 60% and 15%, respectively.

The Company expects to contribute $40,000 to its pension plans and zero to its retirement health benefit plan in 2005.

The following benefits, which reflect expected future service, as appropriate, are expected to be paid:


				Retirement
		Pension		Health
		Benefits		Benefits

2005		$	25,499	$	1,412
2006			27,591		1,572
2007			29,766		1,785
2008			31,322		2,005
2009			32,936		2,231
Year 2010-2014			194,932		15,614

	Total	$	342,046	$	24,619

The Company and its subsidiaries have a defined contribution plan covering substantially all employees which provides benefits payable to participants on retirement or disability and to beneficiaries of participants in the event of the participant’s death. Amounts expensed by the Company were $25,318, $24,919 and $21,710 in 2004, 2003 and 2002, respectively. In addition, the Company recorded $12,212 in expenses related to the non-qualified plan.


19.	Deferred Policy Acquisition Costs

Information about deferred policy acquisition costs follows:


		December 31,

		2004			2003			2002

Beginning Balance		$	1,384,827		$	1,298,797		$	1,076,300
	Costs deferred		1,101,065			921,385			862,078
	Amortization		(841,096	)		(839,799	)		(638,298	)
	Other		2,858			4,444			(1,283	)

Ending Balance		$	1,647,654		$	1,384,827		$	1,298,797

F-41

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)


20.	Goodwill and VOBA

Information about goodwill and VOBA follows:


		Goodwill for the Year Ended									VOBA for the Year Ended
		December 31,									December 31,

		2004			2003			2002			2004			2003			2002

Beginning Balance		$	828,523		$	834,138		$	2,089,704		$	191,929		$	215,245		$	308,933
	Acquisitions(Dispositions)		6,501			—			—			—			—			—
	Amortization, net of interest accrued		—			—			—			(21,472	)		(23,848	)		(93,712	)
	Impairment charge		—			—			(1,260,939	)		—			—			—
	Other(1)		(11,970	)		(5,615	)		5,373			206			532			24

Ending Balance		$	823,054		$	828,523		$	834,138		$	170,663		$	191,929		$	215,245


(1)	Other represents foreign currency translation and purchase price adjustments.

As prescribed under FAS 142, starting January 1, 2002, the Company has assigned goodwill to its reportable segments. Below is a rollforward of goodwill by reportable segment. This assignment of goodwill is performed only for FAS 142 impairment testing purposes.


								Employee
		Solutions			Health			Benefits			PreNeed			Consolidated

Balance at December 31, 2002		$	390,795		$	217,609		$	187,596		$	38,138		$	834,138

	Other(1)		(5,467	)		61			(1,178	)		969			(5,615	)

Balance at December 31, 2003			385,328			217,670			186,418			39,107			828,523

	Acquisitions (Dispositions)		(934	)		8,275			(840	)		—			6,501
	Other(1)		(1,887	)		(5,702	)		(500	)		(3,881	)		(11,970	)

Balance at December 31, 2004		$	382,507		$	220,243		$	185,078		$	35,226		$	823,054


(1)	Other represents foreign currency translation and purchase price adjustments.

Prior to January 1, 2002 goodwill was amortized over 20 years. Upon the adoption of FAS 142, amortization of goodwill ceased and the Company recognized a $1,260,939 impairment charge reflecting the cumulative effect of change in accounting principle.

As of December 31, 2004, the majority of the outstanding balance of VOBA is in the Company’s PreNeed segment. VOBA in the PreNeed segment assumes an interest rate ranging from 6.5% to 7.5%.

At December 31, 2004 the estimated amortization of VOBA for the next five years is as follows:


Year	Amount $

2005		18,944
2006		17,096
2007		15,488
2008		13,902
2009		12,470

F-42

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)


21.	Segment Information

The Company has five reportable segments, which are defined based on the nature of the products and services offered: Assurant Solutions, Assurant Health, Assurant Employee Benefits, Assurant Preneed, and Corporate and Other. Assurant Solutions provides credit insurance, including life, disability and unemployment, debt protection administration services, warranties and extended service contracts, creditor-placed homeowners insurance and manufactured housing homeowners insurance. Assurant Health provides individual, short-term and small group health insurance. Assurant Employee Benefits provides employee and employer paid dental, disability, and life insurance products and related services. Assurant Preneed provides life insurance policies and annuity products that provide benefits to fund pre-arranged funerals. Corporate and Other includes activities of the holding company, financing expenses, net realized gains (losses) on investments and interest income earned from short-term investments held. Corporate and Other also includes the amortization of deferred gains associated with the sales of FFG and LTC through reinsurance agreements.

The Company evaluates performance based on segment income after-tax excluding realized gains (losses) on investments. The Company determines reportable segments in a manner consistent with the way the Company organizes for purposes of making operating decisions and assessing performance. The accounting polices of the reportable segments are the same as those described in the summary of significant accounting policies. (See Note 2)

As of January 1, 2004, the Company changed the segment invested assets allocation methodology. Previously, the Company allocated a notional amount of invested assets to the segments primarily based on future policy benefits, claims and unearned premiums, and capital allocated to each segment. As of January 1, 2004, the Company primarily allocates invested assets based on the actual investment portfolios supporting the segments. This change resulted in an increase in investment income of $11,415, $4,096, and $3,413 in Assurant Health, Assurant Employee Benefits, and Assurant Preneed, respectively, with a decrease in investment income of $552 and $18,372 in Assurant Solutions and Corporate and Other, respectively, for the year ended December 31, 2004. The Company assigns net deferred acquisition costs, value of businesses acquired, reinsurance recoverables, and other assets and liabilities to the respective segments where those assets or liabilities originate.

In August 2003, the Company began to utilize derivative instruments in managing the PreNeed segment’s exposure to inflation risk. The derivative instrument, the CPI CAP, limits the inflation risk on certain policies to a maximum of 5% and has a notional amount of $454,000 amortizing to zero over 20 years. The CPI CAP does not qualify under GAAP as an effective hedge; therefore, it is marked-to-market on a quarterly basis and the accumulated gain or loss is recognized in the results of operations in fees and other income. As of December 31, 2004 and December 31, 2003, the CPI CAP included in other assets amounted to $9,850 and $8,800, respectively, and the income recorded in the results of operations totaled $1,050 and $100, respectively.

F-43

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The following tables summarize selected financial information by segment for the year ended and as of December 31, 2004, 2003 and 2002:


			Year Ended December 31, 2004

							Employee				Corporate &
			Solutions		Health		Benefits		PreNeed		Other			Consolidated

Revenues
	Net earned premiums and other considerations		$	2,448,641	$	2,231,298	$	1,276,812	$	526,120	$	—		$	6,482,871
	Net investment income			184,951		67,902		149,718		206,300		25,878			634,749
	Net realized gains on investments			—		—		—		—		24,308			24,308
	Amortization of deferred gain on disposal of businesses			—		—		—		—		57,632			57,632
	Loss on disposal of business			—		—		—		—		(9,232	)		(9,232	)
	Fees and other income			136,468		38,708		29,306		6,810		1,844			213,136

		Total revenues		2,770,060		2,337,908		1,455,836		739,230		100,430			7,403,464
Benefits, losses and expenses
	Policyholder benefits			935,431		1,422,783		950,235		531,320		—			3,839,769
	Amortization of deferred acquisition costs and value of business acquired			695,559		37,602		15,700		113,707		—			862,568
	Underwriting, general and administrative expenses			955,593		637,305		394,037		42,779		76,904			2,106,618
	Interest expense			—		—		—		—		56,418			56,418
	Distributions on mandatorily redeemable preferred securities			—		—		—		—		2,163			2,163

		Total benefits, losses and expenses		2,586,583		2,097,690		1,359,972		687,806		135,485			6,867,536

F-44

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)


				Year Ended December 31, 2004

								Employee				Corporate &
				Solutions		Health		Benefits		PreNeed		Other			Consolidated

Segment income (loss) before income tax					183,477		240,218		95,864		51,424		(35,055	)		535,928
	Income taxes				57,319		81,931		33,654		17,189		(4,725	)		185,368

Segment income (loss) after tax				$	126,158	$	158,287	$	62,210	$	34,235	$	(30,330	)	$	350,560

Net income															$	350,560

Segment Assets:

		Segments assets, excluding goodwill		$	7,189,563	$	1,706,024	$	2,703,990	$	4,060,240	$	8,021,025			23,680,842

		Goodwill														823,054

			Total assets												$	24,503,896

F-45

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)


					Year Ended December 31, 2003

									Employee				Corporate &
					Solutions		Health		Benefits		PreNeed		Other			Consolidated

Revenues
	Net earned premiums and other considerations				$	2,361,815	$	2,009,248	$	1,256,430	$	529,279	$	—		$	6,156,772
	Net investment income					186,850		49,430		139,956		188,224		42,853			607,313
	Net realized gains on investments					—		—		—		—		1,868			1,868
	Amortization of deferred gain on disposal of businesses					—		—		—		—		68,277			68,277
	Fees and other income					129,482		32,255		53,793		5,315		11,138			231,983

			Total revenues			2,678,147		2,090,933		1,450,179		722,818		124,136			7,066,213
Benefits, losses and expenses
	Policyholder benefits					899,229		1,317,046		920,948		520,540		—			3,657,763
	Amortization of deferred acquisition costs and value of business acquired					677,312		71,295		9,656		105,384		—			863,647
	Underwriting, general and administrative expenses					912,888		517,988		423,536		41,558		69,521			1,965,491
	Interest expense and distributions on preferred securities of subsidiary trusts					—		—		—		—		114,133			114,133
	Interest premium on redemption of mandatorily redeemable preferred securities					—		—		—		—		205,822			205,822

			Total benefits, losses and expenses			2,489,429		1,906,329		1,354,140		667,482		389,476			6,806,856

Segment income (loss) before income tax						188,718		184,604		96,039		55,336		(265,340	)		259,357
	Income taxes					55,529		63,591		34,472		19,314		(99,201	)		73,705

Segment income (loss) after tax					$	133,189	$	121,013	$	61,567	$	36,022	$	(166,139	)	$	185,652

Net income																$	185,652

Segment Assets:

		Segments assets, excluding goodwill			$	6,795,991	$	1,129,614	$	2,412,924	$	3,718,354	$	9,174,610			23,231,493

		Goodwill															828,523

				Total assets												$	24,060,016

F-46

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)


					Year Ended December 31, 2002

									Employee				Corporate &
					Solutions		Health		Benefits		PreNeed		Other			Consolidated

Revenues
	Net earned premiums and other considerations				$	2,077,277	$	1,833,656	$	1,232,942	$	537,721	$	—		$	5,681,596
	Net investment income					205,037		55,268		147,722		183,634		40,167			631,828
	Net realized losses on investments					—		—		—		—		(118,372	)		(118,372	)
	Amortization of deferred gain on disposal of businesses					—		—		—		—		79,801			79,801
	Gain on disposal of businesses					—		—		—		—		10,672			10,672
	Fees and other income					118,949		22,716		74,324		5,123		25,563			246,675

				Total revenues		2,401,263		1,911,640		1,454,988		726,478		37,831			6,532,200
Benefits, losses and expenses
	Policyholder benefits					755,140		1,222,049		944,593		513,393		—			3,435,175
	Amortization of deferred acquisition costs and value of business acquired					567,622		64,029		2,381		96,550		1,428			732,010
	Underwriting, general and administrative expenses					881,564		482,057		419,849		39,934		52,818			1,876,222
	Distributions on mandatorily redeemable preferred securities					—		—		—		—		118,396			118,396

				Total benefits, losses an expenses		2,204,326		1,768,135		1,366,823		649,877		172,642			6,161,803

Segment income (loss) before income tax						196,937		143,505		88,165		76,601		(134,811	)		370,397
	Income taxes					64,782		49,059		31,048		26,943		(61,175	)		110,657

Segment income (loss) after tax					$	132,155	$	94,446	$	57,117	$	49,658	$	(73,636	)	$	259,740

	Cumulative effect of change in accounting principle																(1,260,939	)

Net (loss)																$	(1,001,199	)

Segment Assets:

		Segments assets, excluding goodwill			$	6,916,173	$	1,058,935	$	2,432,411	$	3,418,977	$	7,973,835		$	21,800,331

		Goodwill															834,138

			Total assets													$	22,634,469

F-47

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The Company operates primarily in the United States and Canada. The following table summarizes selected financial information by geographic location for the years ended or at December 31:


				Long-lived
Location		Revenues		Assets

2004
United States		$	7,058,825	$	268,229
Foreign			344,639		8,859

	Total	$	7,403,464	$	277,088

2003
United States		$	6,762,764	$	274,230
Foreign			303,449		9,532

	Total	$	7,066,213	$	283,762

2002
United States		$	6,335,645	$	245,936
Foreign			196,555		4,849

	Total	$	6,532,200	$	250,785

Revenue is based in the country where the product was sold and long-lived assets are based on the physical location of those assets. The Company has no reportable major customers.


22.	Incentive Plans


	*Assurant Appreciation Incentive Rights Plan (“AAIR Plan”)*

Since January 1, 1999, the Company has maintained the Assurant Appreciation Incentive Rights Plan (formerly the Fortis Appreciation Incentive Rights Plan), which provides key employees and directors with the right to receive long-term incentive cash compensation based on the appreciation in value of incentive units of the Company and incentive units of each of its operating business segments. The AAIR Plan is administered by a committee appointed by the Company’s board of directors.

The Company accounts for the AAIR Plan as a variable plan in accordance with the provisions of APB 25 and its interpretations. Therefore, compensation expense is recognized based on the intrinsic value method.

Employees of Assurant, Inc. receive 75% of their award value in Assurant, Inc. incentive rights and the remaining 25% in equal portions of incentive rights from the business segments. Segment participants receive 75% of their award value from their own particular business segment and 25% from Assurant, Inc.

The incentive rights vest over a three-year period from the date of grant and are exercisable for a period of 7 years from the date the rights are fully vested. Unexercised vested incentive rights are exercised automatically following the tenth anniversary of the date of grant. If upon expiration of the award the strike price is below the exercise price, then the award is automatically forfeited.

Upon the closing of the IPO, the AAIR Plan was amended to provide for the cash-out and replacement of Assurant, Inc. incentive rights with stock appreciation rights on the Assurant common stock. The business segment rights outstanding under the plan were not changed or effected. The conversion of outstanding Assurant, Inc. incentive rights occurred as described in this paragraph. The Assurant, Inc. incentive rights were valued as of December 31, 2003 using a special valuation method, as follows. The measurement value of

F-48

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

each Assurant, Inc. incentive right as of December 31, 2002, was adjusted to reflect dividends paid by Assurant, Inc., consistent with past practices; such adjusted value was then multiplied by the arithmetic average of the change during calendar year 2003 in the Dow Jones Life Insurance Index, the Dow Jones Property Casualty Index, and the Dow Jones Healthcare Providers Index; and the result became the measurement value of Assurant, Inc. incentive rights as of December 31, 2003.

On January 18, 2004, each Assurant, Inc. incentive right then outstanding under the plan was cashed out for a cash payment equal to the difference, if any, between the measurement value of the Assurant, Inc. incentive rights as of December 31^st immediately preceeding the date of grant, and the measurement value of that right determined as of December 31, 2003, pursuant to the special valuation. Each outstanding Assurant, Inc. incentive right, whether or not vested, was cancelled effective as of the date it was cashed out. Following the cash-out and cancellation of Assurant, Inc. incentive rights, Assurant granted to each participant whose rights were cashed out a number of stock appreciation rights on Assurant’s common stock (referred to as “replacement rights”). The number of replacement rights granted to a participant was equal (1) the measurement value of the participant’s cashed-out Assurant, Inc. incentive rights, divided by (2) the IPO price of $22 a share. Each replacement right that replaced a vested cashed-out right was vested immediately, and each replacement right that replaced a non-vested cashed-out right will become vested on the vesting date for the corresponding cashed-out right, but no replacement right, whether or not vested, may be exercised sooner than one year from the closing date of the IPO. After that waiting period, each replacement right is exercisable for the remaining term of the corresponding cancelled right.

The value of each Assurant, Inc. stock appreciation right is based on the Assurant common stock price. The value of each business segment right is based on an independent valuation of the Company performed by a qualified appraiser. Each year, the appraiser determines a fair market value for the individual business segments. Based on this valuation, “phantom share prices” are established for each business segment. These share prices are calculated by dividing the market value of a business segment by the number of outstanding “phantom shares” in that segment.

The Assurant, Inc. stock appreciation right price and business segment phantom share price established for a given grant year become the strike price for that year and the exercise price for prior grant years. When the share price increases above the strike price, the rights accrue intrinsic value that will be paid in cash when exercised.

The Company recognized $31,503, $27,072 and $19,570 of compensation expense for the AAIR Plan in 2004, 2003, and 2002, respectively.


	*Stock Option Plan*

In contemplation of the IPO, the Company’s Stock Option Plan, which was based indirectly on the performance and value of the stock of Fortis, was terminated effective as of September 22, 2003. All stock options thereunder were cancelled in exchange for a payment of the fair value of such options, as determined by an independent third party. Payments totaling $2,237 were made in the fourth quarter of 2003. There is no further obligation associated with the Company’s Stock Option Plan.


	*AIP*

The AIP, provides key employees the ability to exchange a portion of their compensation for options to purchase certain third-party mutual funds. The plan became effective as of January 1, 1999 and is administered by the Company’s Senior Vice President-Compensation and Benefits, who is referred to as the administrator. Under the AIP, a participant may exchange all or a portion of his or her eligible compensation for a specific number of options under the plan. Each option represents the right to purchase shares of Company designated third-party mutual funds, as selected by the participant. Each option is fully vested and

F-49

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

exercisable on the grant date. Options may not be exercised more than twice in any calendar year, except with the consent of the administrator. For most options, the exercise period generally will expire 120 months after the participant’s death, disability or retirement or 60 months after the participant’s termination of employment for any other reason. Until the options are exercised, a participant may instruct the administrator to exchange some or all of the options to purchase different underlying mutual fund units. Employee compensation exchanged for options is included as compensation expense prior to the exchange. Subsequent to the exchange, the Company accounts for invested assets in accordance with Financial Accounting Standard 115,Accounting for Certain Investments in Debt and Equity Securities, and as such, the Company marks-to-market the AIP investment balances on a quarterly basis. This quarterly mark-to-market adjustment equally impacts the AIP investment and the AIP liability balance. When options are exercised, the investment and liability balances are reduced accordingly. The amounts included in other investments and other liabilities were $93,246 and $57,451 at December 31, 2004 and 2003, respectively. See Note 26 for subsequent amendments to the AIP Plan.


23.	Other Comprehensive Income (Loss)

The Company’s components of other comprehensive income (loss) net of tax at December 31 are as follows:


	Foreign Currency					Pension			Accumulated Other
	Translation			Unrealized Gains on		Under-			Comprehensive
	Adjustment			Securities		Funding			Income

Balance at December 31, 2001	$	(7,858	)	$	106,062	$	—		$	98,204
Activity in 2002		8,332			173,699		(35,250	)		146,781

Balance at December 31, 2002		474			279,761		(35,250	)		244,985
Activity in 2003		21,767			51,775		—			73,542

Balance at December 31, 2003		22,241			331,536		(35,250	)		318,527
Activity in 2004		18,595			3,362		(2,321	)		19,636

Balance at December 31, 2004	$	40,836		$	334,898	$	(37,571	)	$	338,163


24.	Related Party Transactions

In the ordinary course of business, the Company has entered into a number of agreements with Fortis.

Fortis maintained a $1,000,000 commercial paper facility that prior to the IPO the Company had been able to access (via intercompany loans) for up to $750,000. The Company has used the commercial paper facility to cover any cash shortfalls, which may occur from time to time. In mid-December 2003, the Company used the commercial paper facility in the amount of $74,991 for three days to cover a cash shortfall in the early extinguishment of the Mandatorily Redeemable Preferred Securities. The Company had no outstanding intercompany loans with Fortis related to this commercial paper facility at year-end December 31, 2003 and no longer has access to this facility.

During 2003 and 2002, the Company paid $644 and $749, respectively, to Fortis for costs representing salary, benefits and other expenses of a director of the Company, who was then an employee of a Fortis subsidiary, and his support staff. The Company discontinued these payments as of October 3, 2003.

The other related party transactions are disclosed in Notes 1, 8, 11, 12, and 26.

F-50

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)


25.	Quarterly Results of Operations (Unaudited)

The Company’s quarterly results of operations for the years ended December 31, 2004 and 2003 are summarized in the tables below:


		Three Month Periods Ended

		March 31		June 30		September 30		December 31

2004
Total revenues		$	1,857,560	$	1,837,349	$	1,831,860	$	1,876,695
Income (loss) before income taxes			142,761		144,044		109,254		139,869
Net income (loss)			94,378		95,210		74,844		86,128
Basic and Diluted per share data:
	Income (loss) before income taxes	$	1.10	$	1.01	$	0.77	$	1.00
	Net income (loss)	$	0.73	$	0.67	$	0.53	$	0.61


		Three Month Periods Ended

		March 31		June 30		September 30		December 31

2003
Total revenues		$	1,731,740	$	1,722,601	$	1,775,577	$	1,836,295
Income (loss) before income taxes			110,367		137,606		145,776		(134,392	)(1)
Net income (loss)			73,237		90,650		99,398		(77,633	)
Basic and Diluted per share data:
	Income (loss) before income taxes	$	1.01	$	1.26	$	1.33	$	(1.23	)
	Net income (loss)	$	0.67	$	0.83	$	0.91	$	(0.71	)


(1)	Includes pre-tax interest premium on redemption of mandatorily redeemable preferred securities of $205,822.


26.	Subsequent Events

See Note 1 for a discussion of the secondary offering.

On February 4, 2005, the Assurant Solutions segment was awarded $70,730 in damages by a Tennessee state court jury in a contract dispute with Progeny Marketing Innovations, a wholly-owned subsidiary of Cendant Corporation. The verdict included $8,000 for a violation of the Tennessee Consumer Protection Act, $15,120 for breach of contract, $42,610 for breach of fiduciary duty and $5,000 in punitive damages. Cendant is entitled to an offset of approximately $14,300, and Assurant Solutions has additional claims exceeding $25,000 for treble damages under the Consumer Protection Act, interest, and attorneys’ fees and expenses. These issues have yet to be decided in post-trial motions. As a result, the total amount of the verdict has not yet been determined. In addition, the verdict is subject to appeal. The Company has not recorded any amounts in the financials statements as a result of this verdict.

Effective March 1, 2005, the Company amended the AIP and created the Assurant Deferred Compensation Plan (“ADCP”) in order to comply with the Jobs Act. The ADCP continues to provide key employees the ability to defer a portion of their compensation consistent with the Jobs Act definition of eligible compensation and distribution requirements. Except for the definition of compensation eligible for deferral and the timing of distributions, the terms of the ADCP are materially the same as the AIP as described in Note 22.

F-51

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)


27.	Commitments and Contingencies

The Company and its subsidiaries lease office space and equipment under operating lease arrangements. Certain facility leases contain escalation clauses based on increases in the lessors’ operating expenses. At December 31, 2004, the aggregate future minimum lease payment under operating lease agreements that have initial or non-cancelable terms in excess of one year are:


	2005	$	34,924
	2006		28,728
	2007		22,804
	2008		20,158
	2009		17,178
Thereafter			28,036

Total minimum future lease payments		$	151,828

Rent expense was $37,712, $36,863 and $39,812 for 2004, 2003 and 2002, respectively.

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. The Company had approximately $65,607 and $117,000 of letters of credit outstanding as of December 31, 2004 and 2003, respectively.

The Company is regularly involved in litigation in the ordinary course of business, both as a defendant and as a plaintiff. The Company may from time to time be subject to a variety of legal and regulatory actions relating to the Company’s current and past business operations. While the Company cannot predict the outcome of any pending or future litigation, examination or investigation, the Company does not believe that any pending matter will have a material adverse effect on the Company’s financial condition or results of operations.

The Solutions segment is subject to a number of pending actions, primarily in the State of Mississippi, many of which allege that the Company’s credit insurance products were packaged and sold with lenders’ products without buyer consent. The judicial climate in Mississippi is such that the outcome of these cases is extremely unpredictable. The Company has been advised by legal counsel that the Company has meritorious defenses to all claims being asserted against the Company. The Company believes, based on information currently available, that the amounts accrued are adequate.

On October 1, 2003, a grand jury in Mower County, Minnesota, issued an indictment of American Bankers Insurance Company (“ABIC”), part of the Solutions segment, and two of its officers. The indictment alleged that ABIC and its two named corporate officers each violated the Minnesota Fair Campaign Practices Act in connection with two contributions by ABIC to the Republican National State Election Committee totaling $15. On April 5, 2004, the prosecuting authorities voluntarily dismissed all charges against ABIC and the two officers. ABIC, in turn, agreed to reimburse Mower County for costs of investigation and prosecution; these costs are not material to the financial statements.

In addition, another part of the Solutions segment, American Reliable Insurance Company (“ARIC”), participated in certain excess of loss reinsurance programs in the London market and, as a result, reinsured certain personal accident, ransom and kidnap insurance risks from 1995 to 1997. ARIC and a foreign affiliate ceded a portion of these risks to other reinsurers (retrocessionaires). ARIC ceased reinsuring such business in 1997. However, certain risks continued beyond 1997 due to the nature of the reinsurance contracts written. ARIC and some of the other reinsurers involved in the programs are seeking to avoid certain treaties on various grounds, including material misrepresentation and non-disclosure by the ceding companies and

F-52

Assurant, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

intermediaries involved in the programs. Similarly, some of the retrocessionaires are seeking avoidance of certain treaties with ARIC and the other reinsurers and some reinsureds are seeking collection of disputed balances under some of the treaties. The disputes generally involve multiple layers of reinsurance, and allegations that the reinsurance programs involved interrelated claims “spirals” devised to disproportionately pass claims losses to higher-level reinsurance layers. Many of the companies involved in these programs, including ARIC, are currently involved in negotiations, arbitration and/or litigation between multiple layers of retrocessionaires, reinsurers, ceding companies and intermediaries, including brokers, in an effort to resolve these disputes. Many of those disputes relating to the 1995 program year, including those involving ARIC, were settled on December 3, 2003. Loss accruals previously established relating to the 1995 program year were adequate. However, the Company’s exposure under the 1995 program year was less significant than the exposure remaining under the 1996 and 1997 program years. In addition, disputes with two affiliated reinsurers involved in the 1996 and 1997 program years were settled by a commutation agreement. Loss accruals previously established relating to this business were adequate. The Company believes, based on information currently available, that the amounts accrued for currently outstanding disputes are adequate. This loss accrual is management’s best estimate. However, the inherent uncertainty of arbitrations and lawsuits, including the uncertainty of estimating whether any settlements the Company may enter into in the future would be on favorable terms, makes it difficult to predict the outcomes with certainty.

The Company was notified on August 26, 2004 that one of our employees is being investigated by the criminal division of the Internal Revenue Service (“IRS”) for responses he made to questions he was asked by the IRS relating to an approximately $18,000 tax reserve taken by us in 1999. At this stage, it would be speculative to predict the outcome of this investigation. However, it could result in a fine assessed against the employee and the Company, negative publicity for the Company or more serious sanctions.

F-53

Assurant, Inc. and Subsidiaries

at December 31, 2004

Schedule I — Summary of Investments Other Than Investments in Related Parties


								Amount at
								Which Shown
				Amortized				in Balance
				Cost		Fair Value		Sheet

				(In thousands)
Fixed maturities
	Bonds:
		United States Government and government agencies and authorities		$	1,498,473	$	1,524,605	$	1,524,605
		States, municipalities and political subdivisions			197,730		217,865		217,865
		Foreign governments			510,745		527,428		527,428
		Public utilities			1,003,349		1,082,724		1,082,724
		All other corporate bonds			5,470,133		5,825,316		5,825,316

			Total fixed maturities	$	8,680,430	$	9,177,938	$	9,177,938

Equity securities
	Common stocks:
		Public utilities		$	13	$	12	$	12
		Banks, trusts and insurance companies			1,037		1,180		1,180
		Industrial, miscellaneous and all other			840		876		876
	Non-Redeemable Preferred Stocks:
		Non-sinking fund preferred stocks			511,058		524,883		524,883

			Total equity securities	$	512,948	$	526,951	$	526,951

Commercial mortgage loans on real estate, at amortized cost				$	1,053,872	$	1,180,402	$	1,053,872
Policy loans					64,886		64,886		64,886
Short-term investments					300,093		300,093		300,093
Collateral held under securities lending					535,331		535,331		535,331
Other investments					468,604		549,361		488,975

			Total investments	$	11,616,164	$	12,334,962	$	12,148,046

Assurant, Inc. and Subsidiaries

Schedule II — Condensed Balance Sheet (Parent Only)


			December 31,

			2004			2003

			(In thousands except number
			of shares)
ASSETS
Investments:
	Equity investment in subsidiaries		$	4,150,391		$	4,069,228
	Fixed maturities (amortized cost — $68,245)			68,321			—
	Short-term investments			11			—
	Other investments			108,490			66,994

		Total investments		4,327,213			4,136,222
Cash and cash equivalents				315,152			463,234
Receivable from subsidiaries, net				6,077			29,507
Income tax receivable				4,067			76,663
Other assets				316,628			262,064

		Total assets	$	4,969,137		$	4,967,690


LIABILITIES
Accounts payable and other liabilities			$	337,935		$	365,203
Debt				971,611			1,750,000
Mandatorily redeemable preferred securities				—			196,224
Mandatorily redeemable preferred stock				24,160			24,160

		Total liabilities	$	1,333,706		$	2,335,587

Commitments and Contingencies			$	—		$	—

Stockholders’ equity
Common stock, par value $.01 per share, 800,000,000 shares authorized, 142,263,299 and 109,222,276 shares issued, 139,766,177 and 109,222,276 shares outstanding at December 31, 2004 and 2003, respectively			$	1,423		$	1,092
Additional paid-in capital				2,790,476			2,063,763
Retained earnings				569,605			248,721
Unamortized restricted stock compensation; 51,996 shares				(608	)		—
Accumulated other comprehensive income				338,163			318,527
Treasury stock, at cost; 2,445,126 shares				(63,628	)		—

Total stockholders’ equity				3,635,431			2,632,103

		Total liabilities and stockholders’ equity	$	4,969,137		$	4,967,690

Assurant, Inc. and Subsidiaries

Schedule II — Condensed Statement of Operations (Parent Only)


		Years Ended December 31,

		2004			2003			2002

		(In thousands except number of shares and
		per share amounts)
Revenues
Cash dividend income from consolidated subsidiaries		$	361,730		$	99,500		$	186,550
Net investment income			6,944			74,281			81,629
Fees and other income			14,120			11,638			17,570

	Total revenues		382,794			185,419			285,749
Expenses
General and administrative expenses			67,780			52,755			32,696
Distributions on mandatorily redeemable preferred securities and interest expense			58,581			114,133			118,396
Interest penalties on redemption of mandatorily redeemable preferred securities			—			205,822			—

	Total expenses		126,361			372,710			151,092
Income/(loss) before income taxes and equity in undistributed net (loss) income of consolidated subsidiaries			256,433			(187,291	)		134,657
Income tax benefit			(38,604	)		(105,298	)		(16,390	)

	Net income/(loss) before equity in undistributed net income/(loss) of subsidiaries		295,037			(81,993	)		151,047
Equity in undistributed net income (loss) of consolidated subsidiaries			55,523			267,645			(1,152,246	)

	Net income/(loss)	$	350,560		$	185,652		$	(1,001,199	)

Assurant, Inc. and Subsidiaries

Schedule II — Condensed Cash Flows (Parent Only)


		Years Ended December 31,

		2004			2003			2002

		(In thousands except number of shares and
		per share amounts)
Operating Activities
Net (loss) income		$	350,560		$	185,652		$	(1,001,199	)
Adjustments to reconcile net income to net cash provided by operating activities:
	Equity in undistributed net (income) loss on consolidated subsidiaries		(55,523	)		(267,645	)		1,152,246
	Change in receivables		22,028			53,154			161,739
	Depreciation and amortization		23,856			16,850			21,605
	Change in income taxes		64,608			(96,113	)		(97,923	)
	Change in accrued interest		(47,693	)		51,078			1,281
	Change in accounts payable		16,854			40,345			11,131
	Change in other invested assets		(41,496	)		—			—
	Net realized losses on investments		4,000			—			—
	Other		(8,685	)		6,798			2,780

Net cash provided by (used in) operating activities		$	328,509		$	(9,881	)	$	251,660

Investing Activities
Capital contributed to subsidiaries		$	(8,529	)	$	(821,264	)	$	(136,422	)
Net purchase of securities			(68,279	)		—			—
Purchase of subsidiaries			(16,000	)		—			—
Surplus note receivable			—			770,000			—
Other			(42,228	)		(31,996	)		(39,306	)

Net cash used in investing activities		$	(135,036	)	$	(83,260	)	$	(175,728	)

Financing Activities
Repayment of mandatorily redeemable preferred securities		$	(196,224	)	$	(1,249,850	)	$	—
Redemption of mandatorily redeemable preferred stock			—			(500	)		(500	)
Issuance of debt from Fortis			—			74,991			—
Repayment of debt from Fortis			—			(74,991	)		—
Issuance of debt			971,537			2,400,000			—
Repayment of debt			(1,750,000	)		(650,000	)		—
Issuance of common stock			725,491			—			—
Purchase of treasury stock			(63,628	)		—			—
Dividends paid			(29,676	)		(181,187	)		(41,876	)
Other			945			(963	)		(1,052	)

Net cash (used in) provided by financing activities		$	(341,555	)	$	317,500		$	(43,428	)

Change in cash and cash equivalents			(148,082	)		224,359			32,504
Cash and cash equivalents at beginning of period			463,234			238,875			206,371

Cash and cash equivalents at end of period		$	315,152		$	463,234		$	238,875

Assurant, Inc. and Subsidiaries

for the years ended December 31, 2004, 2003 & 2002

Schedule III — Supplementary Insurance Information


														Benefits Claims,						Property and
				Future Policy										Losses and		Amortization of				Casualty
		Deferred		Benefits and		Unearned		Claims and		Premium		Net Investment		Settlement		Deferred Policy		Other Operating		Premiums
Segment		Acquisition Cost		Expenses		Premiums		Benefits Payable		Revenue		Income		Expenses		Acquisition Costs		Expenses		Written

		(In thousands)
2004
	Solutions	$	1,360,108	$	320,489	$	3,130,558	$	1,030,636	$	2,448,641	$	184,951	$	935,431	$	691,335	$	959,817	$	1,370,831
	Employee Benefits		19,576		350,668		18,610		1,517,713		1,276,812		149,718		950,235		15,700		394,037
	Health		105,409		388,902		158,290		458,184		2,231,298		67,902		1,422,783		37,602		637,305
	Preneed		162,561		3,214,106		4,405		16,299		526,120		206,300		531,320		96,459		60,027
	Corporate and Other		—		2,138,523		42,436		592,117		—		25,878		—		—		76,904

Total Segments		$	1,647,654	$	6,412,688	$	3,354,299	$	3,614,949	$	6,482,871	$	634,749	$	3,839,769	$	841,096	$	2,128,090	$	1,370,831

2003
	Solutions	$	1,069,289	$	321,578	$	2,933,601	$	1,044,856	$	2,361,815	$	186,850	$	899,229	$	672,447	$	917,753	$	1,226,565
	Employee Benefits		11,488		—		23,525		1,800,595		1,256,430		139,956		920,948		9,656		423,536		—
	Health		141,396		197,919		124,148		423,253		2,009,248		49,430		1,317,046		71,295		517,988		—
	Preneed		161,067		2,971,388		4,657		19,529		529,279		188,224		520,540		86,401		60,541		—
	Corporate and Other		1,587		2,744,255		47,916		183,334		—		42,853		—		—		69,521		—

Total Segments		$	1,384,827	$	6,235,140	$	3,133,847	$	3,471,567	$	6,156,772	$	607,313	$	3,657,763	$	839,799	$	1,989,339	$	1,226,565

2002
	Solutions	$	997,393	$	334,039	$	3,013,731	$	1,036,351	$	2,077,277	$	205,037	$	755,140	$	490,090	$	959,096	$	1,109,819
	Employee Benefits		6,559		—		22,198		1,791,680		1,232,942		147,722		944,593		2,381		419,849		—
	Health		158,142		160,484		118,432		376,678		1,833,656		55,268		1,222,049		64,029		482,057		—
	Preneed		136,703		2,693,122		4,775		19,897		537,721		183,634		513,393		80,370		56,114		—
	Corporate and Other		—		2,619,202		48,500		149,534		—		40,167		—		1,428		52,818		—

Total Segments		$	1,298,797	$	5,806,847	$	3,207,636	$	3,374,140	$	5,681,596	$	631,828	$	3,435,175	$	638,298	$	1,969,934	$	1,109,819

Assurant, Inc. and Subsidiaries

for the year ended December 31, 2004

Schedule IV — Reinsurance


						Assumed				Percentage of
				Ceded to Other		from Other				Amount
		Gross Amount		Companies		Companies		Net Amount		Assumed to Net

		(In thousands)
Life Insurance in Force		$	161,556,309	$	49,955,772	$	4,895,593	$	116,496,130		4.2	%
Premiums:
	Life insurance		1,252,326		549,968		70,330		772,688		9.1	%
	Accident and health insurance		4,650,672		827,090		193,057		4,016,639		4.8	%
	Property and liability insurance		2,462,763		897,117		127,898		1,693,544		7.6	%

	Total premiums	$	8,365,761	$	2,274,175	$	391,285	$	6,482,871		6.0	%

Benefits:
	Life insurance		1,386,210		850,263		51,029		586,976		8.7	%
	Accident and health insurance		2,606,373		259,079		163,781		2,511,075		6.5	%
	Property and liability insurance		1,086,893		442,117		96,942		741,718		13.1	%

	Total benefits	$	5,079,476	$	1,551,459	$	311,752	$	3,839,769		8.1	%

Assurant, Inc. and Subsidiaries

for the year ended December 31, 2003

Schedule IV — Reinsurance


						Assumed				Percentage of
				Ceded to Other		from Other				Amount
		Gross Amount		Companies		Companies		Net Amount		Assumed to Net

		(In thousands)
Life Insurance in Force		$	169,062,847	$	56,441,995	$	724,377	$	113,345,229		0.6	%
Premiums:
	Life insurance		1,351,698		637,049		57,459		772,108		7.4	%
	Accident and health insurance		4,502,527		949,336		240,063		3,793,254		6.3	%
	Property and liability insurance		2,263,389		832,416		160,437		1,591,410		10.1	%

	Total premiums	$	8,117,614	$	2,418,801	$	457,959	$	6,156,772		7.4	%

Benefits:
	Life insurance		1,338,138		859,514		22,702		501,326		4.5	%
	Accident and health insurance		2,686,337		343,981		103,261		2,445,617		4.2	%
	Property and liability insurance		928,360		407,054		189,514		710,820		26.7	%

	Total benefits	$	4,952,835	$	1,610,549	$	315,477	$	3,657,763		8.6	%

Assurant, Inc. and Subsidiaries

for the year ended December 31, 2002

Schedule IV — Reinsurance


						Assumed				Percentage of
				Ceded to Other		from Other				Amount
		Gross Amount		Companies		Companies		Net Amount		Assumed to Net

		(In thousands)
Life Insurance in Force		$	190,535,470	$	67,628,124	$	2,448,687	$	125,356,033		2.0	%
Premiums:
	Life insurance		1,792,276		796,026		100,532		1,096,782		9.2	%
	Accident and health insurance		4,065,768		1,046,245		268,211		3,287,734		8.2	%
	Property and liability insurance		1,955,494		763,336		104,922		1,297,080		8.1	%

	Total premiums	$	7,813,538	$	2,605,607	$	473,665	$	5,681,596		8.3	%

Benefits:
	Life insurance		1,754,586		1,036,256		123,395		841,725		14.7	%
	Accident and health insurance		2,343,568		356,745		105,979		2,092,802		5.1	%
	Property and liability insurance		705,911		358,393		153,130		500,648		30.6	%

	Total benefits	$	4,804,065	$	1,751,394	$	382,504	$	3,435,175		11.1	%

Assurant, Inc. and Subsidiaries

as of December 31, 2004, 2003 and 2002

Schedule V — Valuation and Qualifying Accounts


					Additions

			Balance at		Charged to		Charged to				Balance at
			Beginning of		Costs and		Other				End of
			Year		Expenses		Accounts		Deductions		Year

			(In thousands)
2004:
	Valuation allowance for mortgage loans on real estate		$	18,854	$	550	$	—	$	1,449	$	17,955
	Valuation allowance for uncollectible agents balances			28,449		474		—		6,978		21,945
	Valuation allowance for uncollectible accounts			867		2,569		—		563		2,873

		Total	$	48,170	$	3,593	$	—	$	8,990	$	42,773

2003:
	Valuation allowance for mortgage loans on real estate		$	19,106	$	495	$	—	$	747	$	18,854
	Valuation allowance for uncollectible agents balances			35,487		5,189		—		12,227		28,449
	Valuation allowance for uncollectible accounts			478		288		490		389		867

		Total	$	55,071	$	5,972	$	490	$	13,363	$	48,170

2002:
	Valuation allowance for mortgage loans on real estate		$	25,091	$	—	$	—	$	5,985	$	19,106
	Valuation allowance for uncollectible agents balances			30,929		6,488		—		1,930		35,487
	Valuation allowance for uncollectible accounts			1,232		276		55		1,085		478

		Total	$	57,252	$	6,764	$	55	$	9,000	$	55,071

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Assurant (AIZ) 10-K2004 FY Annual report

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