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Assurant, Inc.
28 Liberty Street
41st Floor
New York, NY 10005
T: 212-859-7000
assurant.com
We’re
Where You
Need Us Most
2019 ANNUAL REPORT
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ABOUT ASSURANT
Assurant, Inc. (NYSE: AIZ) is a leading global provider of lifestyle and housing
solutions that support, protect and connect major consumer purchases.
Anticipating the evolving needs of consumers, Assurant partners with the world’s
leading brands to develop innovative products and services and to deliver an
enhanced customer experience. A Fortune 500 company with a presence in
21 countries, Assurant offers mobile device solutions; extended service contracts;
vehicle protection services; pre-funded funeral insurance; renters insurance;
lender-placed homeowners insurance; and other specialty products.
2019 SUMMARY
$9.3 billion(1)
Total Revenue
$44.3 billion
Assets
$534
million(2)
Holding Company
Liquidity
~50%(3)
Total Shareholder Return,
Net Including
Investor Dividends
63%(4)
Shares Repurchased
Since IPO in 2004
This Annual Report contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.
Please see “Forward-Looking Statements” on page 2 of the Form 10-K included in this Annual Report.
(1) References to total revenue refer to net earned premiums, fees and other income.
(2) Holding company liquidity represents the portion of cash and other liquid marketable securities held at Assurant, Inc., which we
were not otherwise holding for a specific purpose as of the balance sheet date.
(3) Total shareholder return is the appreciation in the Company’s common stock plus dividend yield to stockholders.
(4) Shares repurchased since IPO in 2004 represents total shares repurchased divided by total shares issued since IPO in 2004.
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assurant/2019/ar/
Learn more about Assurant’s social
responsibility efforts with our latest
Social Responsibility report at
https://ir.assurant.com/our-story/
corporate-responsibility/default.aspx.
OTHER INFORMATION
INVESTOR INFORMATION
Suzanne Shepherd
Senior Vice President, Investor Relations
Assurant, Inc.
28 Liberty Street, 41st Floor
New York, NY 10005
212-859-7062
suzanne.shepherd@assurant.com
Sean Moshier
Director, Investor Relations
Assurant, Inc.
28 Liberty Street, 41st Floor
New York, NY 10005
212-859-5831
sean.moshier@assurant.com
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017
Telephone: 646-471-3000
Fax: 813-286-6000
www.pwc.com/us
SHAREHOLDER INQUIRIES
COMPUTERSHARE
462 South 4th Street
Suite 1600
Louisville, KY 40202
computershare.com
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Assurant strives to reduce
the risk and enhance the
experience of ownership
and renting, boosting
the confidence of more
than 300 million consumers
across the globe. Our clients
rely on us to safeguard the
things their customers buy.
And their customers rely
on Assurant to keep them
protected, connected and
supported when and where
they need us most.
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CO N N EC T E D L I V I N G
We’re at your fingertips
Today’s consumers expect to connect with each other seamlessly. That’s why our Connected Living
business is investing in new technology platforms as well as digital and data analytics to help people
finance, troubleshoot, replace or repair their mobile devices, smart home products, appliances and other
essentials. So when a customer loses a phone, breaks a screen, downloads a virus, can’t get things to
work or simply decides to upgrade, we’re just a click, tap or phone call away.
WAYS WE OUTPERFORMED IN 2019
53 million mobile devices connected
and protected
15% increase in covered mobile devices
58% year-over-year increase in
net operating income in Connected
Living business(1)
Extended contractual relationship with T-Mobile
and launched Premium Handset Protection
program for Metro by T-Mobile
Continued mobile protection program growth
in Japan with KDDI and launched a partnership
with Rakuten.
Acquired Cell Phone Repair, one of the largest
franchisors of mobile device repair stores with
more than 700 locations globally
(1) Net operating income for Connected Living business is equal to its GAAP net income.
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We’re under the hood
From the moment a customer drives a car off the lot, Assurant is there with an array of products
that keep consumers protected from expenses related to car ownership. And we’re there for our
clients, too. From underwriting services, claims and administration services to training support,
our solutions help drive the overall performance of our Global Auto business. Our 58-year track
record in finance and insurance as well as our 2018 acquisition of The Warranty Group has enabled
us to work directly with the largest dealer groups and original equipment manufacturers in the
world. Assurant provides the innovative solutions, support and integrated capabilities that help
our clients better serve their customers, which includes addressing the digital trends now
impacting the purchase experience.
Assurant is developing digital platforms that guide consumers through the steps of private party
and online sales, meeting digital buyers where they are.
GLOBAL AUTO
WAYS WE OUTPERFORMED IN 2019
47 million vehicles kept
running smoothly
7% increase in vehicles
covered globally
50+ years in the vehicle
protection business
Piloted Pocket Drive, a next-generation connected
care device that communicates data to drivers,
guiding them through their vehicle’s features,
diagnosing any problems and directing them
to find help when they need it
Launched pilot of Virtual Inspection, an innovative
digital solution for vehicle claim inspections, which
reduces wait times in repair shops
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We’re at your front door
As insurance companies increase their underwriting criteria and pricing in locations where people
need these insurance products the most, many homeowners are having trouble finding coverage.
When people are faced with disasters or economic hardships, our mortgage protection and flood
insurance services are there.
Renters rely on Assurant, too. Our leading position in Multifamily Housing is based on the unique
advantages we provide for our clients and their customers. An integrated suite of capabilities
allows us to absorb many of the responsibilities and risks faced by on-site leasing staffs at
multifamily properties. These turnkey processes help ensure that every resident has a policy
and a security deposit. So, if a resident’s bathtub overflows and causes damage to the unit below,
or they move out without paying rent, our products take the burden of resolution off of the
property management company’s shoulders.
Assurant’s solid relationships with mortgage servicers, lenders, property management companies
and leasing agents mean that we can be there for homeowners and renters when and where they
need us most.
M U LT I FA M I LY H O US I N G
FLOO D
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Assurant, Inc.
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FLOO D
WAYS WE OUTPERFORMED IN 2019
2.2 million rental units protected
from fire, vandalism and other losses
465,000 manufactured homeowners
guarded against loss
16.7% return on equity in
Global Housing(1)
Completed multiple major client conversions to
SingleSourceProcessing in 2019, a next-generation
tracking platform that consolidates customers’ loan,
property and policy information all in one place
Our Point of Lease program embeds the
insurance purchase into the leasing process,
ensuring that premiums are paid along with
the rent
(1) Global Housing return on equity equals Global Housing net operating income which equals GAAP net income divided by average stockholder’s equity.
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We’re there in your time of need
A life well-lived includes easing the burden for family members left behind. We help people plan and pay
for end-of-life arrangements ahead of time. That way, their wishes are respected and their family is freed
from making big decisions at a difficult time, so they can focus on caring for one another.
WAYS WE OUTPERFORMED IN 2019
2 million families prepared for the
expense of end-of-life arrangements
12.2% return on equity in Global Preneed(1)
$1.0 billion in face sales
Launched Assurant Executor Assist, an online tool
that guides executors through the complexities
of managing an estate
(1) Global Preneed return on equity equals Global Preneed net operating income which equals GAAP net income divided by average stockholder’s equity.
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Letter to
Shareholders
ALAN COLBERG
PRESIDENT AND CEO
Assurant: Where You Need Us to Be
Corporations have a purpose — a reason
to exist and to fulfill the needs of many.
For Assurant, it always has been about the
plurality of the stakeholders we serve.
Gandhi once said of purpose, “…the best
way to find yourself is to lose yourself in
the service of others…”
Standing by this belief, this year on behalf of Assurant, I was
proud to be a signatory of the Business Roundtable’s rewritten
“Purpose of a Corporation.” And while we — like most other
global companies — serve our own particular corporate
purpose, we have always acted to uphold the critical
commitments we make to all of our stakeholders.
My signature symbolized our continued drive to deliver
differentiated value to our customers; support and invest in
our employees; offer fair and ethical treatment of our suppliers
and other partners; and support the communities where we live
and work — and as for any public company, generate long-term,
sustainable value for our capital providers, both shareholders
and debtholders, alike.
And while it may seem somewhat irreverent in the context
of an annual letter to place importance on anyone besides
shareholders, it is just the opposite — our commitments to our
customers, employees and other stakeholders helps ensure
that we deliver sustained value for our shareholders.
Our purpose has always driven us and was made clear during
our Investor Day in the first quarter of 2019 — a seminal moment
for the year, as we defined our strategic priorities and financial
objectives for the future. Since our last Investor Day in 2016, we
have taken several giant steps forward, repositioning Assurant for
sustainable profitable growth and achieve market leadership
across key lines of business in which we operate.
Our Investor Day gave us the public platform to declare who
we are as an organization and how we are best-positioned to
support the ever-changing needs of the connected consumer,
across mobile, auto and renters.
In 2019, we were clear in defining not just our purpose and the
“why we do what we do,” but really what we do — to protect major
consumer purchases, in partnership with leading brands that make,
sell and finance those purchases through innovative offerings.
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We continued to deliver against that vision in 2019 by leveraging
insights to drive product innovation, securing acquisitions to
strengthen our capabilities, recruiting and retaining diverse
talent at all levels to deliver on our purpose and promises. And
importantly, doing it all while providing a better experience for
our clients and consumers.
Our shareholders…where you need us to be
Investor Day gave us the opportunity to highlight our strong
shareholder returns over the last five years, as well as since our
IPO in 2004. Through the past decade and a half, we’ve also
maintained a strong balance sheet with investment-grade ratings.
We have been able to realize solid, profitable growth, together
with strong cash flow, with 2019 being no exception. Last year,
after adjusting for $41 million of after-tax reportable catastrophes
and $18 million of after-tax non-recurring charges, net operating
income(1) increased by 15 percent and earnings per share(2) grew
10 percent — which was at the high end of our expectations
for the year.
I’m also proud that our operating segments contributed a total
of $748 million in capital to the holding company. This allowed
us to raise our common stock dividend for the 15th consecutive
year since our IPO and to return $426 million to our shareholders in
common stock dividends and share repurchases.
We not only delivered strong earnings and strong cash flows, but
also took actions that will help deliver on the Investor Day plans
we outlined for our future.
We have been able to maintain and expand our leadership
positions in key markets, while also continuing to diversify our
earnings, lowering our overall catastrophe exposure. In 2019,
nearly three-quarters of our segment net operating income(3)
came from non-catastrophe exposed businesses, enabling us
to further generate more predictable earnings and cash flow.
Our business…where you need us to be…
in Global Lifestyle…
2019 was a record year for our Global Lifestyle business, as
net operating income(4) increased 37 percent to $409 million.
Leading the way was Connected Living, contributing in a major
way through our many long-standing client partnerships. We also
grew the business successfully through 10 new mobile programs
added within the last couple of years. Mobile was the standout
for us this year, where we now protect over 53 million subscribers
— representing an increase of 15 percent year-over-year.
International told a strong global story for Assurant this year.
Following the sun, we maintained strong growth in Asia Pacific,
with Japan continuing to be a source of strength for our mobile
franchise. We extended a major client relationship in Japan —
and we added a key new client that will help to build not only
our business but our reputation in this important market.
Europe delivered solid results for 2019, and a real turnaround
across this multi-country region. Latin America weathered
tough economic headwinds in certain countries, but delivered
solid results, nonetheless.
(1) See footnote 1 on page 15 of this report for more information on this non-GAAP
financial measure and a reconciliation of net operating income, excluding
reportable catastrophes to its most comparable GAAP measure.
(2) See footnote 2 on page 16 of this report for more information on this non-GAAP
financial measure and a reconciliation of net operating income, excluding
reportable catastrophes, per diluted share to its most comparable GAAP measure.
(3) Segment net operating income for Global Lifestyle, Global Housing and Global
Preneed excludes after-tax reportable catastrophes of $41 million.
(4)Segment net operating income is equal to GAAP net income.
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The cementing of several key partnerships were important
drivers of our success.
What we continue to pride ourselves on is our ability to drive
additional value for customers through our fee-for-service
offerings that go beyond standard device protection. Value-
added offerings, including Personal Tech Pro and Pocket Geek,
are key platforms that have allowed customers to solve those
technical issues that plague their use of the technology — we’ve
been able to optimize the performance of their devices, and
connect to live technical assistance — ultimately providing a
better customer experience. As we look ahead, we envision
expanding into other service offerings like ID protection,
something consumers see as a need to be fulfilled.
…in Global Automotive…
We grew the number of vehicles we protect in Global Automotive
to over 47 million in 2019 — mainly the result of the continued
strength of our relationships with global OEMs, national dealers
and third-party administrators. We are still early in fully
leveraging the scale and expertise we now enjoy through our
acquisition of The Warranty Group. And, as we had promised,
we were able to deliver the operating synergies we committed
to — even beyond our original goal of $60 million pre-tax, since
the acquisition closed.
…in Global Housing…
We benefited in 2019 from a mild catastrophe year, generating
a return on equity(5) of about 17 percent, including catastrophe
losses. Our continued growth within Multifamily Housing helped
tell our story across Global Housing. We increased our renters’
policies by 10 percent to 2.2 million in the year — while at
the same time growing revenue by 6 percent.
Within our lender-placed business, it was a year of client
renewals — 16 to be exact — underscoring our superior offerings
and capabilities. Sustaining a leadership position will be
supported by the continued onboarding of clients to our
single-source platform, which is not only more efficient,
but customer-centric as well.
And, we took steps to limit our exposure — moving forward
— within our Specialty Housing portfolio.
…in Global Preneed…
Within our Global Preneed business our continued long-term
partnership with industry-leader SCI and the continued growth
of our final need business marked opportunities for us. We
delivered $52 million in net operating income(1) after taking a
charge of $10 million in the third quarter of 2019 related to
the historical treatment of deferred acquisition costs.
Our clients and customers…where you need us to be
In 2019, enhancing the customer experience (CX) was — and will
continue to be — a central focus for Assurant — and core to our
business and sustained growth. We accelerated actions supporting
our enterprise vision in 2019 and looked to more deeply embed
CX in our culture as a competitive differentiator. To that end, we
continued to deploy technologies such as artificial intelligence
to create a more seamless experience across channels for the
300 million consumers we serve globally.
Importantly, we invested in our bench of talent across the
enterprise within CX in 2019, underscoring the importance of
continually bringing new thinking and ideas to how we enhance
the customer experience and set a higher bar for our competition
to deliver on customer expectations.
Our employees…where you need us to be
Like the consumers we serve, it continues to be vital for us to
understand the needs of our employees. Deciphering the critical
link between delivering a superior employee and customer
experience, we conducted our annual all-employee engagement
survey to solicit feedback from our employees about Assurant.
Seventy-five percent of our employees participated in our global
employee engagement survey in the fall of 2019. Our overall
employee engagement score was 81 out of 100 — which is above
or on par with Fortune’s Best Places to Work and Most Productive
Companies. Our most recent employee engagement survey results
reinforced that:
• Our employee engagement, alignment with the company
priorities overall and the organization’s ability to lead and
respond to change remain strong.
• Assurant’s employee net promoter score is solid, with
employees recommending our products, services and the
company as a good place to work.
• Cooperation and learning from mistakes are strengths. As we
put a greater emphasis on improving day-to-day processes
and make it more comfortable to speak up, we encourage
innovation and increase engagement overall.
Culture is one of the board room buzz words right now, as
organizations are waking up to the importance of a strong
corporate culture and the impact it can have on businesses’
bottom line. Fortunately, we have always maintained a strong
culture, and this year, following our acquisition of The Warranty
Group, we embarked on a global culture initiative that will
allow us to better understand what is so special and different
about our culture. We know it is unique — and we believe the
interconnectedness of a strong corporate culture with a positive
employee experience translates into a better customer experience
and greater performance overall.
This also applies to expanding our efforts to ensure a more
diverse and inclusive culture, which may very well be one
of the most important strategic initiatives to mark the year.
We are committed to diversity and inclusion at Assurant and
building a culture that ensures it’s in the DNA of who we are and
how we operate. We understand the benefits to our customers,
our company and our talent at all levels that we live true to this
value. And, we believe that applies to our suppliers, so we’ve
evolved our sourcing and procurement processes to provide
additional participation opportunities for diverse suppliers.
Like many organizations, we have opportunities in this area, but
we consider it a strategic imperative as we strive to continue to
improve. We also view our ongoing focus on ethics and integrity
reflective of a high-performing company and launched efforts
like a “speak up” campaign that encourages our employees to
raise their hand and be heard if something wasn’t right.
Our communities…where you need us to be
We have always understood the importance of our social
responsibility efforts in furthering the value we deliver
toward our long-term strategy. In 2019, we strengthened
our environmental, social and governance (ESG) commitment
as reflected in our social responsibility strategic framework
that centers on four pillars.
(5) Global Housing return on equity equals Global Housing net operating income
which equals GAAP net income divided by average stockholder’s equity.
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NET OPERATING INCOME
excluding reportable catastrophes(1)
(in millions)
Each of these pillars — Responsible Employer; Impact on Society; Integrity
and Ethics; Customer Commitment — is dynamic with multiple dimensions
that we align to our long-term business strategy.
$574.0
$515.1
$412.5
$379.3
‘16
‘17
‘18
‘19
TOTAL REVENUE(2)
(in billions)
$9.3
$7.5
$6.4
$5.8
Our Assurant Social Responsibility Report 2020 highlights actions, progress
and our guiding principles that further support our commitments as a
purpose-driven company. We hope you’ll read more about the many ways
we are integrating ESG matters throughout Assurant.
Our investments…where you need us to be
The year was marked not only by investments and innovations, but by
innovative investments. We saw one of our minority growth investments
in Vacasa reach an implied overall valuation of at least $1 billion. And we
expanded one of our areas within Global Lifestyle through the acquisition
of Cell Phone Repair (CPR) — bringing our consumers same-day repair of
their mobile phones and devices — while bringing us another link in the
overall value chain.
Overall, 2019 will go down in our books as a strong year for Assurant. One in
which we deepened client relationships, with some of the world’s top brands;
we delivered superior value for our hundreds of millions of end consumers;
and importantly we grew and strengthened our talent bench. All of this adds
up to our ability to generate a more diversified base of earnings — from
which we can continue to grow in the years ahead.
So whether it’s being at your fingertips or under the hood, at your front
door or in your time of need, we pride our organization on being where our
customers, employees and shareholders, partners and community members
need us to be — and sometimes we’re there before they even know they need
us. We take great pride in staying ahead of the needs of our stakeholders.
That’s how we will continue to fulfill our purpose now and as we enter the
Connected Decade. Thank you.
‘16
‘17
‘18
‘19
Alan Colberg
SEGMENT DIVIDENDS(3)
(in millions)
$748
$727
$315
$229
‘16
‘17
‘18
‘19
Alan Colberg
President and CEO
At the time of the printing of our 2019 Annual Report, we were in
the midst of managing through the unprecedented global pandemic,
Coronavirus (COVID-19).
In keeping true to our purpose as captured in the essence of my letter
and this report, we have maintained a dedication to our employees and
our clients and their customers across the world. As a global organization,
we will continue to communicate with our key stakeholders, regularly,
to ensure we are staying true to our purpose and values throughout this
issue with an eye toward always delivering a stronger Assurant.
(1) See footnote 1 on page 15 of this report for more information on this non-GAAP financial measure and a reconciliation of net operating
income, excluding reportable catastrophes to its most comparable GAAP measure.
(2) References to total revenue refer to net earned premiums, fees and other income.
(3) Consists of dividends from operating subsidiaries to the holding company, net of infusions, and excluding acquisitions and divestitures.
Excludes proceeds and capital releases from the Assurant Employee Benefits sale and dividends from the Assurant Health wind-down of
$1.3 billion in 2016, $145 million in 2017 and $12 million in 2018.
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Social Responsibility
Our Board of Directors, Management Committee and employees
understand the importance of social responsibility to deliver
greater value as we operate our business each day and take
actions in support of Assurant’s long-term strategy.
Assurant’s social responsibility strategic framework centers on
four pillars against which we track our progress on significant
environmental, social and governance topics core to our business.
Each of these pillars is dynamic with multiple dimensions that we
align to our long-term business strategy.
Assurant’s Social Responsibility Strategic Framework:
Responsible Employer
We strive to be a responsible
and progressive employer
with a culture that values
diversity, encourages
inclusion and recognizes the
importance of investing in
employee talent.
Integrity and Ethics
We adhere to unwavering
standards of integrity, ethics,
governance, privacy and
information security.
Impact on Society
We actively engage to
strengthen the communities
where we live and work
worldwide, while operating
our business and managing
our investments with a
meaningful environmental
commitment.
Customer Commitment
We deliver differentiated
experiences by being
customer-centric and
anticipating the needs
of the people we serve.
The Assurant Social Responsibility Report 2020 provides detail about
significant environmental, social and governance matters aligned
to the long-term strategy and integrated throughout the company.
Additional and related information is also available in our Corporate
Governance Guidelines and Assurant’s 2020 Proxy Statement,
https://ir.assurant.com/investor-relations/default.aspx.
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100%
2020 Corporate Equality Index
LGBTQ workplace equality for the
second consecutive year
51%
of employees represent
racial/ethnic
groups
62%
of global
workforce
are women
50%
of Assurant’s Board
represents ethnically
and gender-diverse groups
Assurant operates 8 Energy-Star
certified buildings and maintains
a “B” CDP Climate Survey rating
Nearly
1,300
charitable organizations
supported in 2019
Note: Data referenced as of 2019 year-end.
$4.5 million
charitable grants and
matching gifts from
Assurant Foundation
Our Assurant Cares global giving
and volunteer engagement reflects
three focus areas of the Assurant
Foundation that are aligned with
our broader company strategy:
Protecting: We help people access safe
places to live and thrive.
Connecting: We strengthen communities
where we operate, especially when disasters
strike. This includes supporting core
charitable partners in ways that enhance
their capacity to serve.
Inspiring: We encourage and prepare diverse
talent and innovative leaders for the future.
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ASSURANT MANAGEMENT COMMITTEE
ASSURANT BOARD OF DIRECTORS
Date following name is the year joined board
Elaine D. Rosen (2009)
Chair of the Board, Assurant; former Executive Vice
President, UNUM Provident Corporation
Paget L. Alves (2019)
Former Chief Sales Officer, Sprint Corporation
Alan B. Colberg
President and Chief
Executive Officer*
Gene E. Mergelmeyer
Executive Vice President,
Chief Operating Officer*
Michael P. Campbell
Executive Vice President,
President, Global Housing*
Juan N. Cento (2006)
Regional President, FedEx Express — Latin America
& Caribbean Division
Keith W. Demmings
Executive Vice President,
President, Global Lifestyle*
Richard S. Dziadzio
Executive Vice President,
Chief Financial Officer*
Robert A. Lonergan
Executive Vice President,
Chief Strategy and
Risk Officer*
Alan B. Colberg (2015)
President and Chief Executive Officer, Assurant
Harriet Edelman (2017)
Special Advisor to the Chairman, Emigrant Savings Bank
Lawrence V. Jackson (2009)
Senior Advisor, New Mountain Capital, LLC
Charles J. Koch (2005)
Former Chairman, President and Chief
Executive Officer, Charter One Financial, Inc.
Jean-Paul L. Montupet (2012)
Former Chair, Emerson Electric Co.’s Industrial Automation
business and former President, Emerson Europe
Debra J. Perry (2017)
Former Senior Managing Director, Global Ratings and
Research, Moody’s Investors Service
Francesca Luthi
Executive Vice President,
Chief Communication
and Marketing Officer
Kathy McDonald
Executive Vice President,
President, Global Specialty
Keith Meier
Executive Vice President,
President, International
Ogi Redzic (2019)
Chief Digital Officer and Vice President, Caterpillar, Inc.
Tammy Schultz
Executive Vice President,
President, Global Preneed*
Robyn Price Stonehill
Executive Vice President,
Chief Human Resources
Officer*
*Executive Officer of Assurant
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Paul J. Reilly (2011)
Former Executive Vice President and Chief Financial
Officer, Arrow Electronics, Inc.
Robert W. Stein (2011)
Former Global Managing Partner, Actuarial Services,
Ernst & Young LLP
For more information on our executive officers and
directors, please see our 2020 Proxy Statement, which
accompanies this report and also is available online in
the Investor Relations section of www.assurant.com.
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ENTERPRISE ORGANIZATIONAL STRUCTURE
GLOBAL LIFESTYLE | Keith Demmings, President
Products and services that connect and protect consumer devices, appliances, vehicles
and transactions.
$7.1 billion
Revenue(1)
Lines of
Business
Revenue(1)
Consumers
Served
Client
Relationships
Connected Living
$3.8 billion
152 million
6 of the top 10 connected living brands
Global
Automotive
Global Financial
Services and
Other
$2.9 billion
48 million
9 of the top 10 global auto manufacturing brands
$452 million
75 million
3 of the top 4 global credit card transactions; 3 of the top 5 banks in
Canada; 7 of the top 9 banks in the U.K.
GLOBAL HOUSING | Mike Campbell, President
Products and services designed to help protect homeowners, mortgage providers, renters,
rental property and manufactured homes from the unexpected.
$2.0 billion
Revenue(1)
Lines of
Business
Lender Placed
Insurance
Multifamily
Housing
Specialty and
Other
Revenue(1)
Consumers
Served
Client
Relationships
$1.1 billion
33 million
8 of the top 10 largest mortgage services in the U.S.
$429 million
2 million
9 of the top 10 largest multifamily housing property management
companies (6,000+ apartment communities)
$495 million
465,000
Top 3 manufactured housing producers in U.S.
GLOBAL PRENEED | Tammy Schultz, President
Senior lifestyle planning solutions that help ease the financial burden associated
with growing older. Includes prefunded funeral insurance, executor protection
services and more.
$201 million
Revenue(1)
Lines of
Business
Senior Lifestyle
Planning Solutions
Revenue(1)
Consumers
Served
Client
Relationships
$201 million
2 million
Partners with top funeral home and cemetery service provider
(1) References to total revenue refer to net earned premiums, fees and other income.
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GLOBAL OPERATIONS
Assurant has a market presence in 21 countries. The Assurant International operations
unit focuses on executing our global strategy in countries outside the U.S. that have
been identified for their strategic importance in growing our global business.
SINGAPORE
Products and Services
Connected Living
AUSTRALIA
Products and Services
Connected Living
Global Automotive
NEW ZEALAND
Products and Services
Connected Living
Global Automotive
*Available in Puerto Rico
CANADA
Products and Services
Connected Living
Global Automotive
Financial Services
Global Preneed
UNITED STATES INCLUDING
PUERTO RICO
Products and Services
Connected Living*
Global Automotive*
Financial Services*
Lender Placed Insurance
Specialty Offerings
Multifamily Housing
Manufactured Housing
Global Preneed
MEXICO
Products and Services
Connected Living
Global Automotive
Financial Services
COLOMBIA
Products and Services
Connected Living
Global Automotive
PERU
Products and Services
Connected Living
Global Automotive
BRAZIL
Products and Services
Connected Living
Global Automotive
Financial Services
ARGENTINA
Products and Services
Connected Living
Global Automotive
Financial Services
CHILE
Products and Services
Connected Living
Global Automotive
UNITED KINGDOM
Products and Services
Connected Living
Global Automotive
Financial Services
FRANCE
Products and Services
Connected Living
Global Automotive
Financial Services
SPAIN
Products and Services
Connected Living
NETHERLANDS
Products and Services
Connected Living
GERMANY
Products and Services
Connected Living
ITALY
Products and Services
Connected Living
Global Automotive
SOUTH KOREA
Products and Services
Connected Living
Global Automotive
CHINA & HONG KONG
Products and Services
Connected Living
Global Automotive
JAPAN
Products and Services
Connected Living
Global Automotive
INDIA
Products and Services
Connected Living
Global Automotive
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Non-GAAP Financial Measures
(1) Assurant uses net operating income, excluding reportable catastrophes, as an important measure of the company’s operating performance.
Net operating income equals net income attributable to common stockholders, excluding the net charge related to Iké, Assurant Health runoff
operations, net realized gains (losses) on investments, amortization of deferred gains (including Assurant Employee Benefits), net charges
relating to the acquisition of The Warranty Group (“TWG”), foreign exchange gains (losses) from remeasurement of monetary assets and
liabilities, loss on sale of Mortgage Solutions and other highly variable or unusual items. Additionally, it excludes reportable catastrophes
which represent catastrophe losses net of reinsurance and client profit sharing adjustments and including reinstatement and other premiums.
The company believes net operating income, excluding reportable catastrophes, provides investors a valuable measure of the performance of
the company’s ongoing business because it excludes items that do not represent the ongoing operations of the company and because it
excludes reportable catastrophes, which can be volatile. The comparable GAAP measure is net income attributable to common stockholders.
(UNAUDITED)
($ in millions)
Global Lifestyle(1)
Global Housing, excluding reportable catastrophes
Global Preneed
Corporate and other
Interest expense
Preferred stock dividends
Net operating income
Adjustments, pre-tax:
Assurant Health runoff operations
Assurant Employee Benefits
Net realized gains (losses) on investments
Reportable catastrophes
2019
$ 409.4
299.6
52.2
(85.6)
(82.9 )
(18.7)
574.0
(28.0 )
—
66.3
(51.8 )
Amortization of deferred gains on disposal of businesses 14.3
Loss on extinguishment of debt and other related costs
(37.4)
Impact of TCJA at enactment
Net TWG acquisition related charges(2)
Change in tax liabilities
Loss on sale of Mortgage Solutions
Foreign exchange related losses
Net charge related to Iké
Other adjustments(2)
Benefit (provision) for income taxes
—
(28.1 )
—
(9.6 )
(18.2 )
(163.0 )
(19.1 )
8.5
Twelve Months
2018
$ 297.7
320.5
57.7
(84.0 )
(65.8 )
(11.0 )
515.1
3.2
—
(63.4 )
(214.8 )
56.9
—
(1.5 )
(82.4 )
—
(40.3 )
(14.8 )
—
9.9
69.0
2017
$ 180.0
287.9
39.6
(62.8 )
(32.2 )
—
2016
$ 154.4
291.0
42.3
(71.0 )
(37.4 )
—
412.5
379.3
16.0
—
30.1
(295.7 )
103.9
—
177.0
(12.5 )
27.1
—
—
—
9.1
52.1
(47.3 )
13.8
162.2
(157.4 )
394.5
(23.0 )
—
—
—
—
—
—
(40.1 )
(116.6 )
$ 565.4
Net income attributable to common stockholders $ 363.9
$ 236.8
$ 519.6
(1) Twelve Months 2019 and Twelve Months 2017 exclude losses of $0.1 million after-tax ($0.1 million benefit pre-tax) and $2.0 million after-tax
($3.1 million pre-tax), respectively.
(2) Additional details about the components of net TWG acquisition related charges, the components of Other adjustments and other key financial
metrics are included in the Financial Supplement located on Assurant’s Investor Relations website http://ir.assurant.com/investor/default.aspx
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Non-GAAP Financial Measures
(2) Assurant uses net operating income per diluted share, excluding reportable catastrophes, as another important measure of the company’s
stockholder value. Net operating income per diluted share equals net operating income, excluding reportable catastrophes (defined above),
plus any dilutive preferred stock dividends divided by weighted average diluted shares outstanding. The Company believes this metric provides
investors a valuable measure of stockholder value because it excludes items that do not represent the ongoing operations of the Company
and because it excludes reportable catastrophes, which can be volatile. The comparable GAAP measure is net income attributable to common
stockholders per diluted share, defined as net income attributable to common stockholders plus any dilutive preferred stock dividends divided
by weighted average diluted shares outstanding.
Twelve Months Ended December 31,
($ per share)
Net operating income, excluding reportable catastrophes, per diluted share(1)
Adjustments, pre-tax:
Assurant Health runoff operations
Net realized gains (losses) on investments
Reportable catastrophes
Amortization of deferred gains on disposal of businesses
Net TWG acquisition related charge(2)
Loss on sale of Mortgage Solutions
Foreign exchange related losses
Net charge related to Iké
Loss on extinguishment of debt and other related costs
Other adjustments(2)
Benefit for income taxes
Net income attributable to common stockholders, per diluted share(1)
2019
$ 9.21
0.45
1.06
(0.83 )
0.23
(0.45 )
(0.15 )
(0.29 )
(2.62 )
(0.60 )
(0.31 )
0.14
$ 5.84
2018
$ 8.65
0.05
(1.06 )
(3.61 )
0.97
(1.38 )
(0.68 )
(0.25 )
—
—
0.13
1.16
$ 3.98
(1) Information on the share counts used in the per share calculations are included in the Financial Supplement located on Assurant’s Investor
Relations website http://ir.assurant.com/investor/default.aspx
(2) Additional details about the components of net TWG acquisition related charges, the components of Other adjustments and other key financial
metrics are included in the Financial Supplement located on Assurant’s Investor Relations website http://ir.assurant.com/investor/default.aspx
16
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2019
OR
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
(State or other jurisdiction of incorporation)
39-1126612
(I.R.S. Employer Identification No.)
28 Liberty Street, 41st Floor
New York, New York 10005
(212) 859-7000
(Address, including zip code, and telephone number, including area code, of Registrant’s Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $0.01 Par Value
6.50% Series D Mandatory Convertible
Preferred Stock, $1.00 Par Value
Trading Symbol(s)
AIZ
AIZP
Name of Each Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes
No
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
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files). Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $6.47 billion as of
the last business day of the fiscal quarter ended June 30, 2019 based on the closing sale price of $106.38 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 February 14, 2020 was 59,823,754.
Certain information contained in the definitive proxy statement for the registrant’s 2020 annual meeting of stockholders is
incorporated by reference into Part III hereof.
Documents Incorporated by Reference
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ASSURANT, INC.
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 2019
TABLE OF CONTENTS
PART I
Page
Number
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
PART IV
3
16
34
34
34
34
35
38
40
63
67
67
67
68
69
69
69
69
69
70
74
75
Item
Number
1.
1A.
1B.
2.
3.
4.
5.
6.
7.
7A.
8.
9.
9A.
9B.
10.
11.
12.
13.
14.
15.
16.
Signatures
Unless otherwise stated, all amounts are presented in United States of America (“U.S.”) Dollars and all amounts are in millions,
except for number of shares, per share amounts, registered holders, number of employees, beneficial owners, number of securities in
an unrealized loss position and number of loans.
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FORWARD-LOOKING STATEMENTS
Some statements in “Item 1 – Business” and “Item 7 – Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and elsewhere in this Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (this
“Report”), particularly those anticipating future financial performance, business prospects, growth and operating strategies and similar
matters, are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. You can
identify these statements by the use of words such as “will,” “may,” “can,” “anticipates,” “expects,” “estimates,” “projects,” “intends,”
“plans,” “believes,” “targets,” “forecasts,” “potential,” “approximately,” and the negative versions of those words and other words and
terms with a similar meaning. 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 our future plans, estimates or expectations will be achieved. Our actual results might
differ materially from those projected in the forward-looking statements. We undertake no obligation to update or review any forward-
looking statement, whether as a result of new information, future events or other developments. For a discussion of the risk factors that
could affect our actual results, see “Item 1A – Risk Factors” and “Item 7 – Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Critical Factors Affecting Results.”
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Unless the context otherwise requires, references to the terms “Assurant,” the “Company,” “we,” “us” and “our” refer to
PART I
Assurant, Inc.’s consolidated operations.
Item 1. Business
Assurant, Inc. was incorporated as a Delaware corporation in 2004.
We are a leading global provider of lifestyle and housing solutions that support, protect and connect major consumer
purchases. We partner with leading brands to develop innovative products and services and to deliver an enhanced customer
experience. We operate in North America, Latin America, Europe and Asia Pacific through three operating segments: Global
Lifestyle, Global Housing and Global Preneed. Through our Global Lifestyle segment, we provide mobile device solutions and
extended service products and related services for consumer electronics and appliances (referred to as “Connected Living”);
vehicle protection and related services (referred to as “Global Automotive”); and credit and other insurance products (referred
to as “Global Financial Services and Other”). Through our Global Housing segment, we provide lender-placed homeowners
insurance, lender-placed manufactured housing insurance and lender-placed flood insurance (referred to as “Lender-placed
Insurance”); renters insurance and related products (referred to as “Multifamily Housing”); and voluntary manufactured
housing insurance, voluntary homeowners insurance and other specialty products (referred to as “Specialty and Other”).
Through our Global Preneed segment, we provide pre-funded funeral insurance, final need insurance and related services.
Our Competitive Strengths
Our financial strength and core capabilities across our businesses create competitive advantages that we believe allow us
to support our clients, deliver superior experience for their customers and drive sustainable profitable growth over the long
term.
Our financial strength. We believe we have a strong balance sheet and operating cash flows. As of December 31, 2019,
we had $44.29 billion in total assets and our debt to total capital was 26.2%. In addition, our Global Lifestyle, Global Housing
and Global Preneed segments generate significant operating cash flows, which provides us with the flexibility to make
investments to strengthen our strategic capabilities and enter into and grow partnerships with our clients.
Client and consumer insights and evolving capabilities support innovation. During our long business tenure, we have
developed a comprehensive understanding of our clients and the consumer markets we serve. We seek to leverage consumer
insights, together with deep market knowledge and capabilities, to anticipate and identify the specific needs of our clients and
the consumers they serve. We intend to continue capitalizing on our consumer insights, as well as to leverage investments in
emerging technologies, to introduce new and innovative products and services and adapt those offerings to anticipate and
address emerging issues.
Value chain integration. We own or manage multiple pieces of the value chain, which enables us to create products and
service offerings based on client needs and provide a seamless experience for consumers. Offering end-to-end solutions allows
us to provide additional value for consumers and adapt more quickly and efficiently to their needs. Visibility across the value
chain helps us leverage insights to further improve the customer experience and our offerings.
Our Strategy for Profitable Growth
Our vision is to be the premier provider of lifestyle and housing solutions globally. To achieve this vision, we positioned
ourselves for continued long-term profitable growth by:
Growing our portfolio of market leading businesses. We leverage our competitive strengths to focus on businesses where
we can maintain or reach market-leading positions, achieve attractive returns and grow. We periodically assess our business
portfolio to ensure we align resources with the best opportunities and we have identified Connected Living, Global Automotive
and Multifamily Housing as key businesses targeted for growth. We intend to grow our businesses by continuing to invest in
capabilities and technology which allows us to innovate and deliver superior customer experience, as well as further expanding
our offerings and diversifying our distribution channels.
Providing integrated offerings. We provide an array of services that are complementary to our risk-based products. As we
adapt our business portfolio and capabilities to respond to client and consumer needs, we expect to continue to drive additional
value to consumers by expanding our fee-for-service offerings and evolving our mix of business. We expect to generate a more
diversified mix of business and earnings.
Deploying our capital strategically. We deploy capital to invest in and grow our businesses, repurchase shares and pay
dividends. Our approach to mergers, acquisitions and other growth opportunities reflects our strategic and disciplined approach
3
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to capital management. We target new businesses and capabilities that complement or support our strategy, which is focused on
expanding capabilities and distribution in targeted growth businesses globally.
2019 Highlights
In 2019, we grew earnings as we added and renewed a number of client partnerships across Global Lifestyle and Global
Housing and launched several new product offerings. We had significant organic growth in our mobile business, including as a
result of scaling new and existing client partnerships, and a full year of contributions from our acquisition of TWG Holdings
Limited and its subsidiaries (as subsequently reorganized, “TWG”). During the year, we also continued to make investments to
support the launch of new programs, while enhancing our capabilities to support future growth. For example, we acquired Cell
Phone Repair, a global franchisor of electronic device repair stores focusing on mobile device repair, and we are making
additional targeted investments in emerging technologies to enhance the customer experience. To support long-term growth, we
also launched a multi-year transformation of our information technology to realign our IT operating model and fund
investments in our technology infrastructure and cloud capabilities. We will continue to focus on investing in our key
capabilities and strengthening our competitive advantage as we look to deliver more value for our clients and their customers
In 2019, we made considerable progress in integrating our acquisition of TWG, generating operating synergies and
growing from the scale and expertise we acquired. We also undertook a strategic review of our investment in Iké Grupo, Iké
Asistencia and certain of their affiliates (collectively, “Iké”). As part of our initial investment in 2014, we entered into a
shareholders agreement with the majority shareholders that provided us with the right to acquire the remainder of Iké from the
majority shareholders and the majority shareholders the right to put their interests in Iké to us (together, the “put/call”). In the
third quarter of 2019, we decided to pursue the sale of our interests in Iké and in January 2020, we entered into agreements to
sell our interests in Iké to certain management shareholders of Iké. The sale is subject to customary closing conditions,
including regulatory approvals. For additional information on this transaction, see “Item 7 – Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” and Note 5 to the Consolidated
Financial Statements included elsewhere in this Report.
Throughout the year, we also undertook capital initiatives to drive shareholder value. In 2019, we returned $426.3 million
to shareholders through share repurchases and common stock dividends. In 2019, we also refinanced our debt at lower interest
rates. In August 2019, we issued $350.0 million of 3.70% senior notes due 2030, and used the net proceeds, along with cash on
hand, to complete a cash tender offer to purchase $100.0 million of the $375.0 million then outstanding aggregate principal
amount of our 6.75% senior notes due 2034 and to redeem $250.0 million of the $300.0 million then outstanding aggregate
principal amount of our floating rate senior notes due 2021.
Segments
The composition of our reportable segments matches how we view and manage our business. For additional information
on our segments, see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations –
Results of Operations” and Note 6 to the Consolidated Financial Statements included elsewhere in this Report.
Global Lifestyle
Net earned premiums, fees and other income by product:
Connected Living (mobile and service contracts) (1)
Global Automotive
Global Financial Services and Other
Total
Segment net income
Segment Equity
Years Ended December 31,
2019
2018
2017
$
$
$
$
3,768.4
$
2,800.6
$
2,156.0
2,873.6
452.2
7,094.2
409.3
3,948.2
$
$
$
1,909.2
473.5
5,183.3
297.7
4,073.2
$
$
$
782.8
457.4
3,396.2
178.0
1,967.3
(1)
For the years ended December 31, 2019, 2018 and 2017, 55.9%, 55.4%, and 58.7%, respectively, of net earned premiums, fees and other income was
from mobile products and 44.1%, 44.6%, and 41.3%, respectively, was from service contracts, including assistance services.
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4
Our Products and Services
The key lines of business in Global Lifestyle are: Connected Living, which includes mobile device solutions and
extended service contracts (insurance policies and warranties) (“ESCs”) for consumer electronics and appliances; Global
Automotive; and Global Financial Services and Other.
Connected Living: Through partnerships with mobile device carriers, retailers, multiple system operators (“MSOs”),
original equipment manufacturers (“OEMs”) and financial and other institutions, we underwrite and provide administrative
support and related services for ESCs. These contracts provide consumers with coverage on mobile devices and consumer
electronics and appliances, protecting them from certain covered losses. We pay the cost of repairing or replacing these
consumer goods in the event of loss, theft, accidental damage, mechanical breakdown or electronic malfunction after the
manufacturer's warranty expires. Our strategy is to provide integrated service offerings to our clients that address all aspects of
the insurance, ESC or warranty, including program design and marketing strategy, risk management, data analytics, customer
support and claims handling, supply chain and service delivery and repair and logistics. For example, we seek to provide end-
to-end mobile device lifecycle services in our mobile business from when the device is received and inspected, repaired or
refurbished, to when it is ultimately disposed of through a sale to a third-party or used to meet an insurance claim. In addition to
extended protection for multiple devices, our mobile offerings include trade-in and upgrade programs, premium customer
support, including device self-diagnostic tools, and device disposition. We also sell repaired or refurbished mobile and other
electronic devices. We believe that with the required administrative capability, supply chain, technical support infrastructure
and insurance underwriting capabilities, we maintain a differentiated position in this marketplace.
In 2019, Connected Living also included our 40% interest in Iké. Iké primarily provides roadside assistance, home
assistance and travel, mobile and other protection products and services. On January 29, 2020, we entered into agreements to
sell our interests in Iké to certain management shareholders of Iké.
Global Automotive: We underwrite and provide administrative services for vehicle service contracts (“VSCs”) and
ancillary products providing coverage for vehicles, including automobiles, trucks, recreational vehicles and motorcycles, as
well as parts. For VSCs, we pay the cost of repairing a customer’s vehicle in the event of mechanical breakdown. For ancillary
products, coverage varies, but, generally, we pay the cost of repairing, servicing or replacing parts or provide other financial
compensation in the event of mechanical breakdown, accidental damage or theft. We provide integrated service offerings to our
clients, including program design and marketing strategy, risk management, data analytics, customer support and claims
handling, reinsurance facilitation, actuarial consulting, experiential and digital training and performance management.
Global Financial Services and Other: Our Global Financial Services and Other business maintains a suite of protection
and assurance products that deliver a combination of features and benefits for varying customer segment needs. With major
financial services clients, we provide value-added financial services in the U.S. and internationally, ranging from credit
insurance to inclusive credit card benefits and travel coverages. Although traditional credit insurance has been in decline in
North America, it remains a core offering in select international markets.
Distribution and Clients
Global Lifestyle operates globally, with approximately 76% of its revenue from North America (the U.S. and Canada),
9% from Latin America (Brazil, Argentina, Puerto Rico, Mexico, Chile, Colombia and Peru), 8% from Europe (the United
Kingdom (the “U.K.”), France, Italy, Spain, Germany and the Netherlands) and 7% from Asia Pacific (South Korea, China,
Japan, Australia, India, Singapore and New Zealand) for the year ended December 31, 2019. Global Lifestyle focuses on
establishing strong, long-term relationships with clients that are leaders in their markets, including leading distributors of our
products and services. In Connected Living, we partner with mobile device carriers, retailers, MSOs, OEMs and financial and
other institutions to market our mobile device solutions and with some of the largest OEMs, consumer electronics retailers,
appliance retailers (including e-commerce retailers) and MSOs to market our ESC products and related services. In Global
Automotive we partner with auto dealers and agents, third-party administrators and manufacturers to market our vehicle
protection and related services. In Global Financial Services and Other, we partner with financial institutions, insurers and
retailers to market our credit insurance and embedded card offerings. Systems, training, computer hardware and our overall
market development approach are customized to fit the needs of each targeted market.
Most of our distribution agreements are exclusive. Typically, these agreements are multi-year with terms generally
between three and five years and allow us to integrate our administrative systems with those of our clients.
As of December 31, 2019, no single Global Lifestyle client accounted for 10% or more of our consolidated revenue.
However, Global Lifestyle is dependent on a few clients and the loss of any one or more such clients could have a material
adverse effect on our results of operations and cash flows. See “Item 1A – Risk Factors – Business and Competitive Risks –
Our revenues and profits may decline if we are unable to maintain relationships with significant clients, distributors and other
parties, or renew contracts with them on favorable terms, or if those parties face financial, reputational or regulatory issues.”
Our Addressable Markets and Market Activity
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The mobile insurance market is a large and growing global market, characterized by growth in the “Internet of Things”
and evolving wireless standards, particularly the advent of 5G. While smartphone penetration in the U.S., Japanese and
European markets is high, other markets are less mature and present higher growth opportunities. The worldwide used and
refurbished smartphone market is also expected to continue to grow.
In addition, consumer needs relating to mobile devices are continuing to expand in scope. We believe there are growth
opportunities in bundled protection products, which support customers as they take full advantage of the features and functions
of their mobile devices through their daily interaction with a connected world. Customer support, device financing, buyback
and trade-in programs are some of the areas that continue to gain traction. Expanded capabilities like repair and logistics,
technical support for customers and digital security allow us to create product and service offerings that customers find
compelling.
Our business is subject to fluctuations in mobile device trade-in volumes based on the release of new devices and carrier
promotional programs, as well as customer preferences. As a general trend, we believe the average smartphone replacement
cycle is lengthening, which may increase attachment rates for mobile protection offerings; however, this trend may be reversed
based on new technology and innovation.
In the vehicle sales markets, we expect U.S. new vehicle sales to remain relatively flat, while the used vehicle market
remains strong and continues to grow. We work closely with our partners to develop innovative offerings that reflect the rapid
evolution of the large, but fragmented U.S. market. In addition, new vehicle sales outside of the U.S. continue to grow in most
markets.
Consumers are becoming increasingly connected across their mobile devices, vehicles and homes, which is creating a
global market for smart home devices and related services. As we enter the “Connected Decade” we believe it will create long-
term opportunities for Assurant as consumers’ lifestyles will increasingly intertwine with their connected ecosystems.
In our financial services business, we anticipate continued declines in our traditional credit insurance in North America.
Our focus is on expanding our partnerships with leading financial institutions to offer credit card offerings to their customers.
The traditional credit and credit card products are actively sold in select international markets.
On May 31, 2018, we acquired TWG, which specializes in the underwriting, administration and marketing of service
contracts on a wide variety of consumer goods, including automobiles, consumer electronics and major home appliances. We
believe the acquisition has enhanced our position as a leading lifestyle provider, particularly within the Global Automotive
business, with new client partnerships, distribution channels and a deepened global footprint across 21 countries, including key
markets such as Asia Pacific. We have generated significant operating synergies by optimizing global operations.
Risk Management
We earn premiums on our insurance and warranty products and fees for our other services. We write a portion of our
contracts on a retrospective commission basis. This allows us to adjust commissions on the basis of claims experience. Under
these commission arrangements, our clients’ compensation is based upon the actual losses incurred compared to premiums
earned after a specified net allowance to us. We believe that these arrangements better align our clients’ interests with ours and
help us to better manage risk exposure. For additional risks relating to our Global Lifestyle segment, please see “Item 1A – Risk
Factors.”
Inventory
In our mobile business, we carry inventory to meet the delivery requirements of certain clients and we provide the
guaranteed buyback of devices as part of our trade-in and upgrade offerings. These devices are ultimately disposed of through
sales to third parties. Inventory levels may vary from period to period due to, among other things, differences between actual
and forecasted demand, the addition of new devices and parts and strategic purchases. Payment terms with clients also vary,
which may result in less inventory financed by clients and more inventory financed with our own capital.
We take various actions to manage our inventory, including monitoring our inventory levels, managing the timing of
purchases and obtaining return rights for some programs and devices. However, the value of our inventory (as well as devices
that are subject to guaranteed buybacks) will be adversely impacted by price reductions, technological changes affecting the
usefulness or desirability of the devices and parts, physical problems resulting from faulty design or manufacturing, increased
competition, growing industry emphasis on cost containment and adverse foreign trade relationships. No assurance can be
given that we will be adequately protected against declines in inventory value. See “Item 1A – Risk Factors – Business and
Competitive Risks – Our mobile business is subject to the risk of declines in the value of mobile devices in our inventory, to the
risk of guaranteed buybacks, and to export compliance and other risks.”
Seasonality
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We experience seasonal fluctuations that impact demand in each of our lines of business. For example, seasonality for
ESCs and VSCs aligns with the seasonality of the retail and automobile markets. In addition, our mobile results, which align
with the seasonality of mobile device sales and are affected by trade-in volumes, may fluctuate quarter to quarter due to the
actual and anticipated timing of the release of new devices and carrier promotional programs.
Global Housing
Net earned premiums, fees and other income by product:
Lender-placed Insurance
Multifamily Housing
Specialty and Other
Mortgage Solutions (sold in August 2018)
Total
Segment net income
Segment equity
Our Products and Services
Years Ended December 31,
2019
2018
2017
$
1,109.2
$
1,149.7
$
1,224.9
429.2
495.3
—
2,033.7
258.7
1,600.6
$
$
$
406.1
417.3
116.1
2,089.2
150.8
1,505.3
$
$
$
$
$
$
366.3
326.1
257.7
2,175.0
97.4
1,536.9
The key lines of business in Global Housing are: Lender-placed Insurance; Multifamily Housing (which is comprised of
renters insurance and related products); and Specialty and Other (which is comprised of voluntary manufactured housing
insurance, voluntary homeowners insurance and other specialty products). On August 1, 2018, we sold our Mortgage Solutions
business, which was comprised of property inspection and preservation, valuation and title services and other property risk
management services. For additional information on this sale, see Note 4 to the Consolidated Financial Statements included
elsewhere in this Report.
Lender-placed Insurance: We provide lender-placed homeowners, lender-placed manufactured housing and lender-placed
flood insurance as described below.
Lender-placed homeowners insurance. Lender-placed homeowners insurance consists principally of fire and
dwelling hazard insurance offered through our lender-placed program. The lender-placed program provides collateral
protection to lenders, mortgage servicers and investors in mortgaged properties in the event that a homeowner does not
maintain insurance on a mortgaged dwelling. Lender-placed homeowners insurance provides structural coverage,
similar to that of a standard homeowners policy. The amount of coverage is often based on the last known insurance
coverage under the prior policy for the property and provides replacement cost coverage on the property. It protects
both the lender’s interest and the borrower’s interest and equity. We also provide real estate owned (“REO”) insurance,
consisting of insurance on foreclosed properties managed by our clients.
In the majority of cases, we use a proprietary insurance-tracking administration system linked with the
administrative systems of our clients to monitor clients’ mortgage portfolios to verify the existence of insurance on
each mortgaged property and identify those that are uninsured. If there is a potential lapse in insurance coverage, we
begin a process of notification and outreach to both the homeowner and the last known insurance carrier or agent
through phone calls and written correspondence, which generally takes up to 90 days to complete. If coverage cannot
be verified at the end of this process, the mortgage servicer procures a lender-placed policy for which the homeowner
is responsible for paying the related premiums. The process of tracking voluntary coverage - including determining
whether voluntary coverage is in force, the policy limits in place, the perils insured and the deductibles, and obtaining
other required insurance related information - is part of our risk management for our Lender-placed Insurance
business. Tracking is needed in order to underwrite the risk we assume, to understand loss exposure and to
communicate with appropriate parties, including the lender, insurance agent and homeowner. Our placement rates
reflect the ratio of insurance policies placed to loans tracked. The homeowner always retains the option to obtain or
renew the insurance of his or her choice.
Lender-placed manufactured housing insurance. Lender-placed manufactured housing insurance consists
principally of fire and dwelling hazard insurance for manufactured housing offered through our lender-placed
program. Lender-placed manufactured housing insurance is issued after an insurance tracking process similar to that
described above. In most cases, tracking is performed using a proprietary insurance-tracking administration system.
Lender-placed flood insurance. Lender-placed flood insurance consists of flood insurance offered through our
lender-placed program. It provides collateral protection to lenders in mortgaged properties in the event a homeowner
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does not maintain flood insurance. Lender-placed flood insurance is issued after an insurance tracking process similar
to that described above.
Multifamily Housing: We offer renters insurance for a wide variety of multi-family rental properties, including vacation
rentals, providing content protection for renters’ personal belongings and liability protection for the property owners against
renter-caused damage. We also offer an integrated billing and tracking platform for our clients and their customers. We also
provide tenant bonds as an alternative to security deposits, which allows our clients to offer a lower move-in cost option while
minimizing the risk of loss from damages, and receivables management, which helps our clients to maximize the collection of
amounts owed by prior tenants.
Specialty and Other: We offer voluntary manufactured housing insurance, voluntary homeowners insurance and other
specialty products, including offerings related to the sharing economy. Our voluntary insurance generally provides structural
coverage, content and liability coverage. Our sharing economy insurance products include ridesharing, carsharing, vehicle
subscription, vacation rental and on-demand delivery insurance products. We are the second largest administrator for the U.S.
government under the voluntary National Flood Insurance Program (the “NFIP”), for which we earn fees for collecting
premiums and processing claims. This business is 100% reinsured to the U.S. government.
Mortgage Solutions: Prior to the sale of our Mortgage Solutions business, we offered mortgage-related services, including
field, inspection, restoration, REO asset management, valuation, title and settlement services.
Distribution and Clients
Global Housing establishes long-term relationships with leading mortgage lenders and servicers, manufactured housing
lenders, property managers and financial and other institutions. Lender-placed Insurance products are distributed primarily
through mortgage lenders, mortgage servicers and financial and other institutions. The majority of our lender-placed
agreements are exclusive. Typically, these agreements have terms of three to five years and allow us to integrate our systems
with those of our clients. Multifamily Housing products are distributed primarily through property management companies and
affinity marketing partners. We offer our Specialty and Other insurance programs primarily through manufactured housing
lenders and retailers, along with independent specialty agents. Independent specialty agents and on-demand delivery and
ridesharing companies also distribute flood products, sharing economy offerings and other specialty property products.
As of December 31, 2019, no single Global Housing client accounted for 10% or more of our consolidated revenue.
However, Global Housing is dependent on a few clients, and the loss of any one or more such clients could have a material
adverse effect on our results of operations and cash flows. See “Item 1A – Risk Factors – Business and Competitive Risks –
Our revenues and profits may decline if we are unable to maintain relationships with significant clients, distributors and other
parties, or renew contracts with them on favorable terms, or if those parties face financial, reputational or regulatory issues.”
Our Addressable Markets and Market Activity
With respect to the lender-placed market, placement rates have declined as the housing market has improved with industry
delinquency rates below averages, resulting in lower net earned premiums. In addition to the overall market, our lender-placed
results are also impacted by the mix of loans we service. We expect placement rates to continue to decline in 2020 reflecting the
health of the overall housing market and our mix of loans. We will continue to implement expense management efforts to
mitigate the impact to our financial results, as well as leveraging our proprietary tracking administration system.
The U.S. renters insurance market is a growing market where we believe there is opportunity to increase our market share
and attachment rates with new and existing clients.
Risk Management
We earn premiums on our insurance products and fees for our services. Our lender-placed insurance products are not
underwritten on an individual policy basis. Contracts with our clients require us to issue these policies automatically when a
borrower’s insurance coverage is not maintained. These products are priced to factor in the additional risk from ensuring that all
client properties have continuous insurance coverage. We monitor pricing adequacy based on a variety of factors and adjust
pricing as required, subject to regulatory constraints.
Because several of our business lines (such as homeowners, manufactured housing and other property policies) are
exposed to catastrophe risks, we purchase reinsurance coverage to reduce our financial exposure, protect capital, and mitigate
earnings and cash flow volatility. Our reinsurance program generally incorporates a provision to allow for the reinstatement of
coverage, which provides protection against the risk of multiple catastrophes in a single year.
For 2019, our property catastrophe reinsurance program includes U.S. per-occurrence catastrophe coverage providing
$1.16 billion of protection in excess of $80.0 million of retention in the main reinsurance program, as well as multi-year
reinsurance contracts covering approximately 35% of the reinsurance layers. All layers of the program allow for one automatic
reinstatement, except the first layer which has two reinstatements and covers the first $40.0 million of losses in excess of the
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$80.0 million retention, and include a cascading feature that provides multi-event protection in which higher coverage layers
drop down to $120.0 million as the lower layers and reinstatement limit are exhausted. The 2019 catastrophe reinsurance
program also includes Caribbean catastrophe coverage providing $177.5 million of protection in excess of $17.5 million
retention and Latin American catastrophe coverage providing $423.0 million of protection in excess of $4.5 million of
retention. Additionally, in 2019, we placed coverage for a third event in the Caribbean, with protection of up to $27.5 million in
excess of a $17.5 million retention. We placed approximately 68% of our 2020 catastrophe reinsurance program in January
2020.
We are also subject to non-catastrophe risk. Please see “Item 1A – Risk Factors – Business and Competitive Risks –
Catastrophe and non-catastrophe losses, including as a result of climate change, could materially reduce our profitability and
have a material adverse effect on our results of operations and financial condition.”
Seasonality
We experience seasonal fluctuation in several of our lines of business, which are exposed to the risk of catastrophe and
non-catastrophe losses. Catastrophic events such as hurricanes typically occur in the second half of the year, and may increase
in frequency and severity due to climate change. We also experience some seasonal fluctuation as a result of non-catastrophic
weather-related events that tend to occur in the second and third quarters.
Global Preneed
Net earned premiums, fees and other income
Segment net income
Segment equity
Our Products and Services
Years Ended December 31,
2019
2018
2017
$
$
$
200.9
52.2
430.6
$
$
$
189.5
57.7
423.7
$
$
$
181.0
39.6
427.6
Global Preneed offers pre-funded funeral insurance and final need insurance. Pre-funded funeral insurance provides whole
life insurance or annuity death benefits to fund the costs associated with pre-arranged funerals, which are planned and paid for
in advance of death. Our pre-funded funeral insurance products are typically structured as whole life insurance policies in the
U.S. and offer limited pay (“Preneed”) or pay for life (“Final Need”) options. In Canada, our pre-funded funeral insurance
products are typically structured as limited pay annuity contracts. Product choices are based on the health and financial
situation of the customer and the distribution channel.
Consumers have the choice of making their policy payments as a single lump-sum payment, through multi-payment plans
that spread payments out over a period of time or as a pay for life policy. Our insurance policy is intended to cover the cost of
the prearranged funeral, and the funeral home generally becomes the irrevocable assignee of any proceeds from the insurance
policy. However, the insured may name a beneficiary for excess proceeds; otherwise, any excess proceeds are paid to the
insured’s estate. 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, it assists the funeral home that is the assignee in
managing its funeral inflation risk. We do not provide any funeral goods or services in connection with our pre-funded funeral
insurance policies; pre-funded funeral life insurance and annuity policies pay death benefits in cash only.
Distribution and Clients
We distribute our pre-funded funeral insurance products through two distribution channels in the U.S. and Canada: the
independent funeral home market or final expense industry through general agents representing those locations, and corporate
funeral home partners. Our policies are sold by licensed insurance agents or enrollers, who in some cases may also be funeral
directors.
We are the sole provider of pre-funded funeral insurance for Service Corporation International (“SCI”) in Canada and the
U.S. SCI is the largest funeral provider in North America based on total revenues. Our exclusive distribution partnership with
SCI runs through 2024 in the U.S. and through 2021 in Canada.
As of December 31, 2019, no single Global Preneed client accounted for 10% or more of our consolidated revenue.
However, Global Preneed is dependent on a few clients and the loss of any one or more such clients could have a material
adverse effect on our results of operations and cash flows. See “Item 1A – Risk Factors – Business and Competitive Risks –
Our revenues and profits may decline if we are unable to maintain relationships with significant clients, distributors and other
parties, or renew contracts with them on favorable terms, or if those parties face financial, reputational or regulatory issues.”
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Our Addressable Markets and Market Activity
Growth in Global Preneed sales has been traditionally driven by distribution partners. There is a high correlation between
new sales of pre-funded funeral insurance and the number of preneed counselors or enrollers 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 preneed market is
characterized by an aging population combined with low penetration of the over-65 market.
We intend to increase sales by broadening our distribution relationships and increasing market share in Canada. Through
our general agency system, we provide programs and a sales force for our funeral home clients to increase their local market
share. In the U.S., we also intend to direct funerals to SCI’s funeral locations and reduce SCI’s cost to sell and manage its
preneed operation through its sales counselors and third-party sellers. We integrate our processes with SCI’s insurance
production to support SCI’s management of its preneed business. We are also expanding our complementary non-insurance
products and services, including our executor assist product that helps executors manage a deceased’s accounts.
Risk Management
Global Preneed generally writes whole life insurance policies with increasing death benefits and obtains the majority of
its profits from 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 the movement in new money yields and evaluate our actual net new achievable yields
monthly. 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 maximize yield
and reduce risk.
Global Preneed utilizes 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.
Most of our pre-funded whole-life funeral insurance policies have increasing death benefits, some of which are pegged to
changes in the Consumer Price Index (the “CPI”). We have employed risk mitigation strategies, including the use of derivative
instruments, to seek to minimize our exposure to a rapid increase in inflation. However, exposure can still exist due to potential
differences in the amount of our liability under existing insurance policies and the amount of protection provided by our
derivative instruments and other risk mitigation strategies.
Competition
Our businesses focus on lifestyle and housing products and related services within broader insurance and other markets.
Although we face global competition in each of our businesses, we believe that no single competitor competes against us in all
of our business lines. Across Global Lifestyle, Global Housing and Global Preneed, we compete for business, customers, agents
and other distribution relationships with many insurance companies, financial services companies, mobile device repair and
logistics companies, technology and software companies and specialized competitors that focus on one market, product or
service. Competition in each business is based on a number of factors, including, but not limited to, scope of products and
services offered, ability to tailor products and services to client and consumer needs, product features and terms, pricing,
technology offerings, diversity of distribution resources, brand recognition, costs, financial strength and ratings, resources,
quality of service including speed of claims payment and overall customer experience. The relative importance of these factors
varies by product and market. To remain competitive in many of our businesses, we must also anticipate and respond
effectively to changes in customer preferences, new industry standards, evolving distribution models and disruptive technology
developments and alternate business models. In addition, across many of our businesses, we must respond to the threat of
disruption by traditional players, such as insurers, as well as from new entrants, such as technology companies, “Insurtech”
start-up companies and others. For further information on the risks associated with competition, see “Item 1A – Risk Factors –
Business and Competitive Risks – Significant competitive pressures, changes in customer preferences and disruption could
adversely affect our results of operations.”
Ratings
Independent rating organizations periodically review the financial strength of insurers, including many of our insurance
subsidiaries. Financial strength ratings represent the opinions of rating agencies regarding the ability of an insurance company
to meet its financial obligations to policyholders and contract holders. These ratings are not applicable to our common stock,
preferred stock or debt securities. Ratings are an important factor in establishing the competitive position of insurance
companies.
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Rating agencies also use an “outlook statement” of “positive,” “stable,” “negative” or “developing” to indicate a medium-
or long-term trend in credit fundamentals which, if continued, may lead to a rating change. A rating may have a stable outlook
to indicate that the rating is not expected to change; however, a stable outlook does not preclude a rating agency from changing
a rating at any time, without notice.
Most of our domestic and significant international operating insurance subsidiaries are rated by A.M. Best Company
(“A.M. Best”). In addition, four of our domestic operating insurance subsidiaries are rated by Moody’s Investors Service, Inc.
(“Moody’s”) and five are rated by S&P Global Ratings, a division of S&P Global Inc. (“S&P”). The ratings issued on our
operating insurance subsidiaries by these agencies are announced publicly and are available from the agencies.
For information on the risks associated with ratings downgrades, see “Item 1A – Risk Factors-Financial Risks – A decline
in the financial strength ratings of our insurance subsidiaries could adversely affect our results of operations and financial
condition.”
The following table summarizes the financial strength ratings and outlooks of our domestic and significant international
operating insurance subsidiaries as of December 31, 2019:
Company
American Bankers Insurance Company of Florida
American Bankers Life Assurance Company of Florida
American Memorial Life Insurance Company
American Security Insurance Company
Assurant Life of Canada
Caribbean American Life Assurance Company
Caribbean American Property Insurance Company
Reliable Lloyds Insurance Company
Standard Guaranty Insurance Company
Union Security Insurance Company
Union Security Life Insurance Company of New York
Virginia Surety Company, Inc
Voyager Indemnity Insurance Company
A.M. Best (1) Moody’s (2)
S& P (3)
A
A-
A-
A
A-
A-
A
A
A
B++
B++
A
A
A3
Baa1
N/A
A3
N/A
N/A
N/A
N/A
N/A
Baa1
N/A
N/A
N/A
A
A
A
A
N/A
N/A
N/A
N/A
N/A
A
N/A
N/A
N/A
(1) A.M. Best financial strength ratings range from “A++” (superior) to “D” (poor). Ratings of A and A- fall under the “excellent” category, which is the
second highest of A.M. Best’s seven ratings categories. A rating of B++ falls under the “good” category, which is the third highest of A.M. Best’s seven
ratings categories. A.M. Best has a stable outlook on all of our domestic and significant international operating insurance subsidiaries’ financial strength
ratings.
(2) Moody’s insurance financial strength ratings range from “Aaa” (highest quality) to “C” (lowest rated). A numeric modifier may be appended to ratings
from “Aa” to “Caa” to indicate relative position within a category, with 1 being the highest and 3 being the lowest. A rating of A3 is considered “upper-
medium-grade” and falls within the third highest of Moody’s nine ratings categories. A rating of Baa1 is considered "medium-grade" and falls within the
fourth highest of Moody’s nine ratings categories. Moody's has a stable outlook on all of our domestic operating insurance subsidiaries’ insurance
financial strength ratings.
S&P’s insurer financial strength ratings range from “AAA” (extremely strong) to “R” (under regulatory supervision). A “+” or “-” may be appended to
ratings from categories AA to CCC to indicate relative position within a category. Ratings of A (strong) are within the third highest of S&P’s ten ratings
categories. S&P has a stable outlook on all of our domestic operating insurance subsidiaries’ insurer financial strength ratings.
(3)
Regulation
We are subject to extensive federal, state and international regulation and supervision in the jurisdictions in which we do
business. Regulations vary from jurisdiction to jurisdiction. The following is a summary of significant regulations that apply to
our businesses, but is not intended to be a comprehensive review of every regulation to which we are subject. For information
on the risks associated with regulations applicable to us, see “Item 1A – Risk Factors – Business and Competitive Risks”, “Item
1A – Risk Factors – Technology, Cybersecurity and Privacy Risks” and “Item 1A – Risk Factors – Legal and Regulatory
Risks.”
U.S. Insurance Regulation
We are subject to the insurance holding company laws in the states and territories where our insurance companies are
domiciled. These laws generally require insurance companies within the insurance holding company system to register with the
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insurance departments of their respective states and territories of domicile and furnish reports to such insurance departments
regarding capital structure, ownership, financial condition, general business operations and intercompany transactions. These
laws also require that transactions between affiliated companies be fair and equitable. In addition, certain intercompany
transactions, changes of control, certain dividend payments and certain transfers of assets between the companies within the
holding company system are subject to prior notice to, or approval by, regulatory authorities in such states and territories.
We are licensed to sell insurance through our insurance subsidiaries in all 50 states, Puerto Rico and the District of
Columbia. Like all U.S. insurance companies, our insurance subsidiaries are subject to regulation and supervision in the
jurisdictions where they do business. In general, these regulations are designed to protect the interests of policyholders, and not
necessarily the interests of shareholders and other investors. To that end, the laws of the various jurisdictions establish
insurance departments with broad powers with respect to such things as:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
licensing;
capital, surplus and dividends;
underwriting requirements and limitations (including, in some cases, minimum or target loss ratios);
entrance into and exit from markets;
introduction, cancellation and termination of certain coverages;
statutory accounting and annual statement disclosure requirements;
product types, policy forms and mandated insurance benefits;
premium rates;
fines, penalties and assessments;
claims practices, including occasional regulatory requirements to pay claims on terms other than those mandated by
underlying policy contracts;
transactions between affiliates;
the form and content of disclosures to consumers;
the type, amounts and valuation of investments;
annual tests of solvency and reserve adequacy;
assessments or other surcharges for guaranty funds and the recovery of assessments through premium increases; and
• market conduct and sales practices of insurers and agents.
Dividend Payment Limitations. Assurant, Inc. is a holding company and our 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. Our subsidiaries’ ability to pay such dividends and make such other payments is regulated by
the states and territories in which our subsidiaries are domiciled. These dividend regulations vary from jurisdiction to
jurisdiction and by type of insurance provided by the applicable subsidiary, but generally require our insurance subsidiaries to
maintain minimum solvency requirements and limit the amount of dividends these subsidiaries can pay to us. For more
information, see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations –
Liquidity and Capital Resources – Regulatory Requirements.”
Risk-Based Capital Requirements. In order to enhance the regulation of insurer solvency, the National Association of
Insurance Commissioners (the “NAIC”) has established certain risk-based capital (“RBC”) standards applicable to life, health
and property and casualty insurers. RBC, which regulators use to assess the sufficiency of an insurer’s statutory capital, is
calculated by applying factors to various asset, premium, expense, liability and reserve items. Factors are higher for items that
the NAIC views as having greater underlying risk. The NAIC periodically reviews the RBC formula and changes to the formula
could occur in the future. In addition, the NAIC is continuing to develop a group capital calculation tool using an RBC
aggregation methodology for all entities within the insurance holding company system, including non-U.S. entities. The goal is
to provide U.S. regulators with a method to aggregate the available capital and the minimum capital of each entity in a group in
a way that applies to all groups regardless of their structure. The NAIC has stated that the calculation will be a regulatory tool
and will not constitute a requirement or standard. Nonetheless, any new group capital calculation methodology may incorporate
existing RBC concepts. It is not possible to predict what impact any such regulatory tool may have on our business.
Investment Regulation. Insurance company investments must comply with applicable laws and regulations that govern the
kind, quality and concentration of investments made by insurance companies. These regulations require diversification of
insurance company investment portfolios and limit the amount of investments in certain asset categories.
Financial Reporting. Regulators closely monitor the financial condition of licensed insurance companies. Our insurance
subsidiaries are required to file periodic financial reports with insurance regulators. Moreover, states and territories regulate the
form and content of these statutory financial statements.
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Products and Coverage. Insurance regulators have broad authority to regulate many aspects of our products and services.
Additionally, certain non-insurance products and services we offer, such as service contracts, may be regulated by regulatory
bodies other than departments of insurance.
Pricing and Premium Rates. Nearly all states and territories have insurance laws requiring insurers to file price schedules
and policy forms with the state’s or territory’s regulatory authority. In many cases, these price schedules and/or policy forms
must be approved prior to use, and state and territory insurance departments have the power to disapprove increases or require
decreases in the premium rates we charge.
Market Conduct Regulation. Activities of insurers are highly regulated by state and territory insurance laws and
regulations, that govern the form and content of disclosure to consumers, advertising, sales practices and complaint handling.
State and territory regulatory authorities enforce compliance through periodic market conduct examinations.
Guaranty Associations and Indemnity Funds. Most states and territories require insurance companies to support guaranty
associations or indemnity funds, which are established to pay claims on behalf of insolvent insurance companies. These
associations may levy assessments on member insurers. In some states and territories, member insurers can recover a portion of
these assessments through premium tax offsets and/or policyholder surcharges.
Insurance Regulatory Initiatives. The NAIC, state and territory regulators and professional organizations have considered
and are considering various proposals that may alter or increase state and territory authority to regulate insurance companies
and insurance holding companies. See “Item 1A – Risk Factors – Legal and Regulatory Risks – Changes in insurance
regulation may reduce our profitability and limit our growth” for a discussion of the risks related to such initiatives.
Federal Regulation
Employee Retirement Income Security Act. We are subject to regulation under the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”). ERISA places certain requirements on how we may administer employee benefit plans
covered by ERISA. Among other things, regulations under ERISA set standards for certain notice and disclosure requirements
and for claim processing and appeals.
Gramm-Leach-Bliley Act. Certain of our activities are subject to the privacy requirements of the Gramm-Leach-Bliley
Act, which, along with regulations adopted thereunder, generally requires insurers to provide customers with notice regarding
how their nonpublic personal financial information is used and the opportunity to “opt out” of certain disclosures, if applicable.
Dodd-Frank Wall Street Reform and Consumer Protection Act. Regulations under the Dodd-Frank Wall Street Reform
and Consumer Protection Act (the “Dodd-Frank Act”) address mortgage servicers’ obligations to correct errors asserted by
mortgage loan borrowers; provide certain information requested by such borrowers; and provide protections to such borrowers
in connection with Lender-placed Insurance. These requirements affect our operations because, in many instances, we
administer such operations on behalf of our mortgage servicer clients. While the Consumer Financial Protection Bureau (the
“CFPB”) does not have direct jurisdiction over insurance products, it is possible that additional regulations promulgated by the
CFPB may extend its authority more broadly to cover these products and thereby affect us or our clients.
International Regulation
We are subject to regulation and supervision of our international operations in various jurisdictions. These regulations,
which vary depending on the jurisdiction, include, among others, anti-corruption laws; solvency and market conduct
regulations; various privacy, insurance, tax, tariff and trade laws and regulations; and corporate, employment, intellectual
property and investment laws and regulations. We operate in various jurisdictions, including Canada, the U.K., France,
Argentina, Australia, Brazil, Chile, Peru, Colombia, Germany, India, the Netherlands, New Zealand, Spain, Italy, Mexico,
Japan, South Korea, China and Singapore, and our businesses are supervised by local regulatory authorities in these
jurisdictions.
Our insurance operations in the U.K., for example, are subject to regulation by the Financial Conduct Authority and
Prudential Regulation Authority. Currently, authorized insurers in the U.K. are generally permitted to operate throughout the
rest of the European Union (the “E.U.”), subject to satisfying certain requirements of these regulatory bodies and meeting
additional local regulatory requirements. On January 31, 2020, the U.K. withdrew from the E.U. (referred to as “Brexit”). We
have established insurance subsidiaries in the Netherlands and are in the process of obtaining the necessary regulatory
approvals to ensure we have continued access to the European markets after the transition period has concluded. Post-transition
period changes to the E.U. and U.K. legal, trade and regulatory frameworks could increase our compliance costs and subject us
to operational challenges in the region. For additional information, see “Item 1A – Risk Factors – Legal and Regulatory Risks –
The withdrawal of the United Kingdom from the European Union may adversely affect our business, financial condition and
results of operations in the region.”
Additionally, the International Association of Insurance Supervisors (the “IAIS”) is developing a model common
framework for the supervision of Internationally Active Insurance Groups (“IAIGs”), which includes group-wide supervisory
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oversight across national boundaries and the establishment of ongoing supervisory colleges. We qualify for the IAIG
designation; however, at present time no regulatory body has applied to supervise us in this manner. The IAIS is looking to
implement the International Capital Standard over the coming years. We do not expect to be involved in the early development
of the framework. At this time, we cannot predict what additional capital requirements, compliance costs or other burdens these
requirements would impose on us.
Securities and Corporate Governance Regulation
As a company with publicly-traded securities, we are subject to certain legal and regulatory requirements applicable
generally to public companies, including the rules and regulations of the U.S. Securities and Exchange Commission (the
“SEC”) and the New York Stock Exchange (the “NYSE”) relating to public reporting and disclosure, accounting and financial
reporting, corporate governance and other matters. Additionally, we and our subsidiaries are subject to the corporate
governance laws of our respective jurisdictions of incorporation or formation.
One of our subsidiaries is a registered investment adviser and as such is subject to the Investment Advisers Act of
1940, as amended (the “Advisers Act”). The Advisers Act, together with the SEC’s regulations and interpretations thereunder,
imposes substantive and material restrictions and requirements on the operations of our registered investment adviser
subsidiaries that cover, among other things, disclosure of information about our business to clients; maintenance of written
policies and procedures; maintenance of extensive books and records; restrictions on the types of fees we may charge, including
performance fees; solicitation arrangements; engaging in transactions with clients; maintaining an effective compliance
program; custody of client assets; client privacy; advertising; pay-to-play; and cybersecurity. The SEC is authorized to institute
proceedings and impose sanctions for violations of the Advisers Act, ranging from fines and censures to termination of an
investment adviser’s registration.
Anti-Corruption Regulation
We are subject to certain U.S. and foreign laws applicable to businesses generally, including anti-corruption laws. The
Foreign Corrupt Practices Act of 1977 (the “FCPA”) regulates U.S. companies in their dealings with foreign officials and
prohibits bribes and similar practices. In addition, the U.K. Anti-Bribery Act has wide applicability to certain activities that
affect U.K. companies, their commercial activities in the U.K., and potentially that of their affiliates located outside of the U.K.
Anti-bribery and corruption laws and regulations continue to be implemented and/or enhanced across most of the jurisdictions
in which we operate.
Privacy Regulation
We are subject to a variety of laws and regulations in the U.S. and abroad regarding privacy, data protection and data
security. These laws and regulations are continuously evolving and developing. For example, the E.U. General Data Protection
Regulation (“GDPR”), which became effective in May 2018, greatly increased the jurisdictional reach of the European
Commission’s laws and added a broad array of requirements for handling personal data, such as the public disclosure of
significant data breaches, privacy impact assessments, data portability and the appointment of data protection officers. GDPR’s
goal is to impose increased individual rights and protections for all personal data located in or originating from the E.U. GDPR
is extraterritorial in that it applies to all business in the E.U. and any business outside the E.U. that processes E.U. personal data
of individuals in the E.U. There are significant fines associated with non-compliance with GDPR. Additionally, in August 2018,
Brazil passed its first privacy law, which is modeled after GDPR.
At the state level, the New York State Department of Financial Services has issued cybersecurity regulations that
impose an array of detailed security measures on covered entities and California passed a comprehensive privacy act that
increases California residents’ privacy rights in a manner similar to GDPR.
Environmental Regulation
Because we own and operate real property, we are subject to federal, state and local environmental laws. Potential
environmental liabilities and costs in connection with any required remediation of such properties is an inherent risk in property
ownership and operation. Additionally, 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, which could have priority over the lien of an existing mortgage
against the property. To the extent we hold a mortgage loan on any property subject to such a lien, our ability to foreclose on
that property should the related loan be in default would be impaired. Further, under certain circumstances, we may be liable for
the costs of addressing releases or threatened releases of hazardous substances at properties securing mortgage loans held by us.
Other Regulation
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As we continue to grow and evolve our business mix to cover other non-insurance based products and services, we have
and will continue to become subject to other legal and regulatory requirements, including regulations of the CFPB and other
federal, state and municipal regulatory bodies, as well as additional regulatory bodies in non-U.S. jurisdictions. Examples
include import and export trade compliance for the movement of mobile devices across geographic borders; health, safety, labor
and environmental regulations impacting our mobile supply chain operations; and antitrust and competition-related laws and
regulations that may impact future transactions or business practices.
Enterprise Risk Management
We have made effective risk management a key ongoing corporate objective. It is the responsibility of senior management
to assess and manage our exposure to risk. The Board directly and through its committees oversees our risk management
policies and practices. As described below and in their charters, the committees of the Board oversee risk management in
specific areas and regularly discuss risk-related issues with the entire Board, which is actively involved in oversight of
enterprise risk management.
Governance
Risk management is the responsibility of the Chief Strategy and Risk Officer, who leads the Assurant Risk Management
function and reports directly to the Chief Executive Officer and regularly reports to the Finance and Risk Committee of the
Board and to the Board. Our risk management framework cascades downwards into the enterprise through various management
committees. Our risk governance structure is headed by an Executive Risk Committee (“ERC”), comprised of the Chief
Executive Officer, the Chief Financial Officer, the Chief Strategy and Risk Officer and the Chief Legal Officer. The ERC
reviews the most significant risks and the mitigation and remediation plans that correspond to these risks.
An enterprise level Business Risk Committee, chaired by the Chief Strategy and Risk Officer and including members
representing the leaders of each of line of business, international, and functional support areas, reviews and advises on risk
within the business, and reports to the ERC.
Board of Directors and Committee Oversight
The Audit Committee reviews the Company’s policies with respect to risk assessment and risk management and
coordinates with the Finance and Risk Committee with respect to oversight of risk management and enterprise risk
management activities. The Audit Committee also focuses on risks relating to financial statements, privacy and data security,
information technology and cybersecurity, and compliance with legal and regulatory requirements. The Finance and Risk
Committee receives regular risk management updates and also focuses on risks relating to investments, capital management and
catastrophe reinsurance. The Compensation Committee focuses on risks relating to executive retention and compensation plan
design and the Nominating and Corporate Governance Committee focuses on risks relating to director and management
succession and diversity.
Management Oversight
Assurant Risk Management (“ARM”) coordinates our risk management activities and is headed by our Chief Strategy and
Risk Officer. ARM develops risk assessment and risk management policies and facilitates identification, management,
measurement and reporting of risks. ARM also coordinates with the compliance department and other second-line departments
and committees overseeing risk.
Risk Identification, Measuring, Monitoring and Reporting
Risk management facilitates an annual company-wide assessment to identify the key prioritized risks. Risk owners are
required to assess current and future risks in their areas and the effectiveness of controls in place. Risk management presents
results to management and action plans are agreed as necessary. This annual assessment is also used to identify emerging risks
which may not, by their nature, have been classified previously. Key enterprise risks are reviewed with the Board as described
above.
Risk appetite is used to ensure that we manage the types and amount of risk we are willing to assume, consistent with our
business strategy and objectives. The Company’s risk appetite is subject to Board oversight.
The risk management team operates an on-going process in which all relevant risks are reviewed by line of business,
region or country and that includes a risk assessment of both new and renewal client deals. For all these particular processes,
the risk team acts as facilitator and ensures a governance structure is in place, with risk-taking decisions made by first line
business management.
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The risk team manages internal and external risk reporting using a central risk depository as the single source for risk
information. The register collects information obtained from the processes described above and other sources. Risks are
classified using an enterprise-wide risk taxonomy.
Other Information
Employees
We had approximately 14,200 employees, including approximately 13,600 full-time employees, as of December 31, 2019.
As of December 31, 2019, we had employees in Argentina, Brazil, Italy, Spain, France and Mexico that were represented by
labor unions or trade organizations. We believe that employee relations are satisfactory.
Available Information
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments
to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), as well as the Statements of Beneficial Ownership of Securities on Forms 3, 4 and 5 for our directors and
officers, are available free of charge through the SEC website at www.sec.gov. These documents are also available free of
charge through the Investor Relations page of our website (www.assurant.com) as soon as reasonably practicable after they are
filed with or furnished to the SEC. The information found on our website is not incorporated by reference into and does not
constitute a part of this Report or any other report filed with or furnished to the SEC.
Item 1A. Risk Factors
Certain factors may have a material adverse effect on our business, financial condition, results of operations and cash
flows. You should carefully consider them, along with the other information presented in this Report. It is not possible to
predict or identify all such factors. Additional risks and uncertainties that are not yet identified or that we currently believe to
be immaterial may also materially harm our business, financial condition, results of operations and cash flows.
Business and Competitive Risks
Our revenues and profits may decline if we are unable to maintain relationships with significant clients, distributors and
other parties, or renew contracts with them on favorable terms, or if those parties face financial, reputational or regulatory
issues.
The success of our business depends largely on our relationships and contractual arrangements with significant clients,
distributors and other parties, including vendors. Many of these arrangements are exclusive and some rely on preferred provider
or similar relationships. If our key clients, distributors, vendors or other parties terminate important business arrangements with
us, or renew contracts on terms less favorable to us, our cash flows, results of operations and financial condition could be
materially adversely affected.
Each of our Global Lifestyle, Global Housing and Global Preneed segments receives a substantial portion of its revenue
from a few clients. A reduction in business with or the loss of one or more of our significant clients could have a material
adverse effect on the results of operations and cash flows of individual segments or the Company. Our segments’ reliance on a
few significant clients may weaken our bargaining power and we may be unable to renew contracts with them on favorable
terms or at all. Examples of important business arrangements include, at Global Lifestyle, exclusive and non-exclusive
relationships with mobile device carriers, retailers, dealerships, MSOs, OEMs and financial and other institutions through
which we distribute our products and services. At Global Housing, we have exclusive and non-exclusive relationships with
mortgage lenders and servicers, manufactured housing lenders, property managers and financial and other institutions. At
Global Preneed, we have an exclusive distribution relationship with SCI relating to the distribution of our preneed insurance
policies.
We are also subject to the risk that clients, distributors and other parties may face financial difficulties, reputational issues,
problems with respect to their own products and services or regulatory restrictions or compliance issues that may lead to a
decrease in or cessation of sales of our products and services and have other adverse impacts on our results of operations or
financial condition. For example, one of our clients (whose revenues represented approximately 1% of our total revenues for
the year ended December 31, 2019) filed a voluntary petition for reorganization and the U.S. bankruptcy court approved its
acquisition and assumption of certain contracts by another company. Although we currently do not expect a material impact to
our financial performance as a result, the reduction in loans tracked from this client has impacted the results of our Global
Housing segment. In addition, our clients and other parties with whom we do business may choose to exit lines of business that
we service or may disintermediate us by developing internal capabilities, products or services that would allow them to service
their clients without our involvement. In particular, the transfer by mortgage servicer clients of loan portfolios to competitors or
their participation in insuring Lender-placed Insurance risks that we have historically insured could materially reduce our
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revenues and profits from this business. Furthermore, if one or more of our clients or distributors, for example in the wireless
and related markets, consolidate or align themselves with other companies with whom we do not do business, they may choose
to utilize or distribute the products and services of our competitors, which could materially reduce our revenues and profits.
Significant competitive pressures, changes in customer preferences and disruption could adversely affect our results of
operations.
We compete for business, customers, agents and other distribution relationships with many insurance companies, financial
services companies, mobile device repair and logistics companies, technology and software companies and specialized
competitors that focus on one market, product or service. Some of our competitors may offer a broader array of products and
services than we do or be better able to tailor those products and services to customer needs, or may have greater diversity of
distribution resources, better brand recognition, more competitive pricing, lower costs, greater financial strength, more
resources or higher ratings.
There is a risk that purchasers may be able to obtain more favorable terms and offerings from competitors, vendors or
other third parties, including pricing and technology. Additionally, customers may turn to our competitors as a result of our
failure to deliver on customer expectations, product or service flaws, technology issues, gaps in operational support or other
issues affecting customer experience. As a result, competition may adversely affect the persistency of our policies, our ability to
sell products and provide services and our revenues and results of operations. For example, in our Lender-placed Insurance
business, we use a proprietary insurance-tracking administration system and the development by others of competing systems
or equivalent capabilities could reduce our revenues and adversely affect our results of operations.
To remain competitive in many of our businesses, we must anticipate and respond effectively to changes in customer
preferences, new industry standards, evolving distribution models, and disruptive technology developments and alternate
business models. For Global Lifestyle, in particular, the evolving nature of consumer needs and preferences and improvements
in technology could result in a reduction in consumer demand and in the prices of the products and services we offer. In
addition, across many of our businesses, we must respond to the threat of disruption by traditional players, such as insurers, as
well as from new entrants, such as technology companies, “Insurtech” start-up companies and others. These players are focused
on using technology and innovation to simplify and improve the customer experience, increase efficiencies, alter business
models and effect other potentially disruptive changes in the markets in which we operate. In order to maintain a competitive
position, we must continue to invest in new technologies and new ways to deliver our products and services. If we do not
anticipate and respond to customer preferences and disruptive changes, our business and results of operations could be
adversely impacted.
We may be unable to grow our business if we cannot find suitable acquisition candidates at attractive prices, integrate
acquired businesses effectively or identify new areas for organic growth.
We expect acquisitions to continue to play a role in the growth of some of our businesses. There can be no assurance that
we will continue to be able to identify suitable acquisition candidates or new venture opportunities or to finance or complete
such transactions on acceptable terms. Additionally, the integration of acquired businesses may result in significant challenges
and additional costs, and we may be unable to accomplish such integration smoothly or successfully.
Acquisitions may not provide us with the benefits that we anticipate, require significant effort and expenditures and entail
numerous risks, difficulties and uncertainties. These include, among others, diversion of management’s attention to integration
of operations and infrastructure; inaccurate assessment of risks and liabilities; difficulties in realizing projected efficiencies,
synergies and cost savings, including the incurrence of unexpected integration costs; difficulties in keeping existing customers
and obtaining new customers; exposure to jurisdictions or businesses with heightened legal and regulatory risks, including
corruption; difficulties in integrating operations and systems, including cybersecurity and other technology systems and
compliance; difficulties in assimilating employees and corporate cultures; failure to achieve anticipated revenues, earnings,
cash flows, business opportunities and growth prospects; an increase in our indebtedness or future borrowing costs; and
limitations on our ability to access additional capital when needed. Our failure to adequately address these and other acquisition
risks, difficulties and uncertainties could materially adversely affect our results of operations and financial condition.
The market price of our stock may decline if we are unable to integrate acquired businesses successfully, if the integration
takes longer than expected or fails to achieve financial benefits to the extent anticipated by financial analysts or investors, or if
the effect of the business combination on the financial results of the combined company is otherwise not consistent with the
expectations of financial analysts or investors.
Our ability to effectively identify and capitalize on opportunities for organic growth depends on, among other things, our
ability to: deliver on customer expectations and provide a positive customer experience; successfully execute large-scale,
critical programs and projects in a timely and cost-effective manner; identify and successfully enter and market our services in
new geographic markets and market segments; recruit and retain qualified personnel; coordinate our efforts across various
geographic markets and market segments; maintain and grow relationships with our existing customers and expand our
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customer base; offer new products and services; form strategic alliances and partnerships; secure key vendor and distributor
relationships; and access sufficient capital. There can be no assurance that we will be successful in executing on our organic
growth initiatives or that those initiatives will provide us with the expected benefits. Our failure to effectively identify and
capitalize on opportunities for organic growth could have an adverse effect on our results of operations and financial condition.
General economic, financial market and political conditions and conditions in the markets in which we operate may
materially adversely affect our results of operations and financial condition.
General economic, financial market and political conditions and conditions in the markets in which we operate could have
a material adverse effect on our results of operations and financial condition. Limited availability of credit, deteriorations of the
global mortgage and real estate markets, declines in consumer confidence and consumer spending, increases in prices or in the
rate of inflation, periods of high unemployment, persistently low or rapidly increasing interest rates, disruptive geopolitical
events and other events outside of our control, such as a major epidemic or a pandemic, could contribute to increased volatility
and diminished expectations for the economy and the financial markets, including the market for our stock. These conditions
could adversely affect all of our business segments. Specifically, during periods of economic downturn:
•
•
•
•
•
•
•
individuals and businesses may (i) choose not to purchase our insurance products, warranties and other products and
services, (ii) terminate existing policies or contracts or permit them to lapse and (iii) choose to reduce the amount of
coverage they purchase;
conditions in the markets in which we operate may deteriorate, impacting, among other things, consumer demand
for the electronics, appliances, automobiles, housing and other products we insure, including the rate of introduction
and success of new products, technologies and promotional programs that provide opportunities for growth;
clients are more likely to underperform expectations, experience financial distress, declare bankruptcy or liquidate,
which could have an adverse impact on the remittance of premiums from such clients and the collection of
receivables from such clients for items such as unearned premiums and could otherwise expose us to credit risk;
claims on certain specialized insurance products tend to rise;
there is a higher loss ratio on credit card and installment loan insurance due to rising unemployment and disability
levels;
there is an increased risk of fraudulent insurance claims; and
substantial decreases in loan availability and origination could reduce the demand for credit insurance that we write
or debt cancellation or debt deferment products that we administer, and on the placement of hazard insurance under
our Lender-placed Insurance programs.
General inflationary pressures may affect 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 preneed insurance policies,
particularly those that are guaranteed to grow with the CPI. Conversely, deflationary pressures may affect the pricing of our
products and services.
We face risks associated with our international operations.
Our international operations face economic, political, legal, compliance, regulatory, operational and other risks. For
example, we face the risk of restrictions on currency conversion or the transfer of funds; burdens and costs of compliance with
a variety of foreign laws and regulations and the associated risk and costs of non-compliance; exposure to undeveloped or
evolving legal systems, which may result in unpredictable or inconsistent application of laws and regulations; exposure to
commercial, political, legal or regulatory corruption; political, economic or other instability in countries in which we conduct
business, including possible terrorist acts; the imposition of tariffs, trade barriers or other protectionist laws or business
practices that favor local competition, increase costs and adversely affect our business; inflation and foreign exchange rate
fluctuations; diminished ability to enforce our contractual rights; potential increased risk of data breaches; differences in
cultural environments; changes in regulatory requirements, including changes in regulatory treatment of certain products or
services; exposure to local economic conditions and its impact on our clients’ performance and creditworthiness; and
restrictions on the repatriation of non-U.S. investments and earnings.
If our business model is not successful in a particular country or region, or a country or region in which we do business
experiences economic, political or other instability, we may lose all or part of our investment in that country or region. As we
continue to expand in select worldwide markets, our business becomes increasingly exposed to these and other risks, in
particular where certain countries or regions have recently experienced economic or political instability, such as in Argentina,
Brazil, South Korea and the United Kingdom (the “U.K.”). For information on the U.K. and Brexit (as defined hereafter), see
“ – The withdrawal of the United Kingdom from the European Union may adversely affect our business, financial condition and
results of operations in the region.”
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As we engage with international clients, we may make certain up-front commission payments or similar cash outlays,
which we may not recover if the business does not develop as we expect. These up-front payments are typically supported by
various protections, such as letters of credit, letters of guarantee and real estate, but we may not fully or timely recover amounts
owed to us as a result of difficulties in enforcing contracts or judgments in undeveloped or evolving legal systems and other
factors. As our international business grows, we rely increasingly on fronting carriers or intermediaries in certain countries to
maintain their licenses and product approvals, satisfy local regulatory requirements and continue in business. If they fail to do
so, our business, reputation and relationships with our customers could be adversely affected.
For additional information on the significant international regulations that apply to us, including data protection
regulations, and the risks relating thereto, see “Item 1 – Business – Regulation – International Regulation” in this Report, “ –
Legal and Regulatory Risks – We are subject to extensive laws and regulations, which increase our costs and could restrict the
conduct of our business, and violations or alleged violations of such laws and regulations could have a material adverse effect
on our reputation, business and results of operations”, “ – Legal and Regulatory Risks – Our business is subject to risks related
to litigation and regulatory actions” and “ – Technology, Cybersecurity and Privacy Risks – The costs of complying with, or
our failure to comply with, U.S. and foreign laws related to privacy, data security and data protection could adversely affect
our financial condition, operating results and reputation”.
The withdrawal of the United Kingdom from the European Union may adversely affect our business, financial condition
and results of operations in the region.
We currently conduct business in Europe through our U.K. insurance subsidiaries. The withdrawal of the U.K. from the
European Union (the “E.U.”), referred to as “Brexit,” occurred on January 31, 2020. Pursuant to the terms of the withdrawal,
we expect to be able to continue to use our U.K. insurers to conduct business in Europe until the end of the transition period on
December 31, 2020. We are in the process of obtaining the necessary regulatory approvals for insurance subsidiaries in the
Netherlands. There can be no assurance that we will receive them in time for us to transition our business in the E.U. by the
conclusion of the transition period.
If we are unable to write new business and service our current business in Europe following the end of the transition
period, either directly or through other arrangements, our European business may be adversely affected due to, among other
things, financial exposure to client losses, increased cost of doing business and reputational damage. Additionally, post-
transition period changes to the E.U. and U.K. legal, trade and regulatory frameworks could increase our compliance costs,
subject us to operational challenges in the region and negatively impact the region’s economic conditions, financial markets
and exchange rates, each of which may have a negative impact on our business.
Catastrophe and non-catastrophe losses, including as a result of climate change, 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 from catastrophes and non-catastrophes, particularly in our
homeowners insurance businesses. Catastrophes include reportable catastrophe losses, which are individual catastrophe events
that generated losses in excess of $5.0 million, pre-tax and net of reinsurance. Non-catastrophe losses include losses from
weather, fire, water damage, theft and vandalism, as well as general liability in commercial liability, renters and car-sharing
insurance policies, among others.
We have experienced, and expect to continue to experience, catastrophe and non-catastrophe losses that materially reduce
our profitability or have a material adverse effect on our results of operations and financial condition. Catastrophes can be man-
made, including terrorist attacks and accidents, or can be caused by various natural events, including hurricanes, windstorms,
earthquakes, hailstorms, floods, severe winter weather, fires and epidemics.
Natural catastrophe trends are changing due to climate change, a phenomenon linked to rising global temperatures and
resulting in changes in weather patterns. While the exact impact of the physical effects of climate change is uncertain, changes
in the global climate may cause long-term increases in the frequency and severity of weather events, particularly in coastal
areas, and result in increased claims and higher catastrophe losses, which could have a material adverse effect on our results of
operations and financial condition. We also cannot predict how legal, regulatory and social responses to concerns around
climate change may impact our business. While the frequency and severity of both man-made and natural catastrophes are
inherently unpredictable, increases in the value and geographic concentration of insured property, the geographic concentration
of insured lives and the effects of inflation could increase the severity of claims from future catastrophes. In addition,
legislative and regulatory initiatives and court decisions following major catastrophes could expand insurance coverage for
catastrophe claims or otherwise adversely impact our business.
Catastrophe losses can vary widely and could significantly exceed our expectations. We use catastrophe modeling tools
that help estimate our probable losses, but these projections are based on historical data and other assumptions, including with
respect to climate change and seasonal weather variations, that may differ materially from actual events. If the severity of an
event were sufficiently high, our losses could exceed our reinsurance coverage limits and could have a material adverse effect
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on our results of operations and financial condition. In addition, claims from catastrophic events could result in substantial
volatility in our results of operations and financial condition for any particular fiscal quarter or year.
Accounting rules do not permit insurers to reserve for catastrophic events before they occur. Once a catastrophic event
occurs, the establishment of appropriate reserves is an inherently uncertain and complex process. The ultimate cost of losses
may vary materially from recorded reserves and such variance may have a material adverse effect on our results of operations,
financial condition and capital.
Because Global Housing’s lender-placed homeowners and lender-placed manufactured housing insurance products are
designed to automatically provide property coverage for client portfolios, our exposure to certain catastrophe-prone locations,
such as Florida, California, Texas, New York and Puerto Rico, may increase. The withdrawal of other insurers from these or
other states may lead to adverse selection and increased use of our products in these areas and may negatively affect our loss
experience.
In addition, with respect to our preneed insurance policies, the average age of our policyholders was approximately 73
years as of December 31, 2019. Elderly individuals are generally more susceptible to certain 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 inability to successfully recover should we experience a business continuity event could have a material adverse effect
on our business, financial condition and results of operations.
If we experience a local or regional disaster or other business continuity event, such as an earthquake, hurricane, flood,
terrorist attack, pandemic, security breach, cyber-attack, power loss, computer, telecommunication or other systems failure or
other natural or man-made disaster, our ability to continue operations will depend on an effective disaster recovery plan and
system, including the continued availability of our personnel and office facilities and the proper functioning of our computer,
telecommunication and other systems and operations. We have from time to time experienced business continuity events,
including events that impacted the availability of our systems. Although these events have resulted in operational challenges, to
date, they have not had a material adverse effect on our business, financial condition or results of operations. See “ –
Technology, Cybersecurity and Privacy Risks – The failure to effectively maintain and modernize our information technology
systems and infrastructure and integrate those of acquired businesses could adversely affect our business.”
Our operations depend in particular upon our ability to protect our technology infrastructure against damage and
interruption. If a business continuity event occurs, we could lose Company, customer, vendor and other third-party data or
experience interruptions to our operations or delivery of products and services to our customers, which has occurred from time
to time and which could have a material adverse effect on our business, financial condition and results of operations. A cyber-
attack or other business continuity event affecting us or key third parties with whom we work could result in a significant and
extended disruption in the functioning of our information technology systems or operations, requiring us to incur significant
expense to address and remediate or otherwise resolve such issues. An extended outage could result in the loss of premium
income, fee income and clients, reputational damage, substantial volatility in our financial results and a decline in our revenues.
See “ – Technology, Cybersecurity and Privacy Risks – We could incur significant liability if our information systems or those
of third parties are breached or we or third parties otherwise fail to protect the security of data residing on our respective
systems, which could adversely affect our business and results of operations.”
The risk of business disruption is more pronounced in certain geographic areas, including major metropolitan centers,
such as New York City, where our corporate offices are located, and certain catastrophe-prone areas, such as Miami, Florida,
where we have significant operations. This risk is also heightened in certain countries and regions in which we operate that are
subject to higher potential threat of terrorist attacks, military conflicts, political instability and data breaches.
A disaster or other business continuity event on a significant scale or affecting our key businesses or our data center, or
our inability to successfully recover from such an event and any legislative and regulatory responses thereto, could materially
interrupt our business operations and result in material financial loss, loss of human capital, regulatory actions, reputational
harm, loss of customers or damaged customer relationships, legal liability and other adverse consequences. Our liability
insurance policies may not fully cover, in type or amount, the cost of a successful recovery in the event of such a disruption.
We face risks associated with joint ventures, franchises and investments in which we share ownership or management with
third parties.
From time to time, we have and may continue to enter into joint ventures and franchises and invest in entities in which we
share ownership or management with third parties. In certain circumstances, we may not have complete control over
governance, financial reporting, operations, legal and regulatory compliance or other matters relating to such joint ventures,
franchises or entities. As a result, we may face certain operating, financial, legal and regulatory compliance and other risks
relating to these joint ventures, franchises and entities, including risks related to the financial strength of joint venture partners,
franchisees and other investors; the willingness of joint venture partners, franchisees and other investors to provide adequate
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funding for the joint venture, franchise or entity; differing goals, strategies, priorities or objectives between us and joint venture
partners, franchisees or other investors; our inability to unilaterally implement actions, policies or procedures with respect to
the joint venture, franchise or entity that we believe are favorable; legal and regulatory compliance risks relating to actions of
the joint venture, franchise, entity, joint venture partners, franchisees or other investors; the risk that the actions of joint venture
partners, franchisees and other investors could damage our brand image and reputation; and the risk that we will be unable to
resolve disputes with joint venture partners, franchisees or other investors. As a result, joint ventures, franchises and
investments in which we share ownership or management subject us to risk and may contribute significantly less than
anticipated to our earnings and cash flows.
Sales of our products and services may decline if we are unable to develop and maintain distribution sources or attract and
retain sales representatives and executives with key client relationships.
We distribute many of our insurance products and services through a variety of distribution channels, including mobile
carriers, financial institutions, mortgage lenders and servicers, retailers, funeral homes, association groups, other third-party
marketing organizations and, to a limited extent, our own captives and affiliated agents. Our relationships with these
distributors are significant for our revenues and profits. There is intense competition for distribution outlets. Agents who
distribute our products are typically not exclusively dedicated to us, but also market the products of our competitors. In some
cases, such agents may be affiliated with other insurers who may choose to write the product that such agents are now selling
on our behalf. Therefore, we face continued competition from competing products and services.
We also have our own sales representatives. We depend in large part on our sales representatives and segment executives
to develop and maintain client relationships. Our inability to attract and retain effective sales representatives and executives
with key client relationships could materially adversely affect our results of operations and financial condition.
Failure to successfully manage vendors and other third parties could adversely affect our business.
As we continue to improve operating efficiencies, we rely on vendors and other third parties, including independent
contractors, to conduct business and provide services to our clients. For example, we use vendors and other third parties for
business, information technology, call centers, facilities management and other services. We take steps to monitor and regulate
the performance of vendors and other third parties, including in our agreements with such parties, but our oversight controls
could prove inadequate. Since we do not fully control the actions of vendors and other third parties, we are subject to the risk
that their decisions or operations adversely impact us and replacing them could create significant delay and expense. If these
vendors or other third parties fail to satisfy their obligations to us or if they fail to comply with legal or regulatory requirements
in a high-quality and timely manner, our operations and reputation could be compromised, we may not realize the anticipated
economic and other benefits from these arrangements and we could suffer adverse legal, regulatory and financial consequences.
In addition, these third parties face their own technology, operating, business and economic risks, and any significant failures
by them, including the improper use or disclosure of our confidential client, employee or Company information or failure to
comply with applicable law, could cause harm to our reputation or otherwise expose us to liability. An interruption in or the
cessation of service by any service provider as a result of systems failures, capacity constraints, financial difficulties or for any
other reason could disrupt our operations, impact our ability to offer certain products and services and result in contractual or
regulatory penalties, liability claims from clients or employees, damage to our reputation and harm to our business. If we are
unable to attract and retain relationships with qualified vendors, independent contractors and other third-party service
providers, or if changes in law or judicial decisions require independent contractors to be classified as employees, our business
could be significantly adversely affected.
To the extent we engage international vendors or third parties to provide services or carry out business functions, we are
also exposed to the risks that accompany operations in a foreign jurisdiction, including international economic and political
conditions, foreign laws and regulations, fluctuations in currency values and, potentially, increased risk of data breaches. For
more information on the risks associated with the use of international vendors and third parties, see “ – We face risks associated
with our international operations.”
Our mobile business is subject to the risk of declines in the value of mobile devices in our inventory, to the risk of
guaranteed buybacks, and to export compliance and other risks.
The value of the mobile devices that we collect and refurbish for our clients may fall below the prices we have paid or
guaranteed, which could adversely affect our profitability. In our mobile business, we carry inventory to meet the delivery
requirements of certain clients and we provide the guaranteed buyback of devices as part of our trade-in and upgrade offerings.
These devices are ultimately disposed of through sales to third parties. Our mobile business is subject to the risk that the value
of devices and parts will be adversely affected by price reductions, technological changes affecting the usefulness or
desirability of the devices and parts, physical problems resulting from faulty design or manufacturing, increased competition
and growing industry emphasis on cost containment. The value of devices may also be impacted by any adverse trade
relationship between the U.S. and China, including with respect to trade policies, treaties, government relations, tariffs and
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other trade restrictions. If the value of devices or parts is significantly reduced, it could have a material adverse effect on our
profitability.
Our sales of mobile devices to third parties, particularly those domiciled outside of the U.S., subject us to compliance
risks relating to export control laws and regulations. Furthermore, third parties to whom we sell mobile devices may violate
such laws and regulations, which could subject us to liability. Non-compliance with such laws could adversely affect our
business, financial condition and results of operations. For more information on the risks relating to our international
operations, see “ – We face risks associated with our international operations.”
Our products and services and the markets in which we operate may be subject to periodic negative publicity, which may
negatively affect our financial results.
We communicate with and distribute our products and services ultimately to individual consumers. There may be a
perception that some of these purchasers may be unsophisticated and in need of consumer protection. Accordingly, from time to
time, consumer advocacy groups and the media may focus their attention on our products and services, which may subject us to
negative publicity. We may also be negatively affected if another company in one of our industries or in a related industry
engages in practices that subject our industry or businesses to negative publicity. Negative publicity may also result from
judicial inquiries, unfavorable outcomes in lawsuits, social media, regulatory or governmental actions with respect to our
products or services and industry commercial practices.
Negative publicity may cause increased regulation and legislative scrutiny of industry practices as well as increased
litigation or enforcement action by civil and criminal authorities. Additionally, negative publicity may increase our costs of
doing business and adversely affect our profitability by impeding our ability to market our products and services, constraining
our ability to price our products appropriately for the risks we are assuming, requiring us to change the products and services
we offer or increasing the regulatory burdens under which we operate.
The success of our business depends on the implementation of our strategy and the continuing service of key executives,
senior management and other highly-skilled personnel.
As part of our strategy, we are seeking to increase efficiencies and achieve cost savings while investing in technology and
capabilities to support growth. We will continue to incur costs related to, among other things, investments in large-scale, critical
programs, particularly in information technology systems and infrastructure, as well as costs associated with businesses in
runoff or that have been sold. Our long-term strategy depends on successful operational execution, supported by the
transformation of our information technology systems and infrastructure and combined with our ability to achieve efficiencies
and attract and retain personnel.
We rely on the continued service of key executives, senior management and other highly-skilled personnel throughout our
business. We believe that our future success depends in substantial part on our ability to recruit, hire, motivate, develop, and
retain highly-skilled personnel. Doing so may be difficult due to many factors, including fluctuations in economic and industry
conditions, employee tolerance for the significant amount of change within and demands on the Company, the effectiveness of
our compensation programs and competition. If we do not succeed in attracting, retaining and motivating key personnel, our
revenue growth and profitability may be materially adversely affected. Furthermore, our business and results of operations
could be adversely affected if we fail to adequately plan for and successfully carry out the succession of our key executives and
senior management.
Employee misconduct could harm us by subjecting us to significant legal liability, regulatory scrutiny and reputational
harm.
Our ability to attract and retain employees and clients depends upon our corporate culture. Our employees are the
cornerstone of our culture and acts of misconduct by any employee, and particularly by senior management, could erode trust
and confidence and damage our reputation. Our employees could engage or be accused of engaging in misconduct that subjects
us to litigation, regulatory sanctions, financial costs and serious harm to our reputation or financial position. Employee
misconduct could also prompt regulators to allege or determine, on the basis of such misconduct, that we have not established
an adequate program to inform employees of applicable rules or to detect and deter violations of such rules. It is not always
possible to deter employee misconduct and the precautions we take to detect and prevent misconduct may not be effective.
Misconduct by employees, or even unsubstantiated allegations, could have a material adverse effect on our financial position,
reputation and business.
Our common stock may be subject to stock price and trading volume volatility.
Our common stock price could materially fluctuate or decrease in response to a number of events and factors, including:
quarterly variations in our operating results; catastrophe losses; operating and stock price performance of comparable
companies; changes in our insurance subsidiaries’ financial strength ratings; changes in our corporate debt ratings; limitations
on premium levels or the ability to maintain or raise premiums on existing policies; regulatory developments; and negative
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publicity relating to us or our competitors. In addition, broad market and industry fluctuations may materially and adversely
affect the trading price or volume of our common stock, regardless of our actual operating performance.
Applicable laws, our certificate of incorporation and by-laws and contract provisions may discourage takeovers and
business combinations that some stockholders might consider to be in their best interests.
Applicable 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 to be in their best interests. For example, 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. These provisions may also make it difficult for stockholders to replace or remove our directors, which could delay, defer
or prevent a change in control. Such provisions may 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 future takeover attempts.
Additionally, applicable state and foreign insurance laws may require prior approval of an application to acquire control
of a domestic insurer. State statutes generally provide, and certain foreign statutes provide, that control over a domestic insurer
is presumed to exist when any person directly or indirectly owns, controls, has voting power over, or holds proxies
representing, 10% or more of the domestic insurer’s voting securities. Prior to granting such approval, 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.
Our certificate of incorporation or by-laws also contain provisions that permit the Board to issue one or more series of
preferred stock, prohibit stockholders from filling vacancies on the Board, prohibit stockholders from calling special meetings
of stockholders and from taking action by written consent and impose advance notice requirements for stockholder proposals
and nominations of directors to be considered at stockholder meetings.
Financial Risks
Our actual claims losses may exceed our reserves for claims, requiring us to establish additional reserves or to incur
additional expense for settling unreserved liabilities, which could have a material adverse effect on our results of operations,
profitability and capital.
We maintain reserves to cover our estimated ultimate exposure for claims and claim adjustment expenses with respect to
reported claims and incurred but not reported (“IBNR”) claims as of the end of each accounting period. Whether calculated
under accounting principles generally accepted in the United States of America (“GAAP”), Statutory Accounting Principles or
accounting principles applicable in foreign jurisdictions, reserves are estimates. Reserving is inherently a matter of judgment
and our ultimate liabilities could exceed reserves for a variety of reasons, including changes in macroeconomic factors (such as
unemployment and interest rates), case development and other factors. From time to time, we also adjust our reserves, and may
adjust our reserving methodology, as these factors, our claims experience and estimates of future trends in claims frequency and
severity change. Reserve development, changes in our reserving methodology and paid losses exceeding corresponding
reserves could have a material adverse effect on our results of operations, profitability and capital. See “Item 7 – Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates – Reserves” in this
Report for additional detail on our reserves.
We may be unable to accurately predict and price for claims and other costs, which could reduce our profitability.
Our profitability could be reduced if we are unable to accurately predict and price for claims and other costs, including
the frequency and severity of property and other claims. This ability could be affected by factors including inflation, changes in
the regulatory environment, changes in industry practices, changes in legal, social or environmental conditions or new
technologies. Political or economic conditions can also affect the availability of programs on which our business may rely to
accurately predict claims and other costs. The inability to accurately predict and price for claims and other costs could
materially adversely affect our results of operations and financial condition.
For Global Housing, our lender-placed products are not underwritten on an individual policy basis and our contracts with
clients require us to issue these policies automatically when a borrower’s insurance coverage is not maintained. Our results of
operations and financial condition could be adversely affected if our pricing does not accurately account for the additional risk
we assume from ensuring that all client properties are provided continuous insurance coverage rather than underwriting on
individual policies.
A decline in the financial strength ratings of our insurance subsidiaries could adversely affect our results of operations and
financial condition.
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Ratings are important considerations in establishing the competitive position of insurance companies. A.M. Best rates
most of our domestic and significant international operating insurance subsidiaries. Moody’s rates four of our domestic
operating insurance subsidiaries and S&P rates five of our domestic operating insurance subsidiaries. These ratings are subject
to periodic review by A.M. Best, Moody’s and S&P, and we cannot assure that we will be able to retain them. Rating agencies
may change their methodology or requirements for determining ratings, or they may become more conservative in assigning
ratings. Rating agencies or regulators could also increase capital requirements for our subsidiaries. Any reduction in these
ratings could materially adversely affect our standing in the insurance industry and the demand for our products from
intermediaries and consumers, which could materially adversely affect our results of operations.
As of December 31, 2019, our operations had a significant number of contracts that contain provisions that require the
applicable subsidiaries to maintain minimum financial strength ratings, typically from A.M. Best, ranging from “A” or better to
“B+” or better, depending on the contract. Our clients may terminate these contracts or fail to renew them if the subsidiaries’
ratings fall below these minimums. Termination of or failure to renew these agreements could materially and adversely affect
our results of operations and financial condition.
A credit rating agency downgrade of our corporate senior debt rating could have a significant adverse impact on our
business.
Currently, Assurant, Inc.’s senior debt is rated BBB by S&P and Baa3 by Moody’s. The ratings from both S&P and
Moody’s currently carry a stable outlook.
If our senior debt credit ratings were downgraded below investment grade, our business, financial condition and results of
operations, and perceptions of our financial strength, could be adversely affected. In particular, a downgrade could adversely
affect our liquidity, increase our borrowing costs, decrease demand for our debt securities and increase the expense and
difficulty of financing our operations. For example, the interest rate payable on each of the 2021 Senior Notes, the 2023 Senior
Notes, the 2028 Senior Notes and the 2030 Senior Notes (each as defined hereafter) is subject to increase if either of Moody’s
or S&P downgrades the credit rating assigned to such series of senior notes to Ba1 or below or to BB+ or below, respectively.
Additionally, we could be subject to more restrictive financial and operational covenants in any indebtedness we issue in the
future, which could reduce our operational flexibility. There can be no assurance that our credit ratings will not be downgraded
further. See Note 19 to the Consolidated Financial Statements included elsewhere in this Report for additional information on
the 2021 Senior Notes, the 2023 Senior Notes, the 2028 Senior Notes and the 2030 Senior Notes, and the impact of rating
changes.
Fluctuations in the exchange rate of the U.S. Dollar and other foreign currencies may materially and adversely affect our
results of operations.
While most of our costs and revenues are in U.S. Dollars, some are in other currencies. Because our financial results in
certain countries are translated from local currency into U.S. Dollars upon consolidation, our results of operations have been
and may continue to be affected by foreign exchange rate fluctuations. To a large extent, we do not currently hedge foreign
currency risk. If the U.S. Dollar weakens against a local currency, the translation of our foreign-currency-denominated balances
will result in increased net assets, net revenue, operating expenses and net income. Similarly, our net assets, net revenue,
operating expenses and net income will decrease if the U.S. Dollar strengthens against a local currency. These fluctuations in
currency exchange rates may result in losses that materially and adversely affect our results of operations.
Additionally, we may incur foreign exchange losses in connection with the designation of the U.S. Dollar as the
functional currency of our international subsidiaries. For example, management has classified Argentina’s economy as highly
inflationary in accordance with GAAP accounting requirements and, as a result, the functional currency of our Argentina
subsidiaries was changed from the local currency to U.S. Dollars and their non-U.S. Dollar denominated monetary assets and
liabilities were subject to remeasurement resulting in losses. We could incur additional losses, which would adversely affect our
results of operations. For additional information on the change in functional currency for our Argentina subsidiaries and the
effect thereof, see Note 2 to the Consolidated Financial Statements included elsewhere in this Report.
An impairment of goodwill or other intangible assets could materially adversely affect our results of operations and book
value.
As a result of the TWG acquisition, we added a considerable amount of goodwill and other intangible assets to our
balance sheet. Goodwill represented 41% of our total equity as of December 31, 2019. We review our goodwill annually in the
fourth quarter for impairment or more frequently if indicators of impairment exist. Such circumstances include, but are not
limited to, a significant adverse change in legal factors, an adverse action or assessment by a regulator, unanticipated
competition, loss of key personnel or a significant decline in our expected future cash flows due to changes in company-
specific factors or the broader business climate. In addition, other intangible assets collectively represented 10% of our total
equity as of December 31, 2019. Estimated useful lives of finite intangible assets are reassessed on an annual basis. Generally,
other intangible assets with finite lives are only tested for impairment if there are indicators of impairment identified, including
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a significant adverse change in the extent, manner or length of time in which the other intangible asset is being used or a
significant adverse change in legal factors or in the business climate that could affect the value of the other intangible asset. We
recognized an impairment of certain intangible assets of $20.8 million in 2018 and $15.6 million in 2019 associated with the
acquisition of Green Tree Insurance Agency. Any future impairment of goodwill or other intangible assets, or significant
reduction in the useful lives of intangible assets, could have a material adverse effect on our profitability and book value. For
more information on our annual goodwill impairment testing, the goodwill of our segments and related reporting units and
intangible asset impairment testing, see “Item 7 – Management's Discussion and Analysis of Financial Condition and Results of
Operations – Critical Accounting Estimates – Valuation and Recoverability of Goodwill” and Notes 2 and 3 to the Consolidated
Financial Statements included elsewhere in this Report.
Failure to maintain effective internal control over financial reporting could have a material adverse effect on our business
and stock price.
As a public company, we are required to maintain effective internal control over financial reporting. While management
has certified that our internal control over financial reporting was effective as of December 31, 2019, because internal control
over financial reporting is complex, there can be no assurance that our internal control over financial reporting will be effective
in the future. We also rely on manual processes and procedures that subject us to increased risk of error and internal control
failure compared to automated processes. Any failure to implement required controls, or difficulties or errors encountered in
their operation, could adversely affect our results of operations or cause us to fail to meet our reporting obligations. If we are
not able to maintain or document effective internal control over financial reporting, our independent registered public
accounting firm would be unable to certify the effectiveness of our internal control over financial reporting or opine that our
financial statements fairly present, in all material respects, our financial position, results of operations and cash flows in
conformity with GAAP. Internal control deficiencies may also prevent us from reporting our financial information on a timely
basis or cause us to restate previously issued financial information, and thereby subject us to litigation and adverse regulatory
consequences, including fines and other sanctions. If any of the foregoing were to occur, investor confidence in us and the
reliability of our financial statements could erode, resulting in a decline in our stock price, impairing our ability to raise capital,
negatively affecting our reputation and subjecting us to legal and regulatory risk.
Unfavorable conditions in the capital and credit markets may significantly and adversely affect our access to capital and our
ability to pay our debts or expenses.
The global capital and credit markets have experienced periods of uncertainty, volatility and disruption, including due to
changes to U.S. and foreign tax and trade policies, imposition of new or increased tariffs, other trade restrictions, other
government actions, foreign currency fluctuations and other factors. Our ability to raise money during such periods could be
severely or entirely restricted. Our ability to borrow or raise money is important if our operating cash flow is insufficient to pay
our expenses, meet capital requirements, repay debt, pay dividends on our common and preferred stock or make investments.
The principal sources of our liquidity are insurance premiums, fee income, cash flow from our investment portfolio, the Credit
Facility (as defined below) and liquid assets, consisting mainly of cash or assets that are readily convertible into cash. Sources
of liquidity in normal markets also include a variety of short-and long-term instruments. If our access to the capital and credit
markets is restricted, our cost of capital could increase, thus decreasing our profitability and reducing our financial flexibility,
including our ability to refinance maturities of existing indebtedness on similar or more favorable terms. Our results of
operations, financial condition, cash flows and statutory capital position could be materially and adversely affected by periods
of uncertainty, volatility and disruption in the capital or credit markets.
Our investment portfolio is subject to market risk, including changes in interest rates, that may adversely affect our results
of operations and financial condition.
Investment returns are an important part of our profitability. Our investments are subject to market-wide risks and
fluctuations, including in the fixed maturity and equity securities markets, which could impair our profitability, financial
condition and cash flows. Further, in pricing our products and services, we incorporate assumptions regarding returns on our
investments. Market conditions may not allow us to invest in assets with sufficiently high returns to meet our pricing
assumptions and profit targets over the long term.
We are subject to interest rate risk in our investment portfolio. Changes in interest rates may materially adversely affect
the performance of some of our investments, including by materially reducing the fair value of and net investment income from
fixed maturity securities and increasing unrealized losses in our investment portfolio. Fixed maturity securities represented
approximately 84% of the fair value of our total investments as of December 31, 2019. The fair market value of fixed maturity
securities generally increases or decreases in an inverse relationship with fluctuations in interest rates, while net investment
income from fixed maturity securities increases or decreases directly with interest rates. In addition, actual net investment
income and 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. Recent periods
have been characterized by low interest rates. A prolonged period during which interest rates remain at historically low levels
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may result in lower-than-expected net investment income and larger required reserves. Though we employ asset/liability
management strategies to manage the adverse effects of interest rate changes, significant fluctuations in the level of interest
rates may require us to liquidate investments prior to maturity at a significant loss to pay claims, which could have a material
adverse effect on our results of operations and financial condition. See “Item 7A – Quantitative and Qualitative Disclosures
About Market Risk – Interest Rate Risk” in this Report.
In addition, extended periods of declining interest rates or rising inflation may cause compression in the spread between
the death benefit growth rates on our preneed insurance policies and the investment income that we can earn, resulting in a
negative spread, which may have a material adverse effect on our results of operations and our overall financial condition. See
“Item 7A – Quantitative and Qualitative Disclosures About Market Risk – Inflation Risk” in this Report.
Our investment portfolio is subject to credit, liquidity and other risks that may adversely affect our results of operations and
financial condition.
We are subject to credit risk in our investment portfolio, primarily from our investments in corporate bonds, preferred
stocks, leveraged loans, municipal bonds and commercial mortgages. Defaults by third parties in the payment or performance
of their obligations could reduce our investment income or result in realized investment losses. The value of our investments
may be materially adversely affected by downgrades in the corporate bonds included in our portfolio, increases in treasury rates
or credit spreads and by other factors that may result in realized and unrealized investment losses and other-than-temporary
impairments. The determination that a security has incurred an other-than-temporary impairment requires the judgment of
management and there are inherent risks and uncertainties involved in making these judgments. Changes in facts,
circumstances or critical assumptions could cause management to conclude that further impairments have occurred, which
could lead to additional losses on investments. Each of these events may cause us to reduce the carrying value of our
investment portfolio. For further details on net investment losses and other-than-temporary-impairments, see Note 8 to the
Consolidated Financial Statements included elsewhere in this Report.
The value of any particular fixed maturity security is subject to impairment based on the creditworthiness of its issuer. As
of December 31, 2019, fixed maturity securities represented approximately 84% and below investment grade securities (rated
“BB” or lower by nationally recognized statistical rating organizations) represented approximately 4% of the fair value of our
total investments. Below investment grade securities generally are expected to provide higher 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. See “Item 7A –
Quantitative and Qualitative Disclosures About Market Risk – Credit Risk” in this Report for additional information on the
composition of our fixed maturity securities portfolio.
Equity securities represented approximately 3% of the fair value of our total investments as of December 31, 2019.
However, we have had higher percentages of equity securities in the past and may make more equity investments in the future.
Investments in equity securities generally are expected to provide higher total returns but present greater risk to preservation of
capital than our fixed maturity securities. Beginning January 1, 2018, we were required to reflect all changes in the fair value of
equity securities through our statements of comprehensive income, which may increase the volatility of our financial results.
See Note 2 to the Consolidated Financial Statements included elsewhere in this Report for more information.
Our investments in commercial mortgage loans on real estate (which represented approximately 6% of the fair value of
our total investments as of December 31, 2019) are relatively illiquid. If we require extremely large amounts of cash on short
notice, we may have difficulty selling these investments at attractive prices and in a timely manner.
U.S. tax reform could have an adverse impact on our results of operations and financial condition.
Tax laws and regulations, or their interpretation and application, are subject to significant change and may adversely
affect our results of operations and financial condition. For example, on December 22, 2017, the U.S. Tax Cuts and Jobs Act
(the “TCJA”), which significantly amended the Internal Revenue Code of 1986, was enacted. Compliance with the TCJA may
require the collection of information not regularly produced within the Company, the use of estimates in our Consolidated
Financial Statements, and the exercise of significant judgment in accounting for its provisions. The overall impact of the TCJA
is uncertain due to the ambiguities in the application of certain provisions of the TCJA, the impact of future guidance,
interpretations or rules issued by government agencies in applying the TCJA and potential court decisions interpreting the
legislation. Future changes in U.S. tax laws, including changes in the application or interpretation of the TCJA, could have an
adverse impact on our results of operations and financial condition.
The value of our deferred tax assets could become impaired, which could materially and adversely affect our results of
operations and financial condition.
In accordance with applicable income tax guidance, we must determine whether our ability to realize the value of our
deferred tax asset or to recognize certain tax liabilities related to uncertain tax positions is “more likely than not.” Under current
income tax guidance, a deferred tax asset should be reduced by a valuation allowance, or a liability related to uncertain tax
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positions should be accrued, if, based on the weight of all available evidence, it is more likely than not that some portion of the
deferred tax asset will not be realized. The realization of deferred tax assets depends upon the existence of sufficient taxable
income of the same character during the carryback or carry-forward periods.
In determining the appropriate valuation allowance, management made certain judgments relating to recoverability of
deferred tax assets, use of tax loss and tax credit carry-forwards, levels of expected future taxable income and available tax
planning strategies. The assumptions in making these judgments are updated periodically on the basis of current business
conditions affecting us and overall economic conditions. These management judgments are therefore subject to change due to
factors that include, but are not limited to, changes in our ability to realize sufficient taxable income of the same character in
the same jurisdiction or in our ability to execute other tax planning strategies. Furthermore, any future changes in tax laws
could impact the value of our deferred tax assets. Management will continue to assess and determine the need for, and the
amount of, the valuation allowance in subsequent periods. Any change in the valuation allowance could have a material adverse
impact on our results of operations and financial condition.
Reinsurance may not be adequate or available 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 operating segments. Although reinsurers are liable to us for claims properly ceded under our reinsurance
arrangements, we remain liable to the insured as the direct insurer on all risks reinsured. Ceded reinsurance arrangements
therefore 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. The inability to collect amounts due from reinsurers could materially adversely affect our results
of operations and financial condition.
Reinsurance for certain types of catastrophes could become unavailable or prohibitively expensive for some of our
businesses. In such a situation, we might also be adversely affected by state and other regulations that prohibit us from
excluding catastrophe exposures or from withdrawing from or increasing premium rates in catastrophe-prone areas.
Our reinsurance facilities are generally subject to annual renewal. We may not be able to maintain our current reinsurance
facilities or obtain other reinsurance facilities in adequate amounts and at favorable rates. Inability to obtain reinsurance at
favorable rates or at all could cause us to reduce the level of our underwriting commitments, take more risk, or incur higher
costs. Any of these developments could materially adversely affect our results of operations and financial condition.
Through reinsurance, we have sold or exited businesses that could again become our direct financial and administrative
responsibility if the reinsurers become insolvent.
In the past, we have sold, and in the future we may sell, businesses through reinsurance ceded to third parties. We have
also exited certain businesses through reinsurance. For example, we have sold our Long-Term Care division, the insurance
operations of our Fortis Financial Group division, including individual life operations and annuity business, and our Assurant
Employee Benefits segment. The reinsurance recoverable relating to these dispositions was $4.46 billion as of December 31,
2019. The four reinsurers with the largest reinsurance recoverable balances relating to these dispositions were Sun Life
Assurance Company of Canada (“Sun Life”), John Hancock Life Insurance Company (“John Hancock”), Talcott Resolution
Life and Annuity Insurance Company (“Talcott Resolution”) and Employers Reassurance Corporation (“ERAC”). The A.M.
Best ratings of Sun Life, John Hancock and Talcott Resolution are currently A+, A+ and B++, respectively. A.M. Best
withdrew its rating for ERAC in March 2019. Most of the assets backing reserves reinsured under these and other sales are
held in trusts or separate accounts. However, if the reinsurers became insolvent, the assets in the trusts or separate accounts
could prove insufficient to support the liabilities that would revert to us. In addition, there are no assets or other collateral
backing reserves relating to the reinsurance recoverable from ERAC.
We also face the risk of again becoming responsible for administering these businesses in the event of reinsurer
insolvency. We do not currently have the administrative systems and capabilities to process these businesses. Accordingly, we
would need to obtain those capabilities in the event of an insolvency of one or more of the reinsurers. 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. In addition, other third parties to whom we have sold businesses in the past may in turn sell these businesses to other
third parties, through reinsurance or otherwise, and we could face credit risks and risks related to the new administrative
systems and capabilities of these third parties in administering these businesses.
For more information on these arrangements, including the reinsurance recoverables and risk mitigation mechanisms
used, see “Item 7A – Quantitative and Qualitative Disclosures About Market Risks – Credit Risk” in this Report.
Due to the structure of our commission program, we are exposed to risks related to the creditworthiness and reporting
systems of some of our agents, third-party administrators and clients.
We are subject to the credit risk of some of the agents, third-party administrators and clients with which we contract in
our businesses. For example, we advance agents’ commissions as part of our preneed insurance offerings. These advances are a
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percentage of the total face amount of coverage. There is a one-year payback provision against the agency if death or lapse
occurs within the first policy year. If SCI, which receives the largest share of such agent commissions, were unable to fulfill its
payback obligations, this could have an adverse effect on our operations and financial condition.
In addition, some of our agents, third-party administrators and clients collect and report premiums or pay claims on our
behalf. These parties’ failure to remit all premiums collected or to pay claims on our behalf on a timely and accurate basis could
have an adverse effect on our results of operations.
Our subsidiaries’ inability to pay us sufficient dividends could prevent us from meeting our obligations and paying 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, to repurchase shares or debt, to acquire new businesses and to pay dividends to common and
preferred stockholders and corporate expenses. Our subsidiaries’ ability to pay dividends and to make such other payments
depends on their GAAP equity or statutory surplus, future earnings, cash position, rating agency requirements and regulatory
restrictions, as applicable. Except to the extent that we are a creditor with recognized claims against our subsidiaries, claims of
our subsidiaries’ creditors, including policyholders, have priority over our claims with respect to our subsidiaries’ assets and
earnings. If any of our subsidiaries should become insolvent, liquidate or otherwise reorganize, our creditors and stockholders
will have no right to proceed against our subsidiaries’ assets or to cause the liquidation, bankruptcy or winding-up of our
subsidiaries 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 and the
insurance authority of that jurisdiction would act as a liquidator or rehabilitator for the subsidiary.
The payment of dividends by any of our regulated domestic insurance company subsidiaries in excess of specified
amounts (i.e., extraordinary dividends) must be approved by the subsidiary’s domiciliary jurisdiction department of insurance.
Ordinary dividends, for which no regulatory approval is generally required, are limited to amounts determined by a formula,
which varies by jurisdiction. The formula for the majority of the jurisdictions in which our subsidiaries are domiciled is based
on the prior year’s statutory net income or 10% of the statutory surplus as of the end of the prior year. Some jurisdictions 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, they may block such
payments that would otherwise be permitted without prior approval. Future regulatory actions could further restrict our
insurance subsidiaries’ ability to pay us dividends. For more information on the maximum amount of dividends our regulated
U.S. domiciled insurance subsidiaries could pay us in 2020 under applicable laws and regulations, without prior regulatory
approval, see “Item 5 - Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities - Dividend Policy.”
Any additional material restrictions on our insurance subsidiaries’ ability to pay us dividends could adversely affect our
ability to pay any dividends on our common and preferred stock, service our debt and pay other corporate expenses.
Our ability to declare and pay dividends on our capital stock or repurchase shares may be limited.
Our declaration and payment of dividends on our common and preferred stock in the future will be determined by the
Board in its sole discretion and will depend on our financial condition, earnings, growth prospects, other uses of cash, funding
requirements, applicable law and other factors the Board deems relevant. The payment of dividends on our common stock is
subject to the preferential rights of our 6.50% Series D Mandatory Convertible Preferred Stock, par value of $1.00 per share
(the “MCPS”), and other preferred stock that the Board may create from time to time. The Credit Facility also contains
limitations on our ability to pay dividends to our stockholders if we are in default, or such dividend payments would cause us to
be in default, of our obligations thereunder. In addition, if we defer the payment of interest on our Subordinated Notes (as
defined hereafter), we generally may not make payments on our capital stock. Furthermore, the agreements governing any of
our or our subsidiaries’ future indebtedness may limit our ability to declare and pay dividends on our common and preferred
stock. In the event that any agreements governing any such indebtedness restrict our ability to declare and pay dividends in
cash on our common and preferred stock, we may be unable to declare and pay dividends in cash on our common or preferred
stock unless we can repay or refinance the amounts outstanding under such agreements.
No common stock may be repurchased, redeemed or otherwise acquired for consideration unless all accumulated and
unpaid dividends on the MCPS for all preceding dividend periods have been declared and paid in full, subject to certain limited
exceptions. In addition, at any time when we have given notice of our election to defer interest payments on the Subordinated
Notes, we generally may not repurchase any shares of our capital stock, subject to certain limited exceptions.
We may be adversely affected by changes in the method for determining LIBOR or the replacement of LIBOR.
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The U.K. Financial Conduct Authority has announced that it will no longer persuade or compel banks to submit rates for
the calculation of LIBOR rates after 2021, which is expected to result in LIBOR rates no longer being available. In the U.S., the
Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions convened by the
U.S. Federal Reserve, has recommended the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to U.S.
Dollar LIBOR. The calculation of interest on any of our LIBOR-linked instruments, including our Credit Facility if drawn,
based on an alternative rate may result in a higher interest expense and may adversely affect our cash flows and results of
operations. In addition, uncertainty regarding potential changes to LIBOR until 2021, the establishment of SOFR or an
alternative reference rate as the primary reference for setting interest rates on loans globally, and other reforms may adversely
affect the trading market for LIBOR-based securities, including those held in our investment portfolio.
Technology, Cybersecurity and Privacy Risks
The failure to effectively maintain and modernize our information technology systems and infrastructure and integrate
those of acquired businesses could adversely affect our business.
The success of our business depends on our ability to maintain effective, secure and reliable information technology
systems and infrastructure and to modernize them to support current and new clients and grow in an efficient and cost-effective
manner. We are undergoing a multi-year transformation of our information technology systems and infrastructure, including
enhancing existing systems and developing new systems and products, to support our strategy and keep pace with continuing
changes in information processing technology and evolving industry and regulatory requirements. We are also updating certain
operations and financial systems, procedures and controls. However, we currently rely on manual processes and procedures that
subject us to increased risk of error and internal control failure compared to automated processes. We must integrate the
systems of acquired businesses effectively so that technology gained through acquisitions meets the required level of security
and performance capabilities to avoid additional risk to existing operations.
Our ability to modernize our information technology systems and infrastructure requires us to execute large-scale,
complex programs and projects, which rely on the commitment of significant financial and managerial resources and effective
planning and management processes. We may be unable to implement these programs and projects effectively, efficiently or in
a timely manner, which could result in poor customer experience, cost overruns, additional expenses, reputational harm, legal
and regulatory actions and other adverse consequences.
If we are unable to maintain information technology systems, procedures (including technology continuity planning and
recovery testing) and controls that function effectively without interruption and securely (including through a failure to replace
or update redundant or obsolete hardware, applications or software systems) or to update or integrate our systems, we may not
be able to successfully offer our products, grow our business and account for transactions in an appropriate and timely manner
and our relationships with clients could be adversely affected. We have from time to time experienced failures that result in the
unavailability of information technology systems upon which our clients rely. Such failures could result in loss of business and
adversely affect our financial condition and results of operations. For risks relating to the security of our information
technology systems and cyber-attacks, see “ – We could incur significant liability if our information systems or those of third
parties are breached or we or third parties otherwise fail to protect the security of data residing on our respective systems,
which could adversely affect our business and results of operations.”
We could incur significant liability if our information systems or those of third parties are breached or we or third parties
otherwise fail to protect the security of data residing on our respective systems, which could adversely affect our business
and results of operations.
We rely on the uninterrupted and secure operation of our information technology systems to operate our business and
securely process, transmit and store electronic information. This electronic information includes confidential and other sensitive
information, including personal data, that we receive from our customers, vendors and other third parties. In the normal course
of business, we also share confidential and other sensitive information with our vendors and other third parties with whom we
work. Our information technology systems and safety control systems and those of our vendors and other third parties are
vulnerable to damage or interruption from a variety of external threats, including cyber-attacks, computer viruses, malware,
ransomware and other types of data and systems related events. Our systems are also subject to compromise from internal
threats such as improper action by employees and third parties who may have otherwise legitimate access to our systems. Our
call centers subject us to additional risk from internal threats due to access to personal information. Moreover, we face the
ongoing challenge of managing access controls in a complex environment. The latency of a compromise is often measured in
months but could be years, and we may not be able to detect a compromise in a timely manner. We could experience significant
financial and reputational harm if our information systems are breached, sensitive client or Company data are compromised,
surreptitiously modified, rendered inaccessible for any period of time or maliciously made public, or if we fail to make
adequate disclosures to the public or law enforcement agencies following any such event.
Cyber threats are rapidly evolving and becoming increasingly sophisticated. We are at risk of attack by a growing list of
adversaries, including state-sponsored organizations, organized crime, hackers and “hacktivists” (activist hackers), through use
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of increasingly sophisticated methods of attack, including long-term, persistent attacks referred to as advanced persistent threats
or attacks via yet unknown vulnerabilities referred to as zero-day threats. Because the techniques used to obtain unauthorized
access or sabotage systems change frequently and generally are not identified until they are launched against a target, we may
be unable to anticipate these techniques or implement adequate preventative measures, resulting in potential data loss or other
damage to information technology systems. As the breadth and complexity of the technologies we use continue to grow,
including as a result of the use of mobile devices, cloud services, social media and the increased reliance on devices connected
to the Internet, the potential risk of security breaches and cyber-attacks also increases.
Our data protection measures may not be effective to protect our network and systems from such threats. Should an
attacker gain access to our network using compromised credentials of an authorized user or otherwise, we are at risk that the
attacker might successfully leverage that access to compromise additional systems and data. Certain measures that could
increase the security of our systems take significant time and resources to deploy broadly and may not be effective against an
attack. Additionally, our policies, procedures and technical safeguards may be insufficient to prevent or detect improper access
to confidential, personal or proprietary information and other cybersecurity incidents, assess the severity or impact of any such
incidents or appropriately respond in a timely manner. The inability to implement, maintain and upgrade effective protective
measures and other safeguards or adequately respond to a breach could have a material adverse effect on our business.
To safeguard against the accidental introduction of security vulnerabilities, we continue to invest in the development of
software in accordance with best practices. In addition, our information systems must be continually patched and upgraded to
protect against vulnerabilities. As the volume of new software vulnerabilities continues to increase, as has the criticality of
patches and other remedial measures. Accordingly, we are at risk that cyber attackers exploit these vulnerabilities before they
have been addressed. Due to the large number and age of the systems and platforms that we operate and the increased
frequency at which vendors issue security patches to their products, the need to test patches and, in some cases coordinate with
clients and vendors, before they can be deployed, we are at risk that we cannot deploy in a timely and effective manner. We are
also dependent on vendors and other third parties, such as cloud service providers, to keep their systems patched in order to
protect our data. Any failure related to these activities could have a material adverse effect on our business. We have vendors
and other third parties who receive data from us in connection with the services we offer our customers. In addition, we have
migrated certain data, and may increasingly migrate data, to the cloud hosted by third-party providers. We are at risk of a cyber-
attack involving a vendor or other third party, which could result in a breakdown of such third party’s data protection measures
or access to our infrastructure through the third party. To the extent that a vendor or third party suffers a cyber-attack that
compromises their operations, our data and our customers’ data could be compromised or we may experience possible service
interruption, which could have a material adverse effect on our business.
The process of integrating the information systems of the businesses we acquire is complex and exposes us to additional
risk. For instance, we may not adequately identify weaknesses in an acquired entity’s information systems, either before or after
the acquisition, which could affect the value we are able to derive from the acquisition, expose us to unexpected liabilities or
make our own systems more vulnerable to a cyber-attack. We may also be unable to integrate the systems of the businesses we
acquire into our environment in a timely manner, which could further increase these risks until such integration takes place.
We have from time to time experienced cybersecurity incidents, such as malware incursions, employee misconduct and
incidents resulting from human error, such as loss of portable and other data storage devices. Like many companies, we are
subject to regular phishing email and social media engineering campaigns directed at our employees that can result in malware
infections and financial and data losses. Although these incidents have resulted in data loss and other damages, to date, they
have not had a material adverse effect on our business or operations. In the future, these types of incidents could result in
confidential, personal or proprietary information being lost or stolen, surreptitiously modified, rendered inaccessible for any
period of time, or maliciously made public, including client, employee or company data, which could have a material adverse
effect on our business.
Improper access to or disclosure of sensitive client or Company information could harm our reputation and subject us to
significant liability under our contracts, as well as under existing or future laws, rules and regulations. In the event of a cyber-
attack, we might have to take our systems offline, which could interfere with services to our clients or damage our reputation.
We also may be unable to detect an incident, assess its severity or impact, or appropriately respond and recover any financial
and data loss in a timely manner. We may be required to expend significant additional resources to mitigate the damage and to
protect against future damage. In addition, our liability insurance, which includes cyber insurance, may not be sufficient in type
or amount to cover us against claims related to security breaches, cyber-attacks and other related data and system incidents.
The costs of complying with, or our failure to comply with, U.S. and foreign laws related to privacy, data security and data
protection could adversely affect our financial condition, operating results and reputation.
In providing services and solutions to our customers and operating our business, we process, store and transfer sensitive
customer, end-consumer and Company data, including personal data, in and across multiple jurisdictions. As a result, we are or
may become subject to a variety of laws and regulations in the U.S. and abroad regarding privacy, data protection and data
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security. These laws and regulations are continuously evolving and developing. The scope and interpretation of the laws that
are or may be applicable to us are often uncertain and may be conflicting, particularly with respect to foreign laws. For
example, GDPR, which became effective in May 2018, greatly increased the jurisdictional reach of the European
Commission’s laws and added a broad array of requirements for handling personal data, such as the public disclosure of
significant data breaches, privacy impact assessments, data portability and the appointment of data protection officers.
Additionally, in August 2018, Brazil passed its first privacy law, which is modeled after GDPR. At the state level, the New York
State Department of Financial Services has issued cybersecurity regulations that impose an array of detailed security measures
on covered entities and California passed a comprehensive privacy act that increases California residents’ privacy rights in a
manner similar to GDPR. All of these evolving compliance and operational requirements impose significant costs that are
likely to increase over time and may restrict the way services involving data are offered, all of which may adversely affect our
results of operations. Complying with these and similar laws and regulations also requires us to make significant changes to our
operations, which rely on the commitment of significant financial and managerial resources and effective planning and
management processes. We may be unable to implement required operational changes effectively, efficiently or in a timely
manner, which could result in cost overruns, additional expenses, reputational harm, legal and regulatory actions and other
adverse consequences.
Unauthorized disclosure or transfer of personal or otherwise sensitive data, whether through systems failure, employee
negligence, fraud, misappropriation or other means, by us, our vendors or other parties with whom we do business could
subject us to significant litigation, monetary damages, regulatory enforcement actions, fines, criminal prosecution and other
adverse consequences in one or more jurisdictions. Such events could also result in negative publicity and damage to our
reputation and cause us to lose clients, which could have a material adverse effect on our results of operations.
Legal and Regulatory Risks
We are subject to extensive laws and regulations, which increase our costs and could restrict the conduct of our business,
and violations or alleged violations of such laws and regulations could have a material adverse effect on our reputation,
business and results of operations.
We are subject to extensive regulation under the laws of the U.S. and its various states and territories, the E.U. and its
member states, and the other jurisdictions in which we operate. For example, we are subject to regulation by state and territory
insurance regulators in the U.S., by the Prudential Regulatory Authority and the Financial Conduct Authority in the U.K. and
agencies such as the SEC, both in our capacity as a publicly-traded company and through our registered investment adviser
subsidiary. We are also subject to anti-bribery and anti-corruption laws, such as the FCPA and the U.K. Anti-Bribery Act, trade
sanctions, export control regulations and restrictions and anti-money laundering laws. We are subject to other laws and
regulations on matters as diverse as antitrust, internal control over financial reporting and disclosure controls and procedures,
data privacy and protection, taxation, environmental protection, wage-and-hour standards and employment and labor relations.
Furthermore, our domestic and international insurance subsidiaries are subject to extensive regulatory oversight, including:
restrictions and requirements related to licensing; capital, surplus and dividends; underwriting limitations; the ability to enter,
exit and continue to operate in markets, including as a result of Brexit; statutory accounting and other disclosure requirements;
coverage; the ability to provide, terminate or cancel certain coverages; premium rates, including regulatory ability to
disapprove or reduce the premium rates companies may charge; trade and claims practices; content of disclosures to
consumers; type, amount and valuation of investments; assessments or other surcharges for guaranty funds and companies’
ability to recover assessments through premium increases; and market conduct and sales practices.
The U.S. and foreign laws and regulations that apply to our operations are complex and may change rapidly, and our
efforts to comply and keep up with them require significant resources and increase the costs and risks of doing business in these
jurisdictions. The regulations we are subject to have become more stringent over time, may decrease the need for our services,
impose significant operational limits on our business and may be inconsistent across jurisdictions. Further, the laws and
regulations affecting our business are subject to change as a result of, among other things, new interpretations and judicial
decisions, and any such changes may increase the regulatory requirements imposed on us, impact the way we are able to do
business and significantly harm our business and results of operations. While we attempt to comply with applicable laws and
regulations, there can be no assurance that we or our employees, consultants, contractors and other agents are in full
compliance with such laws and regulations at all times or that we will be able to comply with any future laws or regulations. If
we fail to comply with applicable laws and regulations, we may be subject to investigations, criminal penalties, civil remedies
or other adverse consequences, including fines, injunctions, loss of an operating license or approval, increased scrutiny or
oversight by regulatory authorities, the suspension of individual employees, limitations on engaging in a particular business,
redress to clients, exposure to negative publicity or reputational damage and harm to client, employee and other relationships.
Moreover, our failure to comply with laws or regulations in one jurisdiction may result in increased regulatory scrutiny by other
regulatory agencies in that jurisdiction or regulatory agencies in other jurisdictions. The cost of compliance and the
consequences of non-compliance could have a material adverse effect on our business, results of operations and financial
condition. For additional discussion of the various laws and regulations affecting our business, see “Item 1 – Business –
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Regulation” in this Report and “ – Business and Competitive Risks – The withdrawal of the United Kingdom from the
European Union may adversely affect our business, financial condition and results of operations in the region.”
Our business is subject to risks related to litigation and regulatory actions.
From time to time, we may be subject to a variety of legal and regulatory actions relating to our current and past business
operations, including:
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industry-wide investigations regarding business practices, including the use and marketing of certain types of
insurance policies or certificates of insurance, and compliance with guidance issued by regulators;
actions by regulatory authorities that may restrict our ability to increase or maintain our premium rates, require us to
reduce premium rates, impose fines or penalties and result in other expenses;
market conduct examinations, for which we are required to pay the expenses of the regulator as well as our own
expenses, and which may result in fines, penalties, and other adverse consequences;
disputes regarding our Lender-placed Insurance products, including those relating to rates, agent compensation,
consumer disclosure, continuous coverage requirements, loan tracking services and other services that we provide to
mortgage servicers;
disputes over coverage or claims adjudication;
disputes over our treatment of claims, in which states or insureds may allege that we failed to make required
payments or meet prescribed deadlines for adjudicating claims;
disputes regarding regulatory compliance, sales practices, disclosures, premium refunds, licensing, underwriting and
compensation arrangements;
disputes over liability claims under comprehensive general liability policies involving property damage or personal
injury at insured properties or relating to insured vehicles;
disputes alleging bundling of credit insurance and warranty products with other products provided by financial
institutions;
disputes with tax and insurance authorities regarding our tax liabilities; and
disputes relating to customers’ claims that they were not aware of the full cost or existence of the insurance or
limitations on insurance coverage.
Further, actions by certain regulators may cause additional changes to the structure of the Lender-placed Insurance
industry, including the arrangements under which we track coverage on mortgaged properties. These changes could materially
adversely affect the results of operations of Global Housing and the results of operations and financial condition of the
Company. For additional information, see “Item 1 – Business – Regulation” in this Report.
We are involved in a variety of legal and regulatory actions relating to our current and past business operations and may
from time to time become involved in other such actions. In particular, we are a defendant in class actions in a number of
jurisdictions regarding our Lender-placed Insurance programs. These cases allege a variety of claims under a number of legal
theories. The plaintiffs seek premium refunds and other relief. We continue to defend ourselves vigorously in these class actions
and, as appropriate, enter into settlements.
We participate in settlements on terms that we consider reasonable; however, the results of any pending or future litigation
and regulatory proceedings are inherently unpredictable and involve significant uncertainty. Unfavorable outcomes in litigation
or regulatory proceedings or significant problems in our relationships with regulators could materially adversely affect our
results of operations, financial condition, reputation, ratings and ability to continue to do business. They could also expose us to
further investigations or litigation. In addition, certain of our clients in the mortgage, credit card and banking industries are the
subject of various regulatory investigations and litigation matters regarding mortgage lending practices, credit insurance, debt-
deferment and debt cancellation products, and the sale of ancillary products, which could indirectly negatively affect our
businesses. For additional information, see “Item 3 – Legal Proceedings” and Note 27 to the Consolidated Financial Statements
included elsewhere in this Report.
Our business is subject to risks related to reductions in the insurance premium rates we charge.
The premiums we charge are subject to review by regulators. If they consider our loss ratios to be too low, they could
require us to reduce our rates. Significant rate reductions could materially reduce our profitability.
Lender-placed Insurance products accounted for approximately 55% of Global Housing’s net earned premiums, fees and
other income for both of the years ended December 31, 2019 and 2018. The corresponding contributions to segment net income
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for the years ended December 31, 2019 and 2018 were approximately 52% and 46%, respectively. The portion of segment net
income attributable to Lender-placed Insurance products may vary substantially over time depending on the frequency, severity
and location of catastrophic losses, the cost of catastrophe reinsurance and reinstatement coverage, the variability of claim
processing costs and client acquisition costs, and other factors. In addition, we expect placement rates for these products to
decline in 2020 as housing markets continue to improve.
We file rates with the state departments of insurance in the ordinary course of business. In addition to this routine
correspondence, from time to time we engage in discussions and proceedings with certain state regulators regarding our
Lender-placed Insurance business. The results of such reviews may vary. As previously disclosed, we have reached agreements
with state insurance regulators in certain states, including New York, Florida, California, Indiana, Texas and Minnesota,
regarding our Lender-placed Insurance business in those states. In addition, we completed a regulatory settlement agreement
(the “RSA”) to resolve a targeted multistate market conduct examination sponsored by the NAIC and focused on Lender-placed
Insurance, which includes a number of requirements and restrictions that are applicable in all participating states and U.S.
territories. Among other things, the terms of the RSA require more frequent rate filings for Lender-placed Insurance. This could
result in downward pressure on premium rates for these products. If such filings result in significant decreases in premium rates
for our Lender-placed Insurance products, our cash flows and results of operations could be materially adversely affected.
Changes in insurance regulation may reduce our profitability and limit our growth.
Legislation or other regulatory reform related to the insurance industry 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. Various
state and federal regulatory authorities have also taken actions with respect to our Lender-placed Insurance business, including
the multistate market conduct examination and related RSA. If we were unable for any reason to comply with any new or
revised requirements, including the RSA, it could result in substantial costs to us and may materially adversely affect our
results of operations and financial condition. In addition, new interpretations of existing laws or new judicial decisions
affecting the insurance industry could adversely affect our business.
Insurance industry-related legislative or regulatory changes that could significantly harm our subsidiaries and us include,
but are not limited to:
•
•
•
•
•
•
•
•
•
•
imposed reductions in premium rates, limitations on the ability to raise premiums on existing policies, or new
minimum loss ratios;
increases in minimum capital, reserves and other financial viability requirements;
enhanced or new regulatory requirements intended to prevent future financial crises or to otherwise ensure the
stability of institutions;
new licensing requirements;
restrictions on the ability to offer certain types of insurance products or service contracts;
prohibitions or limitations on provider financial incentives and provider risk-sharing arrangements;
more stringent standards of review for claims denials or coverage determinations;
increased regulation relating to Lender-placed Insurance;
new or enhanced regulatory requirements that require insurers to pay claims on terms other than those mandated by
underlying policy contracts; and
restrictions on the solicitation of insurance consumers by funeral board laws for prefunded funeral insurance
coverage.
In addition, regulators in certain states have hired third-party auditors to audit the unclaimed property records of insurance
companies operating in those states. Among other companies, we are currently subject to these audits in a number of states and
have been responding to information requests from these auditors.
Several proposals have been adopted or are currently pending to amend state insurance holding company and other laws
that increase the scope of insurance company regulation globally. The NAIC has implemented the Own Risk and Solvency
Assessment, which requires U.S. insurers and insurance groups to perform an annual assessment, and Corporate Governance
Annual Disclosure reporting, which requires U.S. insurers and insurance groups to report on their governance structure,
policies and practices. Regulatory bodies are expected to increase the frequency of discussions between each other and the level
of data sharing across borders in order to enable more consistent regulation of global companies.
33
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Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We own five properties. Three buildings serve as headquarters for our operating segments and two buildings serve as
operations centers for Global Housing. Global Lifestyle and Global Housing share headquarters buildings located in Miami,
Florida and Atlanta, Georgia. Global Housing has operations centers located in Florence, South Carolina and Springfield, Ohio.
Global Preneed has a headquarters building in Rapid City, South Dakota. We lease office space for various offices and service
centers located throughout the U.S. and internationally, including our New York, New York corporate office and our data center
in Woodbury, Minnesota. Our leases have terms ranging from month-to-month to fifteen years. We believe that our owned and
leased properties are adequate for our current business operations.
Item 3. Legal Proceedings
For a description of material pending legal and regulatory matters in which we are involved, see “Commitments and
Contingencies – Legal and Regulatory Matters” in Note 27 to the Consolidated Financial Statements included elsewhere in this
Report, which is hereby incorporated by reference.
Item 4. Mine Safety Disclosures
Not applicable.
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34
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is listed on the NYSE under the symbol “AIZ.” On February 14, 2020, there were approximately 176
registered holders of record of our common stock.
Stock Performance Graph
The following graph compares the cumulative total return (stock price increase plus dividends paid) on our common stock
from December 31, 2014 through December 31, 2019 with the cumulative total returns for the S&P 400 MidCap Index and the
S&P 500 Index, as the broad equity market indexes, and the S&P 400 Multi-line Insurance Index and the S&P 500 Multi-line
Insurance Index, as the published industry indexes. The graph assumes that the value of the investment in our common stock
and each index was $100 on December 31, 2014 and that all dividends were reinvested.
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35
Total Values/Annual Return Percentages
(Includes reinvestment of dividends)
Security / Index
Assurant, Inc. Common Stock
S&P 500 Index
S&P 400 MidCap Index
S&P 500 Multi-line Insurance Index*
S&P 400 Multi-line Insurance Index*
Initial
Investment at
12/31/14
$
$
100.00
100.00
100.00
100.00
100.00
Security / Index
Assurant, Inc. Common Stock
S&P 500 Index
S&P 400 MidCap Index
S&P 500 Multi-line Insurance Index*
S&P 400 Multi-line Insurance Index*
TOTAL VALUES
December 31,
2015
119.94
101.38
97.82
107.24
124.47
$
2016
141.76
113.51
118.11
118.26
155.46
$
2017
157.33
138.29
137.30
119.48
213.15
2018
$ 142.89
132.23
122.08
90.27
189.38
$
2019
214.02
173.86
154.07
122.45
240.65
ANNUAL RETURN PERCENTAGES
Years Ended December 31,
2016
18.19%
11.96
20.74
10.27
24.90
2017
10.98%
21.83
16.24
1.03
37.11
2018
(9.18)%
(4.38)
(11.08)
(24.44)
(11.15)
2015
19.94%
1.38
(2.18)
7.24
24.47
2019
49.78%
31.49
26.20
35.64
27.07
* The S&P 400 Multi-line Insurance Index is comprised of mid-cap companies, while the S&P 500 Multi-line Insurance Index is comprised of large-cap
companies.
Issuer Purchases of Equity Securities
The table below provides information regarding purchases of our common stock during 2019. No shares of our MCPS
were purchased during this period.
Period in 2019
January 1 – January 31
February 1 – February 28
March 1 – March 31
Total first quarter
April 1 – April 30
May 1 – May 31
June 1 – June 30
Total second quarter
July 1 – July 31
August 1 – August 31
September 1 – September 30
Total third quarter
October 1 – October 31
November 1 – November 30
December 1 – December 31
Total fourth quarter
Total Number
of Shares
Purchased
Average Price
Paid Per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1)
Approximate
Dollar Value of
Shares that May Yet
be Purchased
Under the Plans or
Programs (1)
189,230
$
152,000
184,449
525,679
196,583
184,000
131,000
511,583
154,000
125,186
266,000
545,186
132,322
384,000
318,728
835,050
93.43
98.39
97.07
96.14
94.37
97.13
104.93
98.06
111.57
118.80
125.38
119.97
125.33
131.75
130.55
130.28
113.71
189,230
$
152,000
184,449
525,679
196,583
184,000
131,000
511,583
154,000
125,186
266,000
545,186
132,322
384,000
318,728
835,050
2,417,498
$
743.5
728.5
710.6
710.6
692.1
674.2
660.5
660.5
643.3
628.4
595.1
595.1
578.5
527.9
486.3
486.3
486.3
Total January 1 – December 31
2,417,498
$
(1)
Shares purchased pursuant to the November 14, 2016 publicly announced share repurchase authorization of up to $600.0 million of outstanding
common stock (which was depleted in the third quarter of 2019) and the November 5, 2018 publicly announced share repurchase authorization of up to
36
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an additional $600.0 million of outstanding common stock. As of December 31, 2019, approximately $486.3 million remained under the November
2018 authorization.
Dividend Policy
Any determination to pay dividends will be at the discretion of the Board and will be dependent upon various factors
including: our subsidiaries’ payment of dividends and other statutorily permissible payments to us; our results of operations and
cash flows; our financial condition and capital requirements; general business conditions and growth prospects; any legal, tax,
regulatory and contractual restrictions on the payment of dividends; and any other factors the Board deems relevant.
We are a holding company and, therefore, our ability to pay dividends on our MCPS and common stock, repurchase
shares or debt, service our debt and meet our other obligations depends primarily on the ability of our 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 1A – Risk Factors –
Financial Risks – Our subsidiaries’ inability to pay us sufficient dividends could prevent us from meeting our obligations and
paying future stockholder dividends.” For the year ending December 31, 2020, the maximum amount of dividends our
regulated U.S. domiciled insurance subsidiaries could pay us under applicable laws and regulations, without prior regulatory
approval, is $423.7 million. 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 obtain such approval if sought. Our
international and non-insurance subsidiaries provide additional sources of dividends. Dividends or returns of capital paid by our
subsidiaries, net of infusions and excluding amounts used for acquisitions or received from dispositions, was approximately
$748.0 million for the year ended December 31, 2019, of which $444.0 million was generated by our U.S. domiciled insurance
subsidiaries.
Payments of dividends on shares of common stock are subject to the preferential rights of the MCPS and other preferred
stock that the Board may create from time to time. As of December 31, 2019, we had 2,875,000 shares of the MCPS issued and
outstanding.
In addition, the Credit Facility restricts payments of common stock dividends if an event of default under the Credit
Facility has occurred or if a proposed common stock dividend payment would cause an event of default under the Credit
Facility. Further, if we defer the payment of interest on our Subordinated Notes, we generally may not make payments on our
capital stock. For more information regarding the Credit Facility, the Subordinated Notes and restrictions on the payment of
dividends by us and our insurance subsidiaries, see “Item 7 – Management’s Discussion and Analysis of Financial Condition
and Results of Operations – Liquidity and Capital Resources.”
Securities Authorized for Issuance Under Equity Compensation Plans
See Item 12 of this Report for information about securities authorized for issuance under our equity compensation plans.
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37
Item 6. Selected Financial Data
Assurant, Inc.
Five-Year Summary of Selected Financial Data
For the Years Ended December 31,
2019
2018
2017
2016
2015
(in millions except number of shares and per share amounts)
Consolidated Statements of Operations Data:
Revenues
Net earned premiums
Fees and other income
Net investment income
Net realized gains (losses) on investments
Amortization of deferred gains and gains on disposal of
businesses
Gain on pension plan curtailment
Total revenues (1)
Benefits, losses and expenses
Policyholder benefits (2)
Amortization of deferred acquisition costs and value of
businesses acquired
Underwriting, general and administrative expenses
Iké net losses
Interest expense
Loss on extinguishment of debt
$
8,020.0
$
6,156.9
$
4,404.1
$
5,007.3
$
1,311.2
675.0
66.3
14.3
—
1,308.1
1,383.1
1,422.5
598.4
(62.7)
56.9
—
493.8
30.1
103.9
—
515.7
162.2
394.5
29.6
8,351.0
1,303.5
626.2
31.8
13.0
—
10,086.8
8,057.6
6,415.0
7,531.8
10,325.5
2,654.7
2,342.6
1,870.6
1,808.5
4,742.5
3,322.1
3,250.5
163.0
110.6
31.4
2,300.8
2,980.4
—
100.3
—
1,340.0
2,710.4
—
49.5
—
1,351.3
3,442.8
—
57.6
23.0
1,402.6
3,924.1
—
55.1
—
Total benefits, losses and expenses (1)
9,532.3
7,724.1
5,970.5
6,683.2
10,124.3
Income before provision (benefit) for income taxes
Provision (benefit) for income taxes (3)
Net income
Less: Net income attributable to non-controlling interest
Net income attributable to stockholders
Less: Preferred stock dividends
Net income attributable to common
stockholders
Earnings per common share:
Basic
Diluted
Dividends per common share
Share data:
Weighted average common shares outstanding used in
basic per common share calculations
Plus: Dilutive securities
Weighted average common shares used in diluted per
common share calculations
Other data:
554.5
167.7
386.8
(4.2)
382.6
(18.7)
363.9
5.87
5.84
2.43
$
$
$
$
333.5
80.9
252.6
(1.6)
251.0
(14.2)
236.8
4.00
3.98
2.28
$
$
$
$
444.5
(75.1)
519.6
—
519.6
—
519.6
9.45
9.39
2.15
$
$
$
$
848.6
283.2
565.4
—
565.4
—
565.4
9.23
9.13
2.03
$
$
$
$
201.2
59.6
141.6
—
141.6
—
141.6
2.08
2.05
1.37
$
$
$
$
61,942,969
59,239,608
54,986,654
61,261,288
68,163,825
370,499
305,916
324,378
673,486
853,384
62,313,468
59,545,524
55,311,032
61,934,774
69,017,209
Pre-tax reportable catastrophes (4)
$
51.8
$
214.8
$
295.7
$
157.4
$
29.7
(1)
(2)
(3)
The increase for the years ended December 31, 2019 and 2018 reflects the acquisition of TWG on May 31, 2018. The decrease for the year ended
December 31, 2017 was primarily due to a change in program structure impacting the accounting for revenues on a net instead of gross basis for a large
client in Connected Living. The change in program structure had no impact on net income. The decrease for the year ended December 31, 2016
primarily relates to the Assurant Health wind-down and the sale of our Assurant Employee Benefits segment.
The year ended December 31, 2015 included higher loss experience and adverse claim development on 2015 individual major medical policies
associated with Assurant Health.
The year ended December 31, 2017 included a $177.0 million one-time benefit from the reduction of net deferred tax liabilities following the enactment
of the TCJA. The reduction of net deferred tax liabilities was recorded at the reportable segment level using our best estimate of deferred tax balances as
of the December 22, 2017 enactment date.
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(4)
Includes reportable catastrophe losses, net of reinsurance and client profit sharing adjustments, and including reinstatement and other premiums.
Reportable catastrophe losses include only individual catastrophic events that generated losses to us in excess of $5.0 million, pre-tax.
Consolidated Balance Sheets Data:
Cash and cash equivalents and total investments
Total assets
Policy liabilities (1)
Debt
Total Assurant, Inc. stockholders’ equity
Per share data:
Total book value per basic common share (2)
As of December 31,
2019
2018
2017
2016
2015
(in millions except number of shares and per share amounts)
$
$
$
$
$
$
16,434.4
44,291.2
29,098.6
2,006.9
5,652.8
93.14
$
$
$
$
$
$
14,657.9
41,089.3
27,702.6
2,006.0
5,112.0
81.44
$
$
$
$
$
$
12,550.3
31,843.0
21,218.2
1,068.2
4,270.6
80.46
$
$
$
$
$
$
12,511.0
29,709.1
20,040.6
1,067.0
4,098.1
72.33
$
$
$
$
$
$
14,283.1
30,036.4
19,787.1
1,164.7
4,524.0
67.92
(1)
(2)
Policy liabilities include future policy benefits and expenses, unearned premiums and claims and benefits payable.
Total book value per basic common share equals total Assurant, Inc. stockholders’ equity divided by the basic common shares outstanding. At
December 31, 2019, 2018, 2017, 2016 and 2015 there were 60,693,295, 62,770,031, 53,078,396, 56,660,642, and 66,606,258 common shares,
respectively, outstanding.
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39
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 included elsewhere in this Report. It contains forward-
looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Report,
particularly under the headings “Item 1A – Risk Factors” and “Forward-Looking Statements.”
General
We report our results through four segments: Global Lifestyle, Global Housing, Global Preneed and Corporate and Other.
Corporate and Other includes activities of the holding company, financing and interest expenses, net realized gains (losses) on
investments, interest income earned from short-term investments held and income (expenses) primarily related to our frozen
benefit plans. Corporate and Other also includes the amortization of deferred gains and gains associated with the sales of Fortis
Financial Group, Long-Term Care and Assurant Employee Benefits through reinsurance agreements, expenses related to the
acquisition of TWG, foreign gains (losses) from remeasurement of monetary assets and liabilities, the gain or loss on the sale of
businesses, gains or losses associated with the valuation of our investment in Iké and other unusual or infrequent items.
Additionally, the Corporate and Other segment includes amounts related to businesses disposed of through reinsurance and the
runoff of the Assurant Health business.
The following discussion covers the year ended December 31, 2019 (“Twelve Months 2019”) and year ended
December 31, 2018 (“Twelve Months 2018”). Please see the discussion that follows, for each of these segments, for a more
detailed comparative analysis. Our comparative analysis of Twelve Months 2018 and the year ended December 31, 2017 is
included under the heading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC on February 22, 2019.
Executive Summary
Overview:
We have undertaken several acquisitions and dispositions, which are reflected in our results. On May 31, 2018, we
acquired TWG Holdings Limited and its subsidiaries (as subsequently reorganized, “TWG”) for total consideration of $2.47
billion. On August 1, 2018, we sold our Mortgage Solutions business to Xome, an indirect wholly owned subsidiary of WMIH
Corp. On December 3, 2018, we sold Time Insurance Company, a subsidiary of the runoff Assurant Health business, to Haven
Holdings, Inc.
In October 2019, we acquired the remaining 60% interest in MMI-CPR, LLC (dba Cell Phone Repair), a global franchisor
of electronic device repair stores focusing on mobile device repair. In 2019, we also undertook a strategic review of our
investment in Iké. As part of our initial investment in 2014, we entered into a put/call with the majority shareholders. In the
third quarter of 2019, we decided to pursue the sale of our interests in Iké and recorded a partial impairment in our investment
and an increase in our put obligation related to the decline in fair value of the business in connection with our decision to sell.
On January 29, 2020, we entered into agreements to sell our interests in Iké to certain management shareholders of Iké. We
expect closing to occur in the second quarter of 2020 resulting in an expected net cash outflow of $54 million, which could
increase by up to an additional $40 million in the event we provide seller financing to the management shareholders at closing,
plus transaction costs. In connection with this agreement, we recorded an incremental loss related to the agreed sale price. The
sale is subject to customary closing conditions, including regulatory approvals. For additional information on this transaction,
see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital
Resources” and Note 5 to the Consolidated Financial Statements included elsewhere in this Report.
In August 2019, we issued $350.0 million of 3.70% senior notes due 2030, and used the net proceeds, along with cash on
hand, to complete a cash tender offer to purchase $100.0 million of the $375.0 million then outstanding aggregate principal
amount of our 6.75% senior notes due 2034 and to redeem $250.0 million of the $300.0 million then outstanding aggregate
principal amount of our floating rate senior notes due 2021. A loss on extinguishment of debt of $31.4 million, primarily related
to incremental consideration required to be paid to debtholders as a result of the interest rate differential over the remaining
term as compared to current rates, was reported in Twelve Months 2019 as a result of the cash tender offer. See “– Liquidity
and Capital Resources,” below for further details.
Summary of Financial Results:
Consolidated net income attributable to common stockholders increased $127.1 million, or 54%, to $363.9 million for
Twelve Months 2019 from $236.8 million for Twelve Months 2018. The increase was driven by $128.7 million of lower
reportable catastrophes (reportable catastrophe losses, net of reinsurance and client profit sharing adjustments, and including
reinstatement and other premiums) and expansion in our Global Lifestyle segment, as well as full-year contributions from
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TWG. The increase was partially offset by a $163.9 million after-tax loss related to a change in the fair value of Iké following
the Company’s decision to sell the business.
Global Lifestyle net income increased $111.6 million, or 37%, to $409.3 million for Twelve Months 2019 from $297.7
million for Twelve Months 2018, primarily due to strong organic growth in mobile and full-year contributions from TWG,
partially offset by continued declines in Global Financial Services and Other. TWG contributed approximately $130 million of
full year net income to Global Lifestyle in 2019 compared to $74.7 million of income, excluding the $9.3 million after-tax
benefit for client recoverables, for seven months in 2018.
Global Lifestyle net earned premiums, fees and other income increased $1.91 billion to $7.09 billion for the Twelve
Months 2019 compared with $5.18 billion for Twelve Months 2018, primarily due to full-year contributions from TWG and
growth in Connected Living, primarily driven by growth in new mobile subscribers and higher trade-in volumes in our repairs
and logistics business, and continued growth in Global Automotive.
Global Housing net income increased $107.9 million, or 72%, to $258.7 million for Twelve Months 2019 from $150.8
million for Twelve Months 2018, primarily due to $128.8 million of lower reportable catastrophes. Excluding reportable
catastrophes, segment net income decreased, primarily driven by declines in Lender-placed Insurance, mostly from the
reduction in loans tracked from a financially insolvent client and higher non-catastrophe loss experience in Specialty and Other.
The decrease was partially offset by the absence of Mortgage Solutions losses in Twelve Months 2018 and growth in
Multifamily Housing.
Global Housing net earned premiums, fees and other income decreased $55.5 million to $2.03 billion for Twelve Months
2019 compared with $2.09 billion for Twelve Months 2018, primarily due to the sale of Mortgage Solutions. Excluding
Mortgage Solutions, net earned premiums, fees and other income increased 3% primarily due to growth in Specialty and Other
and Multifamily Housing, partially offset by declines in Lender-placed Insurance, including the impact of additional
catastrophe reinsurance.
Global Preneed net income decreased $5.5 million, or 10%, to $52.2 million for Twelve Months 2019 from $57.7 million
for Twelve Months 2018, primarily due to an out of period adjustment of $9.9 million related to a net over-capitalization of
deferred acquisition costs occurring over a ten-year period. Excluding this adjustment, segment net income increased primarily
due to overall growth in the business and lower mortality.
Global Preneed net earned premiums, fees and other income increased $11.4 million to $200.9 million for Twelve Months
2019 compared with $189.5 million for Twelve Months 2018, primarily driven by growth in prefunded funeral policies and
prior period sales of the Final Need product.
Critical Factors Affecting Results
Our results depend on, among other things, the appropriateness of our product pricing, underwriting, the accuracy of our
reserving methodology for future policyholder benefits and claims, the frequency and severity of reportable and non-reportable
catastrophes, returns on and values of invested assets and our ability to manage our expenses and achieve expense savings. Our
results will also depend on our ability to profitably grow all of our businesses, in particular our Connected Living, Multifamily
Housing and Global Automotive businesses, and manage the pace of declines in placement rates in our Lender-placed
Insurance business and the North American credit insurance business in Global Financial Services and Other. Factors affecting
these items, including, but not limited to, conditions in financial markets, the global economy and the markets in which we
operate, fluctuations in exchange rates and inflation, may have a material adverse effect on our results of operations or financial
condition. For more information on these and other factors that could affect our results, see “Item 1A – Risk Factors.”
Our results may also be impacted by our ability to continue to grow in the markets in which we operate, including in our
Connected Living, Multifamily Housing and Global Automotive businesses, and to manage our Lender-placed Insurance
business, including the expected reduction in loans tracked from a financially insolvent client. Our mobile business is subject to
volatility in mobile device trade-in volumes based on the actual and anticipated timing of the release of new devices and carrier
promotional programs, as well as to changes in consumer preferences. Our Lender-placed Insurance revenues will also be
impacted by changes in the housing market. In addition, across many of our businesses, we must respond to the threat of
disruption. See “Item 1A – Risk Factors – Business and Competitive Risks – Significant competitive pressures, changes in
customer preferences and disruption could adversely affect our results of operations.”
Management believes that we will have sufficient liquidity to satisfy our needs over the next twelve months, including
the ability to pay interest on our debt and dividends on our common and preferred stock.
For Twelve Months 2019, net cash provided by operating activities totaled $1.41 billion; net cash used in investing
activities totaled $619.8 million and net cash used in financing activities totaled $179.2 million. We had $1.87 billion in cash
and cash equivalents as of December 31, 2019. Please see “ – Liquidity and Capital Resources” below for further details.
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Revenues
We generate revenues primarily from the sale of our insurance policies, service contracts and related products and
services and from income earned on our investments. Sales of insurance policies are recognized in revenue as earned premiums
while sales of administrative services are recognized as fee income.
Under the universal life insurance guidance, income earned on preneed life insurance policies sold after January 1, 2009
are presented within fee income net of policyholder benefits. Under the limited pay insurance guidance, the consideration
received on preneed policies sold prior to January 1, 2009 is presented separately as net earned premiums, with policyholder
benefits expense shown separately.
Our premium and fee income is supplemented by income earned from our investment portfolio. We recognize revenue
from interest payments, dividends, change in market value of equity securities and sales of investments. Currently, our
investment portfolio is primarily invested in fixed maturity securities. Both investment income and realized capital gains on
these investments can be significantly affected by changes in interest rates.
Interest rate volatility can increase or reduce unrealized gains or losses in our investment portfolios. Interest rates are
highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political
conditions and other factors beyond our control. Fluctuations in interest rates affect our returns on, and the market value of,
fixed maturity and short-term investments.
The fair market value of the fixed maturity securities in our investment portfolio and the investment income from these
securities fluctuate depending on general economic and market conditions. The fair market value generally increases or
decreases in an inverse relationship with fluctuations in interest rates, while net investment income realized by us from future
investments in fixed maturity securities will generally increase or decrease with interest rates. We also have investments that
are subject to pre-payment risk, such as mortgage-backed and asset-backed securities. Interest rate fluctuations may cause
actual net investment income and/or cash flows from such investments to differ from estimates made at the time of investment.
In periods of declining interest rates, mortgage prepayments generally increase and mortgage-backed securities, commercial
mortgage obligations and bonds are more likely to be prepaid or redeemed as borrowers seek to borrow at lower interest rates.
Therefore, in these circumstances we may be required to reinvest those funds in lower-interest earning investments.
Expenses
Our expenses are primarily policyholder benefits, underwriting, general and administrative expenses and interest
expense.
Policyholder benefits are affected by our claims management programs, reinsurance coverage, contractual terms and
conditions, regulatory requirements, economic conditions, and numerous other factors. Benefits paid or reserves required for
future benefits could substantially exceed our expectations, causing a material adverse effect on our business, results of
operations and financial condition.
Underwriting, general and administrative expenses consist primarily of commissions, premium taxes, licenses, fees,
amortization of deferred costs, general operating expenses and income taxes. In connection with our transformation, we are
undertaking various expense savings initiatives while also making investments in information technology, among other things,
which will impact our expenses.
We also incur interest expense related to our debt.
Critical Accounting Estimates
Certain items in our Consolidated Financial Statements are based on estimates and judgment. Differences between actual
results and these estimates could in some cases have material impacts on our Consolidated Financial Statements.
The following critical accounting policies require significant estimates. The actual amounts realized in these areas could
ultimately be materially different from the amounts currently provided for in our Consolidated Financial Statements.
Reserves
Reserves are established using generally accepted actuarial methods and reflect judgments about expected future claim
payments. Factors used in their calculation include experience derived from historical claim payments and actuarial
assumptions. Calculations incorporate assumptions about the incidence of incurred claims, the extent to which all claims have
been reported, reporting lags, expenses, inflation rates, future investment earnings, internal claims processing costs and other
relevant factors. While the methods of making such estimates and establishing the related liabilities are periodically reviewed
and updated, the estimation of reserves includes an element of uncertainty given that management is using historical
information and methods to project future events and reserve outcomes.
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The recorded reserves represent our best estimate at a point in time of the ultimate costs of settlement and administration
of a claim or group of claims, based upon actuarial assumptions and projections using facts and circumstances known at the
time of calculation. The adequacy of reserves may 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, including, but not limited to:
changes in the economic cycle, inflation, changes in repair costs, natural or human-made catastrophes, judicial trends,
legislative changes and claims handling procedures.
Many of these items are not directly quantifiable and not all future events can be anticipated when reserves are
established. Reserve estimates are refined as experience develops. Adjustments to reserves, both positive and negative, are
reflected in the consolidated statement of operations in the period in which such estimates are updated.
Because establishment of reserves is an inherently complex process involving significant judgment and estimates, there
can be no certainty that future settlement amounts for claims incurred through the financial reporting date will not vary from
reported claims reserves. Future loss development could require reserves to be increased or decreased, which could have a
material effect on our earnings in the periods in which such increases or decreases are made. However, based on information
currently available, we believe our reserve estimates are adequate. See “Item 1A – Risk Factors – Financial Risks – Our actual
claims losses may exceed our reserves for claims, requiring us to establish additional reserves or to incur additional expense
for settling unreserved liabilities, which could have a material adverse effect on our results of operations, profitability and
capital” for more detail on this risk.
For additional information regarding our reserves, see Notes 2 and 17 to the Consolidated Financial Statements included
elsewhere in this Report.
Short Duration Contracts
Claims and benefits payable reserves for short duration contracts include (1) case reserves for known claims which are
unpaid as of the balance sheet date; (2) IBNR reserves for claims where the insured event has occurred but has not been
reported to us as of the balance sheet date; and (3) loss adjustment expense reserves for the expected handling costs of settling
the claims. Periodically, we review emerging experience and make adjustments to our reserves and assumptions where
necessary. Below are further discussions on the reserving process for our major short duration products.
Global Lifestyle and Global Housing
Ultimate loss and loss adjustment expenses are estimated utilizing generally accepted actuarial loss reserving methods.
Both paid claims development as well as case incurred development are typically analyzed at the product or product grouping
level, considering product size and data credibility. The reserving methods widely employed by us include the Chain Ladder,
Munich Chain Ladder and Bornhuetter-Ferguson methods. For Global Housing, reportable catastrophes are analyzed and
reserved for separately using a frequency and severity approach.
The methods all involve aggregating paid and case-incurred loss data by accident quarter (or accident year) and accident
age for each product grouping. As the data ages, development factors are calculated that measure emerging claim development
patterns between reporting periods. By selecting loss development factors indicative of remaining development, known losses
are projected to an ultimate incurred basis for each accident period. The underlying premise of the Chain Ladder method is that
future claims development is best estimated using past claims development, whereas the Bornhuetter-Ferguson method
employs a combination of past claims development and prior estimates of ultimate losses based on an expected loss ratio. The
Munich Chain Ladder method incorporates the correlations between paid and incurred development in projecting future
development factors, and is typically more applicable to products experiencing variability in incurred to paid ratios.
Each of these methods applied to the data groupings produces an estimate of the loss reserves for the product grouping.
The best estimate is generally selected from a blend of the different methods. The IBNR associated with the best estimate is
then allocated to accident year based on a weighting of the underlying actuarial methods. The determination of the best estimate
is based on many factors, including but not limited to:
•
•
•
•
•
•
the nature and extent of the underlying assumptions;
the quality and applicability of historical data - whether internal or industry data;
current and expected future economic and market conditions;
regulatory, legislative, and judicial considerations;
the extent of data segmentation - data should be homogeneous yet credible enough for loss development methods to
apply;
trends in loss frequencies and severities for various causes of loss;
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•
•
consideration of the distribution of loss reserves, management’s selection of the best estimate that may exceed an
estimate based on median values, suggesting that favorable development may be more likely than unfavorable
development; and
hindsight testing of prior loss estimates - the loss estimates on some product lines will vary from actual loss
experience more than others.
When employing the reserving methods, consideration is given to contractual requirements, historical utilization trends
and payment patterns, coverage changes, seasonality, product mix, the legislative and regulatory environment, economic
factors, natural catastrophes and other relevant factors. We consistently apply reserving principles and methodologies from year
to year, while also giving due consideration to the potential variability of these factors.
While management has used judgment in establishing its best estimate of required reserves, different assumptions and
variables could lead to significantly different reserve estimates. Two key measures of loss activity are loss frequency, which is a
measure of the number of claims per unit of insured exposure, and loss severity, which is a measure of the average size of
claims. Factors affecting loss frequency include the effectiveness of loss controls, changes in economic activity and weather
patterns. Factors affecting loss severity include changes in policy limits, retentions, rate of inflation and judicial interpretations.
If the actual level of loss frequency and severity are higher or lower than expected, the ultimate reserves required will be
different than management’s estimate. The effect of higher and lower levels of loss frequency and severity on our ultimate costs
for claims occurring in 2019 would be as follows:
Change in both loss frequency and severity
for all Global Lifestyle and Global Housing
3% higher
2% higher
1% higher
Base scenario (1)
1% lower
2% lower
3% lower
Ultimate cost of claims
occurring in 2019
Change in cost of claims
occurring in 2019
$
$
$
$
$
$
$
1,218.0
1,194.0
1,171.0
1,147.7
1,125.0
1,101.0
1,078.0
$
$
$
$
$
$
$
70.3
46.3
23.3
—
(22.7)
(46.7)
(69.7)
(1) Represents the sum of the case reserves and incurred but not reported reserves as of December 31, 2019 for Global Lifestyle and Global Housing.
Disposed and Runoff Short Duration Lines
We have exposure to asbestos, environmental and other general liability claims arising from our participation in various
reinsurance pools from 1971 through 1985. This exposure arose from a contract that we discontinued writing many years ago.
We carried case reserves for these liabilities, as recommended by the various pool managers, and IBNR reserves totaling $24.3
million (before reinsurance) and $20.7 million (net of reinsurance) at December 31, 2019. 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 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.
Based on information currently available, and after consideration of the reserves reflected in the Consolidated Financial
Statements, we do not believe or expect that changes in reserve estimates for these claims are likely to be material.
Long Duration Contracts
Reserves for future policy benefits represent the present value of future benefits to policyholders and related expenses
less the present value of future net premiums. Reserve assumptions reflect best estimates for expected investment yield,
inflation, mortality, morbidity, expenses and withdrawal rates. These assumptions are based on our experience to the extent it is
credible, modified where appropriate to reflect current trends, industry experience and provisions for possible unfavorable
deviation. We also record an unearned revenue reserve which represents premiums received which have not yet been
recognized in our consolidated statements of operations.
Historically, premium deficiency testing on continuing lines of business has not resulted in material adjustments to
deferred acquisition costs or reserves. Such adjustments could occur, however, if economic or mortality conditions significantly
deteriorated.
Global Preneed
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Global Preneed includes pre-funded funeral (“preneed”) life insurance and annuity contracts and legacy traditional life
insurance (no longer offered). The reserve assumptions for future policy benefits and expenses are determined based upon
pricing, which approximates actual experience.
For preneed life insurance issued after 2008 with discretionary death benefit growth, the universal life-type accounting
model is applied whereby reserve assumptions are made without provision for adverse deviation. Interest and discount rates
are based upon investment returns of the assets acquired to support the business. Expected mortality rates, lapse rates, and
future death benefit increases are based upon pricing assumptions.
For preneed life insurance issued after 2008 with either no death benefit growth or death benefit growth linked to an
inflation index, the long-duration accounting model is applied whereby reserve assumptions are made with provision for
adverse deviation. Interest and discount rates are based upon investment returns of the assets acquired to support the business.
Expected mortality rates and lapse rates are based upon pricing assumptions. For contracts with minimum benefit increases
associated with an inflation index, the reserves assume expected benefit increases equal to a selected discount rate less a spread.
For preneed life insurance issued prior to 2009, the long-duration accounting model is applied whereby reserve
assumptions are made with provision for adverse deviation. Interest and discount rates are based upon investment returns of
the assets acquired to support the business. Expected mortality rates, lapse rates and future death benefit increases are based
upon pricing assumptions.
Annuity contracts have reserve assumptions made without provision for adverse deviation. Assumed discount rates
and interest rates credited on deferred annuities vary by year of issue. Withdrawal charge assumptions are based upon contract
provisions. Nearly all of the deferred annuity contracts have a minimum guaranteed interest rate.
For life insurance and annuity contracts acquired in 2000 and prior, interest and discount rates as well as mortality
assumptions are based on statutory valuation requirements, which approximate the GAAP valuation requirements, with no
explicit provision for lapses.
Disposed and Runoff Long Duration Lines
Risks related to the reserves recorded for certain discontinued individual life, annuity and long-term care insurance
policies have been fully ceded via reinsurance. While we have not been released from our contractual obligation to the
policyholders, changes in and deviations from economic, mortality, morbidity, and withdrawal assumptions used in the
calculation of these reserves will not directly affect our results of operations unless there is a default by the assuming reinsurer.
Deferred Acquisition Costs (“DAC”) and Value of Business Acquired (“VOBA”)
Only direct incremental costs associated with the successful acquisition of new or renewal insurance contracts are
deferred to the extent that such costs are deemed recoverable from future premiums or gross profits. Acquisition costs primarily
consist of commissions and premium taxes. Certain direct response advertising expenses are deferred when the primary
purpose of the advertising is to elicit sales to customers who can be shown to have specifically responded to the advertising and
the direct response advertising results in probable future benefits.
Premium deficiency testing is performed annually and generally reviewed quarterly. Such testing involves the use of best
estimate assumptions including the anticipation of investment income to determine if anticipated future policy premiums are
adequate to recover all DAC and related claims, benefits and expenses. To the extent a premium deficiency exists, it is
recognized immediately by a charge to the consolidated statement of operations and a corresponding reduction in DAC. If the
premium deficiency is greater than unamortized DAC, a loss (and related liability) is recorded for the excess deficiency.
Long Duration Contracts
Acquisition costs for pre-funded funeral life insurance policies issued prior to 2009 and certain life insurance policies no
longer offered are deferred and amortized in proportion to anticipated premiums over the premium-paying period. These
acquisition costs consist primarily of first year commissions paid to agents.
For preneed investment-type annuities, preneed life insurance policies with discretionary death benefit growth issued
after January 1, 2009, universal life insurance policies and investment-type annuities no longer offered, DAC is amortized in
proportion to the present value of estimated gross profits from investment, mortality, expense margins and surrender charges
over the estimated life of the policy or contract. Estimated gross profits include the impact of unrealized gains or losses on
investments as if these gains or losses had been realized, with corresponding credits or charges included in accumulated other
comprehensive income (“AOCI”). The assumptions used for the estimates are consistent with those used in computing the
policy or contract liabilities.
Short Duration Contracts
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Acquisition costs relating to extended service contracts, vehicle service contracts, mobile device protection, credit
insurance, lender-placed homeowners insurance and flood, multifamily housing and manufactured housing are amortized over
the term of the contracts in relation to premiums earned. These acquisition costs consist primarily of advance commissions paid
to agents.
Acquisition costs relating to disposed lines of business (group term life, group disability, group dental and group vision)
consist primarily of compensation to sales representatives. Such costs are deferred and amortized over the estimated terms of
the underlying contracts.
VOBA
As part of the acquisition of businesses that sell long-term extended service contracts, such as warranty contracts sold by
TWG, and long-duration insurance contracts, such as life products, we establish an intangible asset related to VOBA, which
represents the fair value of the expected future profits in unearned premium for insurance contracts acquired. For vehicle
service contracts and extended service contracts such as those purchased in connection with the TWG acquisition, the amount
is determined using estimates, for premium earnings patterns, paid loss development patterns, expense loads, and discount rates
applied to cash flows that include a provision for credit risk. For vehicle service contracts and extended service contracts,
VOBA is amortized consistent with the premium earning patterns of the underlying in-force contracts. For limited payment
policies, preneed life insurance policies, universal life policies and annuities, the valuation of VOBA at the time of acquisition
is derived from similar assumptions to those used to establish the associated claim or benefit reserves and is amortized over the
expected life of the policies.
Investments
We regularly monitor our investment portfolio to ensure that investments that may be other-than-temporarily impaired are
timely identified, properly valued and charged against earnings in the proper period. The determination that a security has
incurred an other-than-temporary decline in value requires the judgment of management. Assessment factors include, but are
not limited to, the length of time and the extent to which the market value has been less than cost, the financial condition and
rating of the issuer, whether any collateral is held, our intent and ability to retain the investment for a period of time sufficient
to allow for recovery and our intent to sell or whether it is more likely than not that we will be required to sell for fixed
maturity securities. 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 that
affect one or more companies, industry sectors, or countries could result in additional impairments in future periods for other-
than-temporary declines in value.
The impairment of a fixed maturity security that we have the intent to sell or that we will more likely than not be required
to sell is deemed other-than-temporary and is written down to its market value at the balance sheet date with the amount of the
impairment reported as a realized loss in that period. For all other-than-temporarily impaired fixed maturity securities that do
not meet either of these two criteria, we are required to analyze our ability to recover the amortized cost of the security by
calculating the net present value of projected future cash flows. For these other-than-temporarily impaired fixed maturity
securities, the net amount recognized in earnings equals the difference between the amortized cost of the fixed maturity security
and its net present value.
See also Notes 2 and 8 to the Consolidated Financial Statements included elsewhere in this Report, “Item 1A – Risk
Factors – Financial Risks – Our investment portfolio is subject to market risk, including changes in interest rates that may
adversely affect our results of operations and financial condition” and “ – Investments” contained later in this Item 7.
Reinsurance
Reinsurance recoverables were $9.59 billion and $9.17 billion as of December 31, 2019 and 2018, respectively, which
include amounts we are owed by reinsurers for claims paid as well as those included in reserve estimates that are subject to the
reinsurance. Reinsurance premiums paid are amortized as reductions to premium over the terms of the underlying reinsured
policies. Amounts recoverable from reinsurers are estimated in a manner consistent with claim and claim adjustment expense
reserves or future policy benefits reserves. An estimated allowance for doubtful accounts is recorded on the basis of periodic
evaluations of balances due from reinsurers (net of collateral), reinsurer solvency, historical disputes of reinsurance liabilities,
management’s experience and current economic conditions. The ceding of insurance does not discharge our primary liability to
our insureds.
We have used reinsurance to exit certain businesses, including Assurant Employee Benefits business and blocks of
individual life, annuity, and long-term care business. The reinsurance recoverables relating to these dispositions amounted to
$4.46 billion and $4.41 billion at December 31, 2019 and 2018, 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 as of December 31, 2019 and 2018:
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Ceded future policyholder benefits and expense
Ceded unearned premium
Ceded claims and benefits payable
Ceded paid losses
Total
2019
2018
$
$
3,329.3
$
4,248.1
1,895.5
120.5
9,593.4
$
3,132.3
3,876.3
2,046.1
111.3
9,166.0
We utilize reinsurance for loss protection and capital management, business dispositions and, in Global Lifestyle and
Global Housing, client risk and profit sharing. See also “Item 1A – Risk Factors – Reinsurance may not be adequate or
available to protect us against losses, and we are subject to the credit risk of reinsurers” and “Item 7A – Quantitative and
Qualitative Disclosures About Market Risk – Credit Risk.”
Retirement and Other Employee Benefits
We have sponsored a qualified pension plan (the “Assurant Pension Plan”) and various non-qualified pension plans
(including an Executive Pension Plan), along with a retirement health benefits plan covering our employees who meet specified
eligibility requirements. Effective March 1, 2016, benefit accruals for the Assurant Pension Plan, the various non-qualified
pension plans and the retirement health benefits plan were frozen. The reported amounts associated with these plans requires an
extensive use of assumptions, which include, but are not limited to, the discount rate and expected return on plan assets. We
determine these assumptions based upon currently available market and industry data, and historical performance of the plan
and its assets. The actuarial assumptions used in the calculation of our aggregate projected benefit obligation vary and include
an expectation of long-term appreciation in equity markets, which is not changed by minor short-term market fluctuations, but
does change when large prolonged interim deviations occur. The assumptions we use may differ materially from actual results
due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of the
participants.
Contingencies
A loss contingency is recorded if reasonably estimable and probable. We establish reserves for these contingencies at the
best estimate, or if no one estimated amount within the range of possible losses is more probable than any other, we record an
estimated reserve at the low end of the estimated range. Contingencies affecting us primarily relate to legal and regulatory
matters, which are inherently difficult to evaluate and are subject to significant changes.
Deferred Taxes
Deferred income taxes are recorded for temporary differences between the financial reporting and income tax bases of
assets and liabilities, based on enacted tax laws and statutory tax rates applicable to the periods in which we expect the
temporary differences to reverse. A valuation allowance is established for deferred tax assets if, based on the weight of all
available evidence, it is more likely than not that some portion of the asset will not be realized. The valuation allowance is
sufficient to reduce the asset to the amount that is more likely than not to be realized. We have deferred tax assets resulting
from temporary differences that may reduce taxable income in future periods. The detailed components of our deferred tax
assets, liabilities and valuation allowance are included in Note 12 to the Consolidated Financial Statements included elsewhere
in this Report.
As of December 31, 2019 and 2018, we had a cumulative valuation allowance of $76.6 million and $26.4 million,
respectively, against deferred tax assets of international subsidiaries. The change during the period is related to the new
valuation allowance of $49.7 million established on the deferred taxes that arose related to losses incurred on our investment in
Iké and a $0.5 million increase in other valuation allowances against foreign net operating loss carryforwards and other
deferred tax assets. The realization of deferred tax assets related to net operating loss carryforwards of international subsidiaries
depends upon the existence of sufficient future taxable income of the same character in the same jurisdiction.
In determining whether the deferred tax asset is realizable, we weighed all available evidence, both positive and negative.
We considered all sources of taxable income available to realize the asset, including the future reversal of existing temporary
differences, future taxable income exclusive of reversing temporary differences, carry forwards and tax-planning strategies.
We believe it is more likely than not that the remainder of our deferred tax assets will be realized. Accordingly, other
than as noted herein for certain international subsidiaries, a valuation allowance has not been established.
Future reversal of the valuation allowance will be recognized either when the benefit is realized or when we determine
that it is more likely than not that the benefit will be realized. Depending on the nature of the taxable income that results in a
reversal of the valuation allowance, and on management’s judgment, the reversal will be recognized either through other
comprehensive income (loss) or through continuing operations in the consolidated statements of operations. Likewise, if we
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determine that it is not more likely than not that we would be able to realize all or part of the deferred tax asset in the future, an
adjustment to the deferred tax asset valuation allowance would be recorded through a charge to continuing operations in the
consolidated statements of operations in the period such determination is made.
In determining the appropriate valuation allowance, management makes judgments about recoverability of deferred tax
assets, use of tax loss and tax credit carryforwards, levels of expected future taxable income and available tax planning
strategies. The assumptions used in making these judgments are updated periodically by management based on current business
conditions that affect us and overall economic conditions. These management judgments are therefore subject to change based
on factors that include, but are not limited to, changes in expected capital gain income in the foreseeable future and our ability
to successfully execute our tax planning strategies. See also “Item 1A – Risk Factors – Financial Risks – The value of our
deferred tax assets could become impaired, which could materially and adversely affect our results of operations and financial
condition.”
Valuation and Recoverability of Goodwill
Our goodwill related to previous acquisitions of businesses was $2.34 billion and $2.32 billion as of December 31, 2019
and 2018, respectively. We review our goodwill annually in the fourth quarter for impairment, or more frequently if indicators
of impairment exist. Such indicators include, but are not limited to: a significant adverse change in legal factors, an adverse
action or assessment by a regulator, unanticipated competition, loss of key personnel or a significant decline in our expected
future cash flows due to changes in company-specific factors or the broader business climate. The evaluation of such factors
requires considerable management judgment. Any adverse change in these factors could have a significant impact on the
recoverability of goodwill and could have a material impact on our Consolidated Financial Statements.
Goodwill is tested for impairment at the reporting unit level, which is either at the operating segment or one level below,
if that component is a business for which discrete financial information is available and segment management regularly reviews
such information. Components within an operating segment can be aggregated into one reporting unit if they have similar
economic characteristics. A goodwill impairment loss is measured as the excess of the carrying value, including goodwill, of
the reporting unit over its fair value. An impairment loss is limited to the amount of goodwill allocated to the reporting unit.
Beginning in 2018, we disaggregated our Global Lifestyle operating segment into the following three reporting units:
Connected Living, Global Automotive and Global Financial Services and Other. In 2018, the carrying amount of our Global
Lifestyle legacy goodwill was allocated based on the fair value of the three new reporting units. The carrying amount of our
goodwill from the TWG acquisition in 2018 was allocated to the three new reporting units based on the acquisition multiple
and implied forward earnings contribution of each reporting unit. Our reporting units for goodwill testing were at the same
level as the operating segment for Global Housing and Global Preneed.
The following table illustrates the amount of goodwill carried by operating segment as of the dates indicated:
Global Lifestyle (1)
Global Housing
Global Preneed
Total
December 31,
2019
2018
1,825.9
$
379.5
138.0
2,343.4
$
1,804.7
379.5
137.6
2,321.8
$
$
(1) As of December 31, 2019, $461.5 million, $1,291.7 million and $72.7 million of goodwill was assigned to the Connected Living, Global Automotive and
Global Financial Services and Other reporting unit, respectively. As of December 31, 2018, $451.2 million, $1,281.3 million, and $72.2 million of goodwill
was assigned to the Connected Living, Global Automotive and Global Financial Services and Other reporting unit, respectively.
In the fourth quarter of 2019, we performed a qualitative assessment for each of our Connected Living, Global Housing
and Global Preneed reporting units. Based on these assessments, we determined that it was more likely than not that the
reporting units’ fair values were more than their respective carrying amounts and therefore further impairment testing was not
necessary. We performed quantitative tests on our Global Automotive and Global Financial Services and Other reporting units
given the relative lower excess fair value over carrying value results from the prior year, concluded that the estimated fair
values exceeded their respective book values by an increased amount over the prior year tests and therefore determined that
goodwill was not impaired.
The determination of fair value of the reporting units requires many estimates and assumptions. These estimates and
assumptions include, but are not limited to, earnings and required capital projections discussed above, discount rates, terminal
growth rates, operating income and dividend forecasts for each reporting unit and the weighting assigned to the results of each
of the three valuation methods described above. Changes in certain assumptions could have a significant impact on the
goodwill impairment assessment.
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Should the operating results of these reporting units decline substantially compared to projected results, or should further
interest rate declines increase the net unrealized investment portfolio gain position, we could determine that we need to perform
an updated impairment test due to the potential impairment indicators, which may require the recognition of a goodwill
impairment loss in any of the reporting units.
Had the net book value for any of the reporting units exceeded its estimated fair value in the quantitative test, the
Company would have recognized a goodwill impairment loss for the difference up to the amount of goodwill allocated to the
reporting unit.
Refer to Note 15 to the Consolidated Financial Statements included elsewhere in this Report for further detail.
Recent Accounting Pronouncements
Please see Note 2 to the Consolidated Financial Statements included elsewhere in this Report.
Results of Operations
Assurant Consolidated
Overview
The table below presents information regarding our consolidated results of operations:
For the Years Ended December 31,
2019
2018
Revenues:
Net earned premiums
Fees and other income
Net investment income
Net realized gains (losses) on investments
Amortization of deferred gains on disposal of businesses
Total revenues
Benefits, losses and expenses:
Policyholder benefits
Amortization of deferred acquisition costs and value of business acquired
Underwriting, general and administrative expenses
Iké net losses
Interest expense
Loss on extinguishment of debt
Total benefits, losses and expenses
Income before provision (benefit) for income taxes
Provision (benefit) for income taxes
Net income
Less: Net income attributable to non-controlling interest
Net income attributable to stockholders
Less: Preferred stock dividends
$
8,020.0
$
1,311.2
675.0
66.3
14.3
10,086.8
2,654.7
3,322.1
3,250.5
163.0
110.6
31.4
9,532.3
554.5
167.7
386.8
(4.2)
382.6
(18.7)
363.9
$
6,156.9
1,308.1
598.4
(62.7)
56.9
8,057.6
2,342.6
2,300.8
2,980.4
—
100.3
—
7,724.1
333.5
80.9
252.6
(1.6)
251.0
(14.2)
236.8
Net income attributable to common stockholders
$
Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018
Net Income Attributable to Common Stockholders
Consolidated net income attributable to common stockholders increased $127.1 million, or 54%, to $363.9 million for
Twelve Months 2019 from $236.8 million for Twelve Months 2018, primarily due to a $128.7 million reduction in reportable
catastrophes and growth in our Global Lifestyle segment, benefiting from continued organic growth in Connected Living and
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full year contributions from the TWG acquisition. The increase was also due to an increase in net realized gains on investments
mostly due to an increase in the fair value of equity securities and sales of fixed maturity securities at net gains in 2019
compared to net losses in 2018, and a $44.1 million reduction in net charges associated with the TWG acquisition. These
increases were partially offset by a $163.9 million after-tax loss related to a decrease in the estimated fair value of Iké (of which
$38.4 million related to cumulative foreign currency losses recorded in other comprehensive income), lower after-tax
amortization of deferred gains associated with the sale of Assurant Employee Benefits and $29.6 million of after-tax charges
primarily related to the August 2019 tender offer for a portion of the Company’s senior notes maturing in 2034.
Global Lifestyle
Overview
The table below presents information regarding the Global Lifestyle segment’s results of operations for the periods
indicated:
Revenues:
Net earned premiums
Fees and other income
Net investment income
Total revenues
Benefits, losses and expenses:
Policyholder benefits
Amortization of deferred acquisition costs and value of business acquired
Underwriting, general and administrative expenses
Total benefits, losses and expenses
Segment income before provision for income taxes
Provision for income taxes
Segment net income
Net earned premiums, fees and other income:
Connected Living (mobile and service contracts)
Global Automotive
Global Financial Services and Other
Total
Net earned premiums, fees and other income:
Domestic
International
Total
For the Years Ended December 31,
2019
2018
$
6,073.7
$
4,291.8
1,020.5
250.8
7,345.0
1,516.2
3,015.7
2,277.6
6,809.5
535.5
126.2
409.3
3,768.4
2,873.6
452.2
7,094.2
5,020.1
2,074.1
7,094.2
$
$
$
$
$
891.5
189.4
5,372.7
1,145.6
2,025.8
1,812.6
4,984.0
388.7
91.0
297.7
2,800.6
1,909.2
473.5
5,183.3
3,560.9
1,622.4
5,183.3
$
$
$
$
$
Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018
Net Income
Segment net income increased $111.6 million, or 37%, to $409.3 million for Twelve Months 2019 from $297.7 million
for Twelve Months 2018, primarily due to organic growth in our Connected Living business, mainly from mobile protection
programs in Asia Pacific and North America, full year contributions from the TWG acquisition, improved operating
performance in our European mobile business and higher domestic trade-in volumes from our mobile repairs and logistics
business. The increases were partially offset by an increase in expenses related to continued investments in our Connected
Living business, the absence of $9.3 million after-tax benefits for client recoverables that were included in Twelve Months
2018, unfavorable foreign exchange and the continued runoff of our domestic credit business. The TWG acquisition
contributed approximately $130 million of full year net income to Global Lifestyle in 2019 compared to $74.7 million of
income, excluding the $9.3 million after-tax benefit for client recoverables, for seven months in 2018.
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Total Revenues
Total revenues increased $1.97 billion, or 37%, to $7.35 billion for Twelve Months 2019 from $5.37 billion for Twelve
Months 2018. Net earned premiums increased $1.78 billion, or 42%, primarily due to full year of revenues from the TWG
acquisition, organic growth in our Connected Living business, mainly due to subscriber growth from mobile protection
programs, and continued growth in our Global Automotive business, due to strong prior period sales of warranty contracts. The
increase was partially offset by unfavorable foreign exchange. Fees and other income increased $129.0 million, or 14%,
primarily driven by higher trade-in volumes from our mobile repairs and logistics business and growth from mobile programs.
Net investment income increased $61.4 million, or 32%, primarily due to full year contributions from the TWG acquisition and
higher income from real estate related investments.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses increased $1.83 billion, or 37%, to $6.81 billion for Twelve Months 2019 from $4.98
billion for Twelve Months 2018. Policyholder benefits increased $370.6 million, or 32%, primarily driven by a full year of
policyholder benefits from the TWG acquisition and growth from our Connected Living and Global Automotive businesses,
partially offset by favorable foreign exchange. Amortization of deferred acquisition costs and value of business acquired
increased $989.9 million, or 49%, primarily due to a full year of expenses from the TWG acquisition. Underwriting, general
and administrative expenses increased $465.0 million, or 26%, primarily due to growth in our global mobile programs,
including higher trade-in volumes from our domestic repairs and logistics business, a full year of expenses from the TWG
acquisition and continued investments in our Connected Living business, partially offset by favorable foreign exchange.
Global Housing
Overview
The table below presents information regarding the Global Housing segment’s results of operations for the periods
indicated:
Revenues:
Net earned premiums
Fees and other income
Net investment income
Total revenues
Benefits, losses and expenses:
Policyholder benefits
Amortization of deferred acquisition costs and value of business acquired
Underwriting, general and administrative expenses
Total benefits, losses and expenses
Segment income before provision for income taxes
Provision for income taxes
Segment net income
Net earned premiums, fees and other income:
Lender-placed Insurance
Multifamily Housing
Specialty and Other
Mortgage Solutions
Total
For the Years Ended December 31,
2019
2018
$
1,885.1
$
1,806.2
148.6
95.2
2,128.9
869.5
221.5
711.6
1,802.6
326.3
67.6
258.7
1,109.2
429.2
495.3
—
$
$
283.0
80.8
2,170.0
938.4
204.5
837.1
1,980.0
190.0
39.2
150.8
1,149.7
406.1
417.3
116.1
2,033.7
$
2,089.2
$
$
$
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51
Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018
Net Income
Segment net income increased $107.9 million, or 72%, to $258.7 million for Twelve Months 2019 from $150.8 million
for Twelve Months 2018, primarily due to after-tax reportable catastrophes of $40.9 million in Twelve Months 2019 compared
to $169.7 million in Twelve Months 2018. Excluding reportable catastrophes, segment net income decreased $20.9 million, or
7%, primarily driven by a decline in Lender-placed Insurance mostly due to the cost of additional catastrophe reinsurance
protection secured as part of the 2019 program and a reduction in loans tracked from a financially insolvent client and higher
non-catastrophe loss experience from an increase in the frequency and severity of losses from our small commercial and
sharing economy products. These decreases were partially offset by the absence of losses from the sale of our Mortgage
Solutions business in Twelve Months 2018 and growth from Multifamily Housing.
Total Revenues
Total revenues decreased $41.1 million, or 2%, to $2.13 billion for Twelve Months 2019 from $2.17 billion for Twelve
Months 2018. The decrease was mainly due to a decrease in fees and other income of $134.4 million, or 47%, primarily due to
the sale of our Mortgage Solutions business. Net earned premiums increased $78.9 million, or 4%, primarily due to growth
from our Specialty and Other business, mainly small commercial and sharing economy products, premium rate increases in
Lender-placed Insurance and continued growth from renters insurance in our Multifamily Housing business, partially offset by
a decline in Lender-placed Insurance from lower placement rates, the reduction in loans tracked from a financially insolvent
client and the cost of additional catastrophe reinsurance protection. Net investment income increased $14.4 million, or 18%,
primarily due to higher income from real estate related investments and an increase in invested assets.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses decreased $177.4 million, or 9%, to $1.80 billion for Twelve Months 2019 from $1.98
billion for Twelve Months 2018. The decrease was primarily due to a decrease in underwriting, general and administrative
expenses of $125.5 million, or 15%, primarily due to the sale of our Mortgage Solutions business. Total policyholder benefits
decreased $68.9 million, or 7%, primarily due to a decrease of $164.2 million in reportable catastrophe losses, partially offset
by higher non-catastrophe loss experience mainly from our small commercial and sharing economy products. Amortization of
deferred acquisition costs increased $17.0 million, or 8%, primarily related to growth in our Specialty and Other and
Multifamily Housing businesses.
Global Preneed
Overview
The table below presents information regarding the Global Preneed segment’s results of operations for the periods
indicated:
For the Years Ended December 31,
2019
2018
Revenues:
Net earned premiums
Fees and other income
Net investment income
Total revenues
Benefits, losses and expenses:
Policyholder benefits
Amortization of deferred acquisition costs and value of business acquired
Underwriting, general and administrative expenses
Total benefits, losses and expenses
Segment income before provision for income taxes
Provision for income taxes
Segment net income
$
52
$
61.2
$
139.7
285.3
486.2
269.0
84.9
67.3
421.2
65.0
12.8
52.2
$
58.4
131.1
278.0
467.5
263.3
70.5
60.1
393.9
73.6
15.9
57.7
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Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018
Net Income
Segment net income decreased $5.5 million, or 10%, to $52.2 million for Twelve Months 2019 from $57.7 million for
Twelve Months 2018, primarily due to a $9.9 million after-tax expense related to an out of period adjustment related to the net
over-capitalization of deferred acquisition costs occurring over a ten-year period and increased general expense, partially offset
by growth in the domestic preneed business and lower mortality.
Total Revenues
Total revenues increased $18.7 million, or 4%, to $486.2 million for Twelve Months 2019 from $467.5 million for Twelve
Months 2018. Fees and other income increased $8.6 million, or 7%, primarily due to growth in the U.S. business, partially
offset by unfavorable foreign exchange. Net investment income increased $7.3 million, or 3%, primarily due to an increase in
invested assets in line with the growth of the domestic preneed business, partially offset by unfavorable foreign exchange.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses increased $27.3 million, or 7%, to $421.2 million for Twelve Months 2019 from
$393.9 million for Twelve Months 2018, primarily due to a $14.2 million pre-tax out of period adjustment related to the net
over-capitalization of deferred acquisition costs occurring over a ten-year period, increased information technology expense
and growth in the domestic preneed business, partially offset by favorable foreign exchange.
Corporate and Other
Overview:
The table below presents information regarding the Corporate and Other segment’s results of operations for the periods
indicated:
Revenues:
Net earned premiums
Fees and other income
Net investment income
Net realized gains (losses) on investments
Amortization of deferred gains on disposal of businesses
Total revenues
Benefits, losses and expenses:
Policyholder benefits
General and administrative expenses
Iké net losses
Interest expense
Loss on extinguishment of debt
Total benefits, losses and expenses
Segment loss before benefit for income taxes
Benefit for income taxes
Segment net (loss) income
Less: Net income attributable to non-controlling interest
Net (loss) income attributable to stockholders
Less: Preferred stock dividends
Net (loss) income attributable to common stockholders
$
53
For the Years Ended December 31,
2019
2018
$
— $
2.4
43.7
66.3
14.3
126.7
—
194.0
163.0
110.6
31.4
499.0
(372.3)
(38.9)
(333.4)
(4.2)
(337.6)
(18.7)
(356.3) $
0.5
2.5
50.2
(62.7)
56.9
47.4
(4.7)
270.6
—
100.3
—
366.2
(318.8)
(65.2)
(253.6)
(1.6)
(255.2)
(14.2)
(269.4)
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Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018
Net (Loss) Income Attributable to Common Stockholders
Segment net loss attributable to common stockholders increased $86.9 million, or 32%, to a net loss of $356.3 million for
Twelve Months 2019 from a net loss of $269.4 million for Twelve Months 2018, primarily due to a $163.9 million of after-tax
loss related to a decrease in the estimated fair value of Iké, an increase in net realized gains on investments driven by an
increase in the fair value of equity securities and sales of fixed maturity securities at net gains in 2019 compared to net losses in
2018, a $44.1 million after-tax reduction in net charges associated with the TWG acquisition and a $24.1 million after-tax
decrease in the loss on the sale of our Mortgage Solutions business. The decreases were partially offset by $29.6 million of
after-tax charges related to the August 2019 tender offer for a portion of the Company’s senior notes maturing in 2034,
additional interest expense and preferred dividends from acquisition related financing and lower amortization of deferred gains
with the sale of Assurant Employee Benefits.
Total Revenues
Total revenues increased $79.3 million, or 167%, to $126.7 million for Twelve Months 2019 from $47.4 million for
Twelve Months 2018, primarily due to an increase in net realized gains on investments mostly due to an increase in the fair
value of equity securities and sales of fixed maturity securities at net gains in 2019 compared to net losses in 2018, partially
offset by lower amortization of deferred gains associated with the sale of Assurant Employee Benefits.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses increased $132.8 million, or 36%, to $499.0 million for Twelve Months 2019 from
$366.2 million for Twelve Months 2018. The increase in expenses for Twelve Months 2019 was primarily due to a $163.0
million loss related to a decrease in estimated fair value of Iké, $37.4 million of debt related charges primarily related to the
August 2019 tender offer for a portion of the Company’s senior notes maturing 2034 and the absence of $17.7 million of gains
from the sale of Time Insurance Company, a legal entity associated with the previously exited Assurant Health business. These
increases were partially offset by $59.2 million decrease in net charges associated with the TWG acquisition and a $30.7
million change due to the comparison to the 2018 loss on the sale of our Mortgage Solutions business. Additionally, general
and administrative expenses for Twelve Months 2019 included a $26.7 million gain related to the reduction of the valuation
allowance on the Company’s Patient Protection and Affordable Health Care Act of 2010 (“ACA”) risk corridor program
receivables. The reduction in the allowance related to improved collection prospects following recent litigation activity as well
as the Company’s entry into an agreement to effectively sell its right to any future claim proceeds received by the Company
related to the risk corridor program receivables. For more information, see Note 4 to the Consolidated Financial Statements
included elsewhere in this Report.
Investments
We had total investments of $14.57 billion and $13.40 billion as of December 31, 2019 and 2018, respectively. Net
unrealized gains on our fixed maturity securities portfolio increased $834.5 million during Twelve Months 2019, from $423.1
million at December 31, 2018 to $1.26 billion at December 31, 2019. The increase was mainly due to a decrease in U.S.
Treasury yields and tightening credit spreads.
The following table shows the credit quality of our fixed maturity securities portfolio as of the dates indicated:
Fixed Maturity Securities by Credit Quality
Aaa / Aa / A
Baa
Ba
B and lower
Total
Fair Value as of
December 31, 2019
December 31, 2018
$
8,014.7
3,734.7
480.7
92.3
65.1% $
30.3%
3.9%
0.7%
7,329.8
3,322.7
447.9
156.7
65.1%
29.5%
4.0%
1.4%
$
12,322.4
100.0% $
11,257.1
100.0%
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54
The following table shows the major categories of net investment income for the periods indicated:
Fixed maturity securities
Equity securities
Commercial mortgage loans on real estate
Short-term investments
Other investments
Cash and cash equivalents
Revenue from consolidated investment entities (1)
Total investment income
Investment expenses
Expenses from consolidated investment entities (1)
Net investment income
Years Ended December 31,
2019
2018
$
492.8
$
451.6
22.1
36.6
13.6
49.2
36.1
119.2
769.6
(24.5)
(70.1)
675.0
$
21.5
33.4
22.0
41.6
25.7
77.8
673.6
(23.3)
(51.9)
598.4
$
(1) The following table shows the revenues net of expenses from consolidated investment entities (“CIEs”) for the periods indicated. Refer to Note 9 to the
Consolidated Financial Statements included elsewhere in this Report for further detail.
Investment income from direct investments in:
Real estate funds (1)
CLO entities
Investment management fees
Net investment income from consolidated investment entities
Years Ended December 31,
2019
2018
$
$
$
25.1
17.0
7.0
49.1
$
11.3
9.5
5.1
25.9
(1) The investment income from the real estate funds includes income attributable to non-controlling interest of $3.8 million and $2.1 million for the years
ended December 31, 2019 and 2018, respectively.
Net investment income increased $76.6 million, or 13%, to $675.0 million for Twelve Months 2019 from $598.4 million
for Twelve Months 2018 benefiting from the investments acquired from the TWG acquisition. In addition to TWG, the
increase was also due to higher income from CIEs, primarily related to our investment in our real estate fund resulting from an
increase in the fair market value of certain real estate properties and income from our direct investment in Assurant-issued CLO
structures launched in 2019. The increase in net investment income was also due to proceeds from the sale of direct real estate
venture properties and an increase in fair market value of certain other properties, as well as increased income from higher
overall invested assets consistent with the underlying growth of our business. The increase was partially offset by the absence
of $2.9 million of interest income related to the recovery of losses on certain mortgage-backed securities and $2.4 million of
interest income from the reinvestment of debt proceeds in anticipation of the TWG acquisition that were recorded for the
Twelve Months 2018.
As of December 31, 2019, we owned $69.6 million of securities guaranteed by financial guarantee insurance companies.
Included in this amount was $57.9 million of municipal securities, whose credit rating was A+ with the guarantee, but would
have had a rating of A- without the guarantee.
As we continue to focus on driving profitable growth, in February 2020 we made the strategic decision to outsource the
day-to-day management of our investment portfolio. We expect to complete the implementation of our new asset management
model in the second quarter of 2020.
For more information on our investments, see Notes 8 and 10 to the Consolidated Financial Statements included
elsewhere in this Report.
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55
Liquidity and Capital Resources
Regulatory Requirements
Assurant, Inc. is a holding company and, as such, has limited direct operations of its own. Our 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. Our insurance subsidiaries’ ability to pay such dividends and to make such other
payments will be limited by applicable laws and regulations of the jurisdictions in which our subsidiaries are domiciled, which
subject our subsidiaries to significant regulatory restrictions. The dividend requirements and regulations vary from jurisdiction
to jurisdiction and by type of insurance provided by the applicable subsidiary. These laws and regulations require, among other
things, our insurance subsidiaries to maintain minimum solvency requirements and limit the amount of dividends they can pay
to the holding company. See “Item 1 – Business – Regulation – U.S. Insurance Regulation” and “Item 1A – Risk Factors –
Legal and Regulatory Risks – Changes in insurance regulation may reduce our profitability and limit our growth.” Along with
solvency regulations, the primary driver in determining the amount of capital used for dividends from insurance subsidiaries is
the level of capital needed to maintain desired financial strength ratings from A.M. Best Company (“A.M. Best”).
Regulators or rating agencies could become more conservative in their methodology and criteria, increasing capital
requirements for our insurance subsidiaries. In 2019, the following actions were taken by the rating agencies:
A.M. Best
• Affirmed all ratings of Assurant entities with a stable outlook, except for two of our subsidiaries that sold the Assurant
Employee Benefits business through reinsurance, whose financial strength ratings were downgraded from A- to B++
due to their diminished profile following the sale. The outlook for the ratings of these two entities was revised from
negative to stable.
• Withdrew the A ratings of two U.K. subsidiaries as the Company elected to no longer have these subsidiaries
participate in the interactive process.
• Assigned a bbb+ to our new senior debt issuance with a stable outlook.
Moody’s
• Assigned a Baa3 rating to our new senior debt issuance with a stable outlook.
S&P
• Assigned a BBB to our new senior debt issuance with a stable outlook.
• All ratings were affirmed with a stable outlook.
For further information on our ratings and the risks of ratings downgrades, see “Item 1 – Business – Ratings” and “Item
1A – Risk Factors – Financial Risks – A decline in the financial strength ratings of our insurance company subsidiaries could
adversely affect our results of operations and financial condition.”
For the year ending December 31, 2020, the maximum amount of dividends our regulated U.S. domiciled insurance
subsidiaries could pay us, under applicable laws and regulations without prior regulatory approval, is $423.7 million. In
addition, our international and non-insurance subsidiaries provide additional sources of dividends.
Holding Company
As of December 31, 2019, we had approximately $533.9 million in holding company liquidity, $308.9 million above our
targeted minimum level of $225.0 million. The target minimum level of holding company liquidity, which can be used for
unforeseen capital needs at our subsidiaries or liquidity needs at the holding company, is calibrated based on approximately one
year of corporate operating and interest expenses and MCPS dividends. We use the term “holding company liquidity” to
represent the portion of cash and other liquid marketable securities held at Assurant, Inc., out of a total of $648.0 million of
holding company investment securities and cash, which we are not otherwise holding for a specific purpose as of the balance
sheet date. We can use such assets for stock repurchases, stockholder dividends, acquisitions and other corporate purposes.
Dividends or returns of capital paid by our subsidiaries, net of infusions and excluding amounts used for acquisitions or
received from dispositions, were approximately $748.0 million and $739.0 million for Twelve Months 2019 and Twelve
Months 2018, respectively. We use these cash inflows primarily to pay expenses, to make interest payments on indebtedness, to
make dividend payments to our stockholders, to fund acquisitions and to repurchase our shares.
In addition to paying expenses, making interest payments on indebtedness and making dividend payments on our
preferred stock, our capital management strategy provides for several uses of the cash generated by our subsidiaries, including
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without limitation, returning capital to common stockholders through share repurchases and dividends, investing in our business
to support growth in targeted areas and making prudent and opportunistic acquisitions. From time to time, we may also seek to
purchase outstanding debt in open market repurchases or privately negotiated transactions. During Twelve Months 2019 and
Twelve Months 2018, we made common stock repurchases and paid dividends to our common stockholders of $426.3 million
and $266.1 million, respectively. We expect to deploy capital primarily to support business growth, fund other investments and
return capital to shareholders, subject to Board approval and market conditions.
In 2014, we made an approximately 40% investment in Iké, a services assistance business, for which we paid
approximately $110.0 million. We also entered into a shareholder agreement with the majority shareholders that provided us
with the right to acquire the remainder of Iké from the majority shareholders, and the majority shareholders the right to put their
interests in Iké to us, in mid-2019. In April 2019, we entered into a cooperation agreement with the majority shareholders of Iké
to explore strategic alternatives. We also agreed to delay the call and put rights to January 31, 2020. In the third quarter of 2019,
we decided to pursue the sale of our interests in Iké and on January 29, 2020, we entered into agreements to sell our interest in
Iké to certain management shareholders, which is subject to regulatory approval. We expect closing to occur in the second
quarter of 2020 resulting in an expected net cash outflow of $54 million, which could increase by up to an additional $40
million in the event we provide seller financing to the management shareholders at closing, plus transaction costs. There can be
no assurance that our efforts to sell our interests in Iké will be successful. See Note 5 to the Consolidated Financial Statements
included elsewhere in this Report.
Assurant Subsidiaries
The primary sources of funds for our subsidiaries consist of premiums and fees collected, proceeds from the sales and
maturity of investments and net investment income. Cash is primarily used to pay insurance claims, agent commissions,
operating expenses and taxes. We generally invest our subsidiaries’ excess funds in order to generate investment income.
We conduct periodic asset liability studies to measure the duration of our insurance liabilities, to develop optimal asset
portfolio maturity structures for our significant lines of business and ultimately to assess that cash flows are sufficient to meet
the timing of cash needs. These studies are conducted in accordance with formal company-wide Asset Liability Management
guidelines.
To complete a study for a particular line of business, models are developed to project asset and liability cash flows and
balance sheet items under a large, varied set of plausible economic scenarios. These models consider many factors including the
current investment portfolio, the required capital for the related assets and liabilities, our tax position and projected cash flows
from both existing and projected new business.
Alternative asset portfolio structures are analyzed for significant lines of business. An investment portfolio maturity
structure is then selected from these profiles given our return hurdle and risk preference. Sensitivity testing of significant
liability assumptions and new business projections is also performed.
Our liabilities generally have limited policyholder optionality, which means that the timing of payments is relatively
insensitive to the interest rate environment. In addition, our investment portfolio is largely comprised of highly liquid fixed
maturity securities with a sufficient component of such securities invested that are near maturity which may be sold with
minimal risk of loss to meet cash needs. Therefore, we believe we have limited exposure to disintermediation risk.
Generally, our subsidiaries’ premiums, fees and investment income, along with planned asset sales and maturities, provide
sufficient cash to pay claims and expenses. However, there may be instances when unexpected cash needs arise in excess of that
available from usual operating sources. In such instances, we have several options to raise needed funds, including selling
assets from the subsidiaries’ investment portfolios, using holding company cash (if available), issuing commercial paper, or
drawing funds from the five-year senior unsecured $450.0 million revolving credit agreement (the “Credit Facility”) with a
syndicate of banks arranged by JPMorgan Chase Bank, N.A. and Wells Fargo Bank, National Association. In addition, in
January 2018, we filed an automatically effective shelf registration statement on Form S-3 with the SEC. This registration
statement allows us to issue equity, debt and other types of securities through one or more methods of distribution. The terms of
any offering would be established at the time of the offering, subject to market conditions. If we decide to make an offering of
securities, we will consider the nature of the cash requirement as well as the cost of capital in determining what type of
securities we may offer.
Dividends and Repurchases
On January 14, 2020, the Board declared a quarterly dividend of $0.63 per common share payable on March 16, 2020 to
stockholders of record as of February 24, 2020. We paid dividends of $0.63 per common share on December 16, 2019 to
stockholders of record as of November 25, 2019. This represents a 5% increase to the quarterly dividend of $0.60 per common
share paid on September 16, 2019 to stockholders of record as of August 26, 2019, $0.60 per common share paid on June 18,
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2019 to stockholders of record as of May 28, 2019, and $0.60 per common share paid on March 18, 2019 to stockholders of
record as of February 25, 2019.
On January 14, 2020, the Board declared a quarterly dividend of $1.6250 per share of MCPS payable on March 16, 2019
to stockholders of record as of March 1, 2019. We paid dividends of $1.6250 per share of MCPS on December 16, 2019 to
stockholders of record as of December 1, 2019, $1.6250 per share of MCPS on September 16, 2019 to stockholders of record as
of September 1, 2019, $1.6250 per share of MCPS on June 17, 2019 to stockholders of record as of June 1, 2019, and $1.6250
per share of MCPS on March 15, 2019 to stockholders of record as of March 1, 2019.
Any determination to pay future dividends will be at the discretion of the Board and will be dependent upon various
factors, including: our subsidiaries’ payments of dividends and other statutorily permissible payments to us; our results of
operations and cash flows; our financial condition and capital requirements; general business conditions and growth prospects;
legal, tax, regulatory and contractual restrictions on the payment of dividends; and other factors the Board deems relevant.
Payments of dividends on shares of common stock are subject to the preferential rights of the MCPS described below. The
Credit Facility also contains limitations on our ability to pay dividends to our stockholders if we are in default, or such dividend
payments would cause us to be in default, of our obligations thereunder. In addition, if we defer the payment of interest on our
Subordinated Notes, we generally may not make payments on our capital stock.
On November 5, 2018, the Board authorized us to repurchase up to an additional $600.0 million of our outstanding
common stock. During Twelve Months 2019, we repurchased 2,417,498 shares of our outstanding common stock at a cost of
$274.9 million, exclusive of commissions. As of December 31, 2019, $486.3 million remained under the Board repurchase
authorization. The timing and the amount of future repurchases will depend on market conditions, our financial condition,
results of operations, liquidity and other factors.
Management believes that we will have sufficient liquidity to satisfy our needs over the next twelve months, including the
ability to pay interest on our debt and dividends on our common and preferred stock.
Mandatory Convertible Preferred Stock
In March 2018, we issued 2,875,000 shares of our MCPS. Each outstanding share of MCPS will convert automatically on
March 15, 2021 into between 0.9374 (the “minimum conversion rate”) and 1.1248 shares of common stock, subject to
customary anti-dilution adjustments. At any time prior to March 2021, holders may elect to convert each share of MCPS into
shares of common stock at the minimum conversion rate or in the event of a fundamental change at the specified rates defined
in the Certificate of Designations of the Mandatory Convertible Preferred Stock.
Dividends on the Mandatory Convertible Preferred Stock will be payable on a cumulative basis when, as and if declared,
at an annual rate of 6.50% of the liquidation preference of $100.00 per share. We may pay declared dividends in cash or, subject
to certain limitations, in shares of our common stock, or in any combination of cash and shares of our common stock quarterly,
commencing in June 2018 and ending in March 2021. No dividend or distribution may be declared or paid on common stock or
any other class or series of junior stock, and no common stock or any other class or series of junior stock or parity stock may be
purchased, redeemed or otherwise acquired for consideration unless all accumulated and unpaid dividends on the MCPS for all
preceding dividend periods have been declared and paid in full, subject to certain limited exceptions. We paid preferred stock
dividends of $18.7 million and $14.2 million for Twelve Months 2019 and Twelve Months 2018, respectively. For additional
information regarding the MCPS, see Note 20 in the Consolidated Financial Statements included elsewhere in this Report.
Credit Facility and Commercial Paper Program
We have a Credit Facility that provides for revolving loans and the issuance of multi-bank, syndicated letters of credit and
letters of credit from a sole issuing bank in an aggregate amount of $450.0 million, which may be increased up to $575.0
million. The Credit Facility is available until December 2022, provided we are in compliance with all covenants. The Credit
Facility has a sub-limit for letters of credit issued thereunder of $50.0 million. The proceeds from these loans may be used for
our commercial paper program or for general corporate purposes.
Our commercial paper program requires us to maintain liquidity facilities either in an available amount equal to any
outstanding notes from the program or in an amount sufficient to maintain the ratings assigned to the notes issued from the
program. Our commercial paper is rated AMB-1 by A.M. Best, P-3 by Moody’s and A-2 by S&P. Our subsidiaries do not
maintain commercial paper or other borrowing facilities. This program is currently backed up by the Credit Facility, of which
$441.0 million was available as of December 31, 2019, and $9.0 million letters of credit were outstanding.
We did not use the commercial paper program during Twelve Months 2019 or Twelve Months 2018 and there were no
amounts relating to the commercial paper program outstanding as of December 31, 2019 or 2018. We made no borrowings
using the Credit Facility during Twelve Months 2019 or Twelve Months 2018 and no loans were outstanding as of
December 31, 2019 or 2018.
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Covenants
The Credit Facility contains restrictive covenants including, but not limited to:
(i)
Maintenance of a maximum consolidated total debt to capitalization ratio on the last day of any fiscal quarter of
not greater than 0.35 to 1.0; and
(ii) Maintenance of a consolidated adjusted net worth in an amount not less than a “Minimum Amount” equal to the
sum of (a) the greater of 70% of our consolidated adjusted net worth on the date of the closing of the TWG
acquisition and $2.72 billion, (b) 25% of consolidated net income for each fiscal quarter (if positive) beginning
with the first fiscal quarter ending after the date of the closing of the TWG acquisition and (c) 25% of the net cash
proceeds received from any capital contribution to, or issuance of any capital stock, disqualified capital stock and
hybrid securities, received after the closing of the TWG acquisition.
In the event of a breach of certain covenants, all obligations under the Credit Facility, including unpaid principal and
accrued interest and outstanding letters of credit, may become immediately due and payable.
Senior and Subordinated Notes
The following table shows the principal amount and carrying value of our outstanding debt, less unamortized discount
and issuance costs as applicable, as of December 31, 2019 and 2018:
December 31, 2019
December 31, 2018
Principal Amount
Carrying Value
Principal Amount
Carrying Value
Floating Rate Senior Notes due March 2021 (1)
$
50.0
$
49.9
$
300.0
$
4.00% Senior Notes due March 2023
4.20% Senior Notes due September 2023
4.90% Senior Notes due March 2028
3.70% Senior Notes due February 2030
6.75% Senior Notes due February 2034
7.00% Fixed-to-Floating Rate Subordinated Notes
due March 2048 (2)
Total debt
350.0
300.0
300.0
350.0
275.0
400.0
348.5
297.8
296.8
346.8
272.1
395.0
2,006.9
$
350.0
300.0
300.0
—
375.0
400.0
298.1
348.1
296.8
297.6
—
370.9
394.5
2,006.0
$
(1)
(2)
Bears floating interest at a rate equal to three-month LIBOR plus 1.25%.
Bears a 7.00% annual interest rate from March 2018 to March 2028 and annual interest rate equal to three-month LIBOR plus 4.135% thereafter.
2030 Senior Notes: In August 2019, we issued senior notes with an aggregate principal amount of $350.0 million which
bear interest at a rate of 3.70% per year, mature in February 2030 and were issued at a 0.035% discount to the public (the “2030
Senior Notes”). Interest is payable semi-annually in arrears beginning in February 2020. Prior to November 2029, we may
redeem the 2030 Senior Notes at any time in whole or from time to time in part at a make-whole premium plus accrued and
unpaid interest. On or after that date, we may redeem the 2030 Senior Notes at any time in whole or from time to time in part at
a redemption price equal to 100% of the principal amount being redeemed plus accrued and unpaid interest.
We used the net proceeds from the offering, together with cash on hand to purchase $100.0 million of our 6.75% senior
notes due 2034 in a cash tender offer, to redeem $250.0 million of our floating rate senior notes due 2021 and to pay related
premiums, fees and expenses.
2021, 2023 and 2028 Senior Notes
In March 2018, we issued the following three series of senior notes with an aggregate principal amount of $900.0 million:
• 2021 Senior Notes: The first series of senior notes is $300.0 million in principal amount, bears floating interest rate
equal to three-month LIBOR plus 1.25% (3.21% as of December 31, 2019) and matures in March 2021 (the “2021
Senior Notes”). Interest on the 2021 Senior Notes is payable quarterly. Commencing on or after March 2019, we
may redeem the 2021 Senior Notes at any time in whole or from time to time in part at a redemption price equal to
100% of the principal amount being redeemed plus accrued and unpaid interest. In August 2019, we redeemed
$250.0 million of the $300.0 million then outstanding aggregate principal amount of the 2021 Senior Notes.
• 2023 Senior Notes: The second series of senior notes is $300.0 million in principal amount, bears interest at 4.20%
per year, matures in September 2023 and was issued at a 0.233% discount to the public (the “2023 Senior Notes”).
Interest on the 2023 Senior Notes is payable semi-annually. Prior to August 2023, we may redeem the 2023 Senior
Notes at any time in whole or from time to time in part at a make-whole premium plus accrued and unpaid interest.
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On or after that date, we may redeem the 2023 Senior Notes at any time in whole or from time to time in part at a
redemption price equal to 100% of the principal amount being redeemed plus accrued and unpaid interest.
• 2028 Senior Notes: The third series of senior notes is $300.0 million in principal amount, bears interest at 4.90%
per year, matures in March 2028 and was issued at a 0.383% discount to the public (the “2028 Senior Notes”).
Interest on the 2028 Senior Notes is payable semi-annually. Prior to December 2027, we may redeem the 2028
Senior Notes at any time in whole or from time to time in part at a make-whole premium plus accrued and unpaid
interest. On or after that date, we may redeem the 2028 Senior Notes at any time in whole or from time to time in
part at a redemption price equal to 100% of the principal amount being redeemed plus accrued and unpaid interest.
The interest rate payable on each of the 2021 Senior Notes, the 2023 Senior Notes, the 2028 Senior Notes and the 2030
Senior Notes will be subject to adjustment from time to time, if either Moody’s or S&P downgrades the credit rating assigned to
such series of senior notes to Ba1 or below or to BB+ or below, respectively, or subsequently upgrades the credit ratings once
the senior notes are at or below such levels. For more details on the increase in interest rate over the issuance rate by rating, see
Note 19 to our Consolidated Financial Statements included elsewhere in this Report.
Subordinated Notes
In March 2018, we issued fixed-to-floating rate subordinated notes due March 2048 with a principal amount of $400.0
million (the “Subordinated Notes”), which bear interest from March 2018 to March 2028 at an annual rate of 7.00%, payable
semi-annually. The Subordinated Notes will bear interest at an annual rate equal to three-month LIBOR plus 4.135%, payable
quarterly, beginning in June 2028. On or after March 2028, we may redeem the Subordinated Notes in whole at any time or in
part from time to time, at a redemption price equal to their principal amount plus accrued and unpaid interest provided that if
they are not redeemed in whole, a minimum amount must remain outstanding. At any time prior to March 2028, we may
redeem the Subordinated Notes in whole but not in part after the occurrence of a tax event, rating agency event or regulatory
capital event as defined in the global note representing the Subordinated Notes, at a redemption price equal to (i) with respect to
a rating agency event 102% of their principal amount and (ii) with respect to a tax event or regulatory capital event, their
principal amount plus accrued and unpaid interest.
In addition, so long as no event of default with respect to the Subordinated Notes has occurred and is continuing, we have
the right, on one or more occasions, to defer the payment of interest on the Subordinated Notes for one or more consecutive
interest periods for up to five years as described in the global note representing the Subordinated Notes. During a deferral
period, interest will continue to accrue on the Subordinated Notes at the then-applicable interest rate. At any time when we have
given notice of our election to defer interest payments on the Subordinated Notes, we generally may not make payments on or
redeem or purchase any shares of our capital stock or any of our debt securities or guarantees that rank upon our liquidation on
a parity with or junior to the Subordinated Notes, subject to certain limited exceptions.
Other Notes
In March 2013, we issued two series of senior notes with an aggregate principal amount of $700.0 million. The first series
was $350.0 million in principal amount, bore interest at 2.50% per year and was repaid at maturity in March 2018. The second
series is $350.0 million in principal amount and was issued at a 0.365% discount to the public. This series bears interest at
4.00% per year and matures in March 2023. Interest is payable semi-annually. We may redeem the outstanding series of senior
notes in whole or in part at any time and from time to time before maturity at the redemption price set forth in the global note
representing the outstanding series of senior notes.
In February 2004, we issued senior notes with an aggregate principal amount of $475.0 million at a 0.61% discount to the
public, which bear interest at 6.75% per year and matures in February 2034. Interest is payable semi-annually. These senior
notes are not redeemable prior to maturity. In December 2016 and August 2019, we completed a cash tender offer of $100.0
million each in aggregate principal amount of such senior notes. A loss on extinguishment of debt of $31.4 million was reported
for the year ended December 31, 2019 and the outstanding aggregate principal amount of the senior notes was $275.0 million as
of December 31, 2019.
See Note 19 to the Consolidated Financial Statements included elsewhere in this Report for more information.
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60
Retirement and Other Employee Benefits
We have sponsored a qualified pension plan (the “Assurant Pension Plan”) and various non-qualified pension plans
(including an Executive Pension Plan), along with a retirement health benefits plan covering our employees who meet specified
eligibility requirements. Effective March 1, 2016, benefit accruals for the Assurant Pension Plan, the various non-qualified
pension plans and the retirement health benefits plan were frozen. The reported amounts associated with these plans requires an
extensive use of assumptions, which include, but are not limited to, the discount rate and expected return on plan assets. We
determine these assumptions based upon currently available market and industry data, and historical performance of the plan
and its assets. The actuarial assumptions used in the calculation of our aggregate projected benefit obligation vary and include
an expectation of long-term appreciation in equity markets, which is not changed by minor short-term market fluctuations, but
does change when large prolonged interim deviations occur. The assumptions we use may differ materially from actual results
due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of the
participants.
Effective January 1, 2014, the Assurant Pension Plan and Executive Pension Plans became closed to new hires.
Subsequently, the Assurant Pension Plan was amended and restated as of January 1, 2016, and split into two separate plans
(“Plan No. 1” and “Plan No. 2”). Plan No. 1 generally covered all eligible employees (including the active population as of
January 1, 2016, the remainder of the terminated vested population and all Puerto Rico participants). Plan No. 2 generally
included a subset of the terminated vested population and the total population that commenced distribution of their accrued
benefit prior to January 1, 2016. Assets for both Plan No. 1 and Plan No. 2 remained in the Assurant, Inc. Pension Plan Trust.
Effective December 31, 2017, Plan No. 1 and Plan No. 2 were merged back together into the Assurant Pension Plan.
During 2019, there were no contributions to the Assurant Pension Plan. Due to the Plan’s current overfunded status, no
contributions are expected to the Assurant Pension Plan over the course of 2020. See Note 24 to the Consolidated Financial
Statements included elsewhere in this Report for more information.
Cash Flows
We monitor cash flows at the consolidated, holding company and subsidiary levels. Cash flow forecasts at the
consolidated and subsidiary levels are provided on a monthly basis, and we use trend and variance analyses to project future
cash needs making adjustments to the forecasts when needed.
The table below shows our recent net cash flows for the periods indicated:
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash
Cash Flows for the Years Ended December 31, 2019 and 2018
Operating Activities:
For the Years Ended December 31,
2019
2018
$
$
1,413.4
(619.8)
(179.2)
(1.3)
613.1
$
$
656.7
(2,202.5)
1,838.0
(35.0)
257.2
We typically generate operating cash inflows from premiums collected from our insurance products, fees received for
services and income received from our investments while outflows consist of policy acquisition costs, benefits paid and
operating expenses. These net cash flows are then invested to support the obligations of our insurance products and required
capital supporting these products. Our cash flows from operating activities are affected by the timing of premiums, fees, and
investment income received and expenses paid.
Net cash provided by operating activities was $1.41 billion and $656.7 million for Twelve Months 2019 and Twelve
Months 2018, respectively. The increase in net cash provided by operating activities was primarily due to growth of our Global
Lifestyle business that benefitted from the TWG acquisition and organic growth in Connected Living from new and existing
mobile protection programs domestically and internationally as well as a decrease in claim payments for reportable
catastrophes. Additionally, Twelve Months 2018 included a $41.5 million payment of an accrued indemnification liability
related to the previous sale of our general agency business in the prior year.
Investing Activities:
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Net cash used in investing activities was $619.8 million and $2.20 billion for Twelve Months 2019 and Twelve Months
2018, respectively. The decrease in net cash used in investing activities was primarily due to the acquisition of TWG in the
Second Quarter 2018 when $1.49 billion of cash was used to fund a portion of the $2.47 billion purchase price. In addition,
cash from our CIEs was lower due to the timing of CLO structures launched in each year. For additional information, see Note
9 to the Consolidated Financial Statements included elsewhere in the Report. The reductions in cash were partially offset by
normal changes in our operating portfolio.
Financing Activities:
Net cash provided by (used in) in financing activities was $179.2 million and $1.84 billion for Twelve Months 2019 and
Twelve Months 2018, respectively. The decrease in net cash provided by financing activities was primarily due to TWG
acquisition related financing obtained in Twelve Months 2018. Net proceeds from the issuance of debt and preferred stock
related to the TWG acquisition were $1.29 billion for Twelve Months 2018 and $276.4 million for Twelve Months 2019. A
portion of the net proceeds for Twelve Months 2018 were used to repay in full the Company’s then outstanding 2.50% senior
notes due 2018. The decrease in net cash provided by financing activities also included a $619.8 million decrease in cash
provided by our CIEs, net of repayments of borrowings to short-term warehouse facilities, primarily related to the timing of
CLO structures launched in each year and a $31.4 million loss on extinguishment of debt primarily related to the tender offer of
$100.0 million of its 6.75% senior notes due 2034. For additional information, see Note 12 to the Consolidated Financial
Statements included elsewhere in this Report.
The table below shows our cash outflows for taxes, interest and dividends for the periods indicated:
Income taxes paid
Interest paid on debt
Common stock dividends
Preferred stock dividends
Total
Commitments and Contingencies
For the Years Ended December 31,
2019
2018
$
$
93.1
$
103.2
151.3
18.7
366.3
$
93.9
79.5
133.8
14.2
321.4
We have obligations and commitments to third parties as a result of our operations, as detailed in the table below by
maturity date as of December 31, 2019:
Total
Less than 1
Year
1-3
Years
3-5
Years
More than 5
Years
As of December 31, 2019
Contractual obligations:
Insurance liabilities (1)
Debt and related interest
Operating leases
Pension obligations and
postretirement benefits
Purchase agreements
Commitments:
Investment purchases outstanding:
Commercial mortgage loans on
real estate
Capital contributions to
consolidated VIEs
Capital contributions to non-
consolidated VIEs
Liability for unrecognized tax
benefits
Total obligations and commitments $
$
8,948.3
$
1,157.8
$
768.5
$
741.7
$
3,436.0
101.4
578.5
4.5
1.8
1.6
27.4
14.0
102.4
20.4
69.4
4.5
1.8
1.6
27.4
—
252.0
33.1
114.4
—
—
—
—
10.3
814.9
19.3
114.1
—
—
—
—
—
6,280.3
2,266.7
28.6
280.6
—
—
—
—
3.7
13,113.5
$
1,385.3
$
1,178.3
$
1,690.0
$
8,859.9
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(1)
Insurance liabilities reflect undiscounted estimated cash payments to be made to policyholders, net of expected future premium cash receipts on in-force
policies and excluding fully reinsured runoff operations. The total gross reserve for fully reinsured runoff operations that was excluded was $4.86 billion
which, if the reinsurers defaulted, would be payable over a 30+ year period with the majority of the payments occurring after 5 years. Additional
information on the reinsurance arrangements can be found in Note 18 to the Consolidated Financial Statements included elsewhere in this Report. As a
result, the amounts presented in this table do not agree to the future policy benefits and expenses and claims and benefits payable in the consolidated
balance sheets.
Liabilities for future policy benefits and expenses have been included in the commitments and contingencies table.
Significant uncertainties relating to these liabilities include mortality, morbidity, expenses, persistency, investment returns,
inflation, contract terms and the timing of payments.
Letters of Credit
In the normal course of business, letters of credit are issued primarily to support reinsurance arrangements in which we
are the reinsurer. These letters of credit are supported by commitments under which we are required to indemnify the financial
institution issuing the letter of credit if the letter of credit is drawn. We had $12.1 million and $13.2 million of letters of credit
outstanding as of December 31, 2019 and 2018, respectively.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that are reasonably likely to have a material effect on the
financial condition, results of operations, liquidity or capital resources of the Company.
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 lesser extent, foreign currency risk.
Interest rate risk is the possibility that 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 investment yields 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. We have exposure to credit risk primarily from
customers, as a holder of fixed maturity securities and by entering into reinsurance cessions.
Inflation risk is the possibility that a change in domestic price levels produces an adverse effect on earnings. This
typically happens when either invested assets or liabilities, but not both, 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
securities, mortgage-backed and asset-backed securities and commercial mortgage loans, primarily in the U.S. 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 is primarily associated
with the need to reinvest cash flows (primarily coupons and maturities) in an unfavorable lower interest rate environment. In
addition, for securities with embedded options such as callable bonds, mortgage-backed securities and certain asset-backed
securities, reinvestment risk occurs when fluctuations in interest rates have a direct impact on expected cash flows. 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. 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.
We 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.
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Our group long-term disability and group term life waiver of premium reserves are also sensitive to interest rates. These
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.
The interest rate sensitivity relating to price risk of our fixed maturity securities investment portfolio is assessed using
hypothetical scenarios that assume several positive and negative parallel shifts of the yield curves. We have assumed that the
U.S. and Canadian yield curve shifts are equal in direction and magnitude. The individual securities are repriced under each
scenario using a valuation model. For investments such as callable bonds and mortgage-backed and asset-backed securities, a
prepayment model is 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
tables summarize the results of this analysis for bonds, mortgage-backed securities and asset-backed securities held in our
investment portfolio as of the dates indicated:
Interest Rate Movement Analysis
of Market Value of Fixed Maturity Securities Investment Portfolio
December 31, 2019
Total market value
% change in market value from base case
$ change in market value from base case
Total market value
% change in market value from base case
$ change in market value from base case
-100 bps
13,279.2
7.76%
956.8
-50 bps
12,785.7
3.76%
463.3
$
$
December 31, 2018
-100 bps
12,075.8
7.27%
818.7
-50 bps
11,655.8
3.54%
398.7
$
$
$
$
$
$
$
$
$
$
Base
50 bps
100 bps
12,322.4
$ 11,888.9
$ 11,478.5
—%
(3.52)%
(6.85)%
— $
(433.5)
$
(843.9)
Base
50 bps
100 bps
11,257.1
$ 10,882.2
$ 10,527.0
—%
(3.33)%
(6.49)%
— $
(374.9)
$
(730.1)
The interest rate sensitivity relating to reinvestment risk of our fixed maturity securities investment portfolio is assessed
using hypothetical scenarios that assume purchases in the primary market and consider the effects of interest rates on sales. The
effects of embedded options, including call or put features are not considered. Our actual results 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 tables summarize the results of this analysis on our reported portfolio yield as of the dates indicated:
Interest Rate Movement Analysis
of Portfolio Yield of Fixed Maturity Securities Investment Portfolio
December 31, 2019
Portfolio yield*
% change in portfolio yield
Portfolio yield*
% change in portfolio yield
-100 bps
-50 bps
Base
50 bps
100 bps
4.34 %
(0.13)%
4.41 %
(0.06)%
4.47%
—%
4.53%
0.06%
4.60%
0.13%
December 31, 2018
-100 bps
-50 bps
Base
50 bps
100 bps
4.31 %
(0.15)%
4.39 %
(0.07)%
4.46%
—%
4.53%
0.07%
4.61%
0.15%
* Includes investment income from real estate joint venture partnerships.
Credit Risk
We have exposure to credit risk primarily from customers, as a holder of fixed maturity 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+, 0.38% for issuers rated BB- to BB+ and
0.25% for issuers rated B and below. These portfolio limits are further reduced for certain issuers with whom we have credit
exposure on reinsurance agreements. For our portfolio limits, we use credit ratings from Moody’s, S&P, Fitch Ratings, Inc. and
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DBRS, Inc. (collectively, the “Nationally Recognized Statistical Rating Organizations” or “NRSROs”) to determine an issuer’s
rating. When three or more credit ratings are available for an issuer, the second lowest rating will be used. When two or fewer
credit ratings are available for an issuer, the lower rating will be used.
The following table presents our fixed maturity securities investment portfolio by ratings of the NRSROs as of the dates
indicated:
Rating
Aaa/Aa/A
Baa
Ba
B and lower
Total
December 31, 2019
December 31, 2018
Fair Value
Percentage of
Total
Fair Value
Percentage of
Total
$
$
8,014.7
3,734.7
480.7
92.3
12,322.4
65% $
30%
4%
1%
7,329.8
3,322.7
447.9
156.7
100% $
11,257.1
65%
30%
4%
1%
100%
We are also exposed to the credit risk of our reinsurers. When we purchase reinsurance, 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 “Item 7 –
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates –
Reinsurance.”
We had $9.59 billion and $9.17 billion of reinsurance recoverables as of December 31, 2019 and 2018, respectively, the
majority of which are protected from credit risk by various types of risk mitigation mechanisms such as trusts, letters of credit
or by withholding the assets in a modified coinsurance or co-funds-withheld arrangement. For example, reserves of $606.1
million, $511.2 million and $2.49 billion as of December 31, 2019 and $761.7 million, $525.7 million and $2.34 billion as of
December 31, 2018, relating to coinsurance arrangements with Sun Life, Talcott Resolution (formerly owned by The Hartford)
and John Hancock, respectively, related to sales of businesses that are backed by trusts. If the value of the assets in these trusts
falls below the value of the associated liabilities, Sun Life, Talcott Resolution and John Hancock, as applicable, will be required
to put more assets in the trusts. We may be dependent on the financial condition of Sun Life, Talcott Resolution and John
Hancock, whose A.M. Best financial strength ratings are currently A+, B++ and A+, respectively. A.M. Best currently
maintains a stable outlook on each of their financial strength ratings. As of December 31, 2019 and 2018, we had $845.2
million and $775.9 million, respectively, of reinsurance recoverables from ERAC that are not protected by the risk mitigation
mechanisms discussed above. A.M. Best withdrew its rating for ERAC in March 2019. General Electric Company (“GE”), the
ultimate parent of ERAC, has a capital maintenance agreement in place to maintain ERAC’s RBC ratios at an acceptable
regulatory level, which has been maintained in recent years through capital infusions into ERAC. For ERAC and other
reinsurance recoverables that are not protected by the risk mitigation mechanisms referenced above, we are dependent on the
creditworthiness of the reinsurer. See “Item 1A – Risk Factors – Financial Risks – Reinsurance may not be adequate or
available to protect us against losses, and we are subject to the credit risk of reinsurers”, “Item 1A – Risk Factors – Financial
Risks – Through reinsurance, we have sold or exited businesses that could again become our direct financial and
administrative responsibility if the reinsurers become insolvent” and Note 18 to the Consolidated Financial Statements included
elsewhere in this Report.
Inflation Risk
Inflation risk arises as we invest in assets that are not indexed to the level of inflation, whereas the corresponding
liabilities are indexed to the level of inflation. Approximately 3% and 4% of Assurant preneed insurance policies, with reserves
of $217.5 million and $221.7 million, as of December 31, 2019 and 2018, respectively, 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 derivative contracts with payments tied to the CPI. See “ – Derivatives.”
Foreign Exchange Risk
We are exposed to foreign exchange risk arising from our international operations, mainly in Canada. We also have
foreign exchange risk exposure to the British Pound, Brazilian Real, Euro, Mexican Peso and Argentine Peso. Total invested
assets denominated in currencies other than the Canadian Dollar were approximately 5% and 7% of our total invested assets at
December 31, 2019 and 2018, respectively.
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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 currencies. We also have entered into forward contracts to hedge
certain exposures denominated in the Euro, British Pound and Mexican Peso.
The foreign exchange risk sensitivity of our fixed maturity securities denominated in Canadian Dollars, whose balance
was $2.08 billion and $1.78 billion of the total market value as of December 31, 2019 and 2018, respectively, on our entire
fixed maturity securities portfolio is summarized in the following tables:
Foreign Exchange Movement Analysis
of Market Value of Fixed Maturity Securities
December 31, 2019
Foreign exchange spot rate at December 31,
2019, US Dollar to Canadian Dollar
Total market value
% change of market value from base case
$ change of market value from base case
Foreign exchange spot rate at December 31,
2018, US Dollar to Canadian Dollar
Total market value
% change of market value from base case
$ change of market value from base case
-10%
12,114.0
(1.69)%
(208.4)
$
$
-5%
12,218.2
(0.85)%
(104.2)
December 31, 2018
-10%
11,079.1
(1.58)%
(178.0)
$
$
-5%
11,168.1
(0.79)%
(89.0)
$
$
$
$
$
$
$
$
0
5%
12,322.4
$
12,426.6
—%
— $
0.85%
104.2
0
5%
11,257.1
$
11,346.1
—%
— $
0.79%
89.0
10%
12,530.8
1.69%
208.4
10%
11,435.1
1.58%
178.0
$
$
$
$
The foreign exchange risk sensitivity of our consolidated net income is assessed using hypothetical test scenarios that
assume earnings in Canadian Dollars are recognized evenly throughout a period. Our actual results may differ from the results
noted below particularly due to assumptions utilized or if events occur that were not included in the methodology. For more
information on this risk, see “Item 1A – Risk Factors – Financial Risks – Fluctuations in the exchange rate of the U.S. Dollar
and other foreign currencies may materially and adversely affect our results of operations.” The following tables summarize
the results of this analysis on our reported net income for the periods indicated:
Foreign Exchange Movement Analysis
of Net Income
Year Ended December 31, 2019
-10%
-5%
$
$
384.7
(0.54)%
(2.1)
$
$
385.8
(0.26)%
(1.0)
Year Ended December 31, 2018
-10%
-5%
$
$
250.1
(0.99)%
(2.5)
$
$
251.4
(0.48)%
(1.2)
0
0
$
$
$
$
5%
10%
386.8
$
387.8
—%
— $
0.26%
1.0
5%
252.6
$
253.8
—%
— $
0.48%
1.2
$
$
$
$
388.9
0.54%
2.1
10%
255.1
0.99%
2.5
Foreign exchange daily average rate for the year
ended December 31, 2019, US Dollar to Canadian
Dollar
Net Income
% change of net income from base case
$ change of net income from base case
Foreign exchange daily average rate for the year
ended December 31, 2018, US Dollar to Canadian
Dollar
Net income
% change of net income from base case
$ change of net income from base case
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.
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We have entered into forward contracts to hedge certain exposures denominated in the Euro, British Pound and Mexican
Peso.
We have purchased contracts to cap the inflation risk exposure inherent in some of our preneed insurance policies.
In accordance with the guidance on embedded derivatives, we have bifurcated the modified coinsurance agreement with
Talcott Resolution into its debt host and embedded derivative (total return swap) and recorded the embedded derivative at fair
value in the consolidated balance sheets. The invested assets related to this modified coinsurance agreement are included in
other investments in the consolidated balance sheets.
For additional information on derivatives, see Notes 8 and 19 to the Consolidated Financial Statements included
elsewhere in this Report.
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
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer
(“CFO”), has evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) or 15d-15(b)
under the Exchange Act as of December 31, 2019. Based on such evaluation, management, including our CEO and CFO, has
concluded that as of December 31, 2019, our disclosure controls and procedures were effective and provide reasonable
assurance that information we are required to disclose in our reports under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified by the SEC’s rules and forms. Our CEO and CFO also have
concluded that as of December 31, 2019, information that we are required to disclose in our reports under the Exchange Act is
accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions
regarding required disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for us
as defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. A
company’s internal control over financial reporting includes policies and procedures that: (1) pertain to the maintenance of
records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the
financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our internal control over
financial reporting as of December 31, 2019 using criteria established in Internal Control – Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Management, including our CEO and CFO, based on its evaluation of our internal control over financial reporting, has
concluded that our internal control over financial reporting was effective as of December 31, 2019.
The effectiveness of our internal control over financial reporting as of December 31, 2019 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
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Changes in Internal Control Over Financial Reporting
On May 31, 2018, we completed our acquisition of TWG. During the quarter ended December 31, 2019, we completed
the integration of TWG into our internal control environment. There were no other changes in our internal control over
financial reporting during the quarterly period ended December 31, 2019 that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
Item 9B. Other Information
Richard S. Dziadzio, Executive Vice President and Chief Financial Officer, will serve as interim Chief Accounting Officer
and Controller of Assurant, Inc., effective February 21, 2020, the day on which Daniel A. Pacicco will resign from his position
as Chief Accounting Officer and Controller of the Company. Mr. Dziadzio, 56, will continue to serve as the Company’s
Executive Vice President and Chief Financial Officer. Mr. Dziadzio was appointed Executive Vice President and Chief
Financial Officer effective July 2016 and served as the Company’s Treasurer from July 2016 through November 2018. Before
joining Assurant, Mr. Dziadzio served as Chief Financial Officer of QBE North America beginning in August 2013. The
Company is actively conducting a search for a permanent successor.
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68
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information regarding directors in our upcoming 2020 Proxy Statement (the “2020 Proxy Statement”) under the
caption “Proposals Requiring Your Vote – Proposal One – Election of Directors” is incorporated herein by reference. The
information regarding executive officers in the 2020 Proxy Statement under the caption “Executive Officers” is incorporated
herein by reference. If applicable, the information regarding compliance with Section 16(a) of the Exchange Act in the 2020
Proxy Statement under the caption “Delinquent Section 16(a) Reports” is incorporated herein by reference. The information
regarding our Code of Ethics in the 2020 Proxy Statement under the caption “Corporate Governance – Corporate Governance
Guidelines and Code of Ethics – Code of Ethics” is incorporated herein by reference. The information regarding the
Nominating and Corporate Governance Committee and the Audit Committee in the 2020 Proxy Statement under the captions
“Corporate Governance – Board and Committee Composition, Leadership and Refreshment”, “Corporate Governance –
Director Nomination, Qualifications and Succession Planning” and “Corporate Governance – Audit Committee” is
incorporated herein by reference.
Item 11. Executive Compensation
The information in the 2020 Proxy Statement under the captions “Compensation Discussion and Analysis,” “Executive
Compensation” and “Director Compensation” is incorporated herein by reference. The information in the 2020 Proxy
Statement regarding the Compensation Committee under the captions “Corporate Governance – Compensation Committee
Interlocks and Insider Participation” and “Compensation Committee Report” is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information in the 2020 Proxy Statement under the captions “Security Ownership of Certain Beneficial Owners,”
“Security Ownership of Directors and Executive Officers” and “Equity Compensation Plan Information” is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information in the 2020 Proxy Statement under the captions “Transactions with Related Persons” and “Corporate
Governance – Director Independence” is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
The information in the 2020 Proxy Statement under the caption “Audit Committee Matters – Fees of Principal
Accountants” is incorporated herein by reference.
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69
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a)(1) Consolidated Financial Statements
The following Consolidated Financial Statements of Assurant, Inc. are attached hereto:
Consolidated Financial Statements of Assurant, Inc.
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Operations For Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Income For Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Changes in Stockholders’ Equity For Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows For Years Ended December 31, 2019, 2018 and 2017
Notes to the Consolidated Financial Statements
(a)(2) Consolidated Financial Statement Schedules
The following Consolidated Financial Statement Schedules of Assurant, Inc. are attached hereto:
Schedule I – Summary of Investments Other Than Investments in Related Parties as of December 31, 2019
Schedule II – Parent Only Condensed Financial Statements as of December 31, 2019 and 2018 and for Years Ended
December 31, 2019, 2018 and 2017
Schedule III – Supplementary Insurance Information as of December 31, 2019, 2018 and 2017 and for the years
then ended
Schedule IV – Reinsurance as of December 31, 2019, 2018 and 2017 and for the years then ended
Schedule V – Valuation and Qualifying Accounts as of December 31, 2019, 2018 and 2017 and for the years then
ended
Page
Number
F-1
F-4
F-6
F-7
F-8
F-9
F-11
F-87
F-88
F-93
F-94
F-95
*
All other financial statement schedules are omitted because they are not applicable or not required or the information is
included in the Consolidated 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.
Exhibit
Number Exhibit Description
2.1 Master Transaction Agreement, dated as of September 9, 2015, by and between Assurant, Inc. and Sun Life
Assurance Company of Canada (incorporated by reference from Exhibit 2.1 to the Registrant’s Current
Report on Form 8-K, originally filed on September 10, 2015).
2.2 Amended and Restated Agreement and Plan of Merger, dated as of January 8, 2018, by and among
Assurant, Inc., TWG Holdings Limited, TWG Re, Ltd., Arbor Merger Sub, Inc. and Spartan Merger Sub,
Ltd. (incorporated by reference from Exhibit 2.1 to the Registrant's Current Report on Form 8-K, originally
filed on January 9, 2018).
2.3 Letter Agreement, dated as of May 31, 2018, by and among Assurant, Inc., TWG Holdings Limited, TWG
Re, Ltd and Spartan Merger Sub, Ltd. (incorporated by reference from Exhibit 2.2 to the Registrant’s
Current Report on Form 8-K, originally filed on May 31, 2018).
3.1 Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference from
Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, originally filed on May 12, 2017).
3.2 Amended and Restated By-Laws of the Registrant (incorporated by reference from Exhibit 3.2 to the
Registrant’s Current Report on Form 8-K, originally filed on May 12, 2017).
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3.3 Certificate of Designations of 6.50% Series D Mandatory Convertible Preferred Stock, filed with the
Secretary of State of Delaware on March 12, 2018 (incorporated by reference from Exhibit 3.1 to the
Registrant’s Current Report on Form 8-K, originally filed on March 12, 2018).
4.1 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).
4.2 Specimen Certificate of 6.50% Series D Mandatory Convertible Preferred Stock (incorporated by reference
from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (which incorporates by reference Exhibit
3.1 thereto), originally filed on March 12, 2018).
4.3 Senior Debt Indenture, dated as of February 18, 2004, between Assurant, Inc. and U.S. Bank National
Association, successor to SunTrust Bank, as trustee (incorporated by reference from Exhibit 10.27 to the
Registrant’s Form 10-K, originally filed on March 30, 2004).
4.4 Indenture, dated as of March 28, 2013, between Assurant, Inc. and U.S. Bank National Association, as
trustee (incorporated by reference from Exhibit 4.1 to the Registrant’s Form 8-K, originally filed on March
28, 2013).
4.5 Subordinated Notes Indenture, dated as of March 27, 2018, between Assurant, Inc. and U.S. Bank National
Association, as trustee (incorporated by reference from Exhibit 4.2 to the Registrant’s Current Report on
Form 8-K, originally filed on March 27, 2018).
4.6 Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Registrant hereby agrees to furnish to the SEC, upon
request, a copy of any other instrument defining the rights of holders of long-term debt of the Registrant
and its subsidiaries.
4.7 Description of the Registrant’s Securities.
10.1 Form of Assurant, Inc. Restricted Stock Unit Award Agreement for Time-based Awards for Directors,
effective as of January 1, 2013 (incorporated by reference from Exhibit 10.2 to the Registrants Form 10-K,
originally filed on February 20, 2013). *
10.2 Form of Assurant, Inc. Restricted Stock Unit Award Agreement for Time-based Awards for Directors,
effective as of January 1, 2013 (incorporated by reference from Exhibit 10.3 to the Registrants Form 10-K,
originally filed on February 20, 2013). *
10.3 Amended and Restated Assurant, Inc. Long Term Equity Incentive Plan, effective as of January 1, 2012
(incorporated by reference from Exhibit 10.15 to the Registrant’s Form 10-K, originally filed on
February 23, 2012). *
10.4 Form of Restricted Stock Unit Award Agreement for Time-based Awards under the Assurant, Inc. Long
Term Equity Incentive Plan, effective as of May 10, 2016 (incorporated by reference from Exhibit 10.2 to
the Registrant’s Form 10-Q, originally filed on August 2, 2016). *
10.5 Restricted Stock Unit Award Agreement for Time-based Awards under the Assurant, Inc. Long Term Equity
Incentive Plan, dated July 18, 2016, by and between Assurant, Inc. and Richard Dziadzio (incorporated by
reference from Exhibit 10.4 to the Registrant’s Form 10-Q, originally filed on August 2, 2016). *
10.6 Form of Assurant, Inc. Restricted Stock Unit Award Agreement for Time-based Awards under the Assurant,
Inc. Long Term Equity Incentive Plan, effective March 10, 2016. (incorporated by reference from Exhibit
10.3 to the Registrant’s Form 10-Q, originally filed on May 3, 2016). *
10.7 Form of Assurant, Inc. Restricted Stock Unit Award Agreement for Performance-based Awards under the
Assurant, Inc. Long Term Equity Incentive Plan, effective March 10, 2016. (incorporated by reference from
Exhibit 10.4 to the Registrant’s Form 10-Q, originally filed on May 3, 2016). *
10.8 Form of Assurant, Inc. Restricted Stock Unit Award Agreement for Performance-based Awards under the
Assurant, Inc. Long Term Equity Incentive Plan for the Management Committee, effective March 10, 2016
(incorporated by reference from Exhibit 10.5 to the Registrant’s Form 10-Q, originally filed on May 3,
2016). *
10.9 Form of Assurant, Inc. Restricted Stock Unit Award Agreement for Time-based Awards for Directors, under
the Assurant Inc. 2017 Long Term Equity Incentive Plan (incorporated by reference from Exhibit 10.1 to
the Registrant's Form S-8, originally filed on May 12, 2017). *
10.10 Assurant, Inc. 2017 Long Term Equity Incentive Plan (incorporated by reference from Exhibit 10.1 to the
Registrant's Current Report on Form 8-K, originally filed on May 12, 2017). *
10.11 Assurant, Inc. 2017 Long Term Equity Incentive Plan, as amended (incorporated by reference from Exhibit
10.1 to the Registrant’s Current Report on Form 8-K, originally filed on May 8, 2019). *
10.12 Amended and Restated Assurant, Inc. Executive Short Term Incentive Plan, effective as of January 1, 2012
(incorporated by reference from Exhibit 10.23 to the Registrant’s Form 10-K, originally filed on February
23, 2012). *
10.13 Amended and Restated Assurant Deferred Compensation Plan, effective as of January 1, 2008
(incorporated by reference from Exhibit 10.33 to the Registrant’s Form 10-K, originally filed on March 3,
2008). *
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10.14 Amendment No. 1 to the Amended and Restated Assurant Deferred Compensation Plan, effective as of
January 1, 2012 (incorporated by reference from Exhibit 10.28 to the Registrant’s Form 10-K, originally
filed on February 23, 2012). *
10.15 Amendment No. 2 to the Amended and Restated Assurant Deferred Compensation Plan, effective as of
December 3, 2013 (incorporated by reference from Exhibit 10.31 to the Registrant's Form 10-K, originally
filed on February 19, 2014). *
10.16 Amended and Restated Supplemental Executive Retirement Plan, effective as of January 1, 2008
(incorporated by reference from Exhibit 10.5 to the Registrant’s Form 10-K, originally filed on March 3,
2008). *
10.17 Amendment No. 1 to the Amended and Restated Supplemental Executive Retirement Plan, effective as of
January 1, 2009 (incorporated by reference from Exhibit 10.6 to the Registrant’s Form 10-K, originally
filed on February 27, 2009). *
10.18 Amendment No. 2 to the Amended and Restated Supplemental Executive Retirement Plan, effective as of
January 1, 2010 (incorporated by reference from Exhibit 10.7 to the Registrant’s Form 10-K, originally
filed on February 23, 2011). *
10.19 Amendment No. 3 to the Amended and Restated Supplemental Executive Retirement Plan, effective as of
February 29, 2016 (incorporated by reference from Exhibit 10.2 to the Registrant’s Form 10-Q, originally
filed on May 3, 2016). *
10.20 Assurant Executive Pension Plan, amended and restated effective as of January 1, 2009 (incorporated by
reference from Exhibit 10.15 to the Registrant’s Form 10-K, originally filed on February 27, 2009). *
10.21 Amendment No. 1 to the Assurant Executive Pension Plan, effective as of January 1, 2009 (incorporated by
reference from Exhibit 10.33 to the Registrant’s Form 10-K, originally filed on February 23, 2012). *
10.22 Amendment No. 2 to the Assurant Executive Pension Plan, effective as of January 1, 2010 (incorporated by
reference from Exhibit 10.34 to the Registrant’s Form 10-K, originally filed on February 23, 2012). *
10.23 Amendment No. 3 to the Assurant Executive Pension Plan, effective as of December 31, 2013
(incorporated by reference from Exhibit 10.38 to the Registrant's Form 10-K, originally filed on February
19, 2014). *
10.24 Amendment No. 4 to the Assurant Executive Pension Plan, effective as of February 29, 2016 (incorporated
by reference from Exhibit 10.1 to the Registrant’s Form 10-Q, originally filed on May 3, 2016). *
10.25 Assurant Executive 401(k) Plan, Amended and Restated, effective as of January 1, 2014 (incorporated by
reference from Exhibit 10.1 to the Registrant’s Form 10-Q, originally filed on April 29, 2014). *
10.26 Amendment No. 1 to the Assurant Executive 401(k) Plan, as Amended and Restated, effective as of March
1, 2016 (incorporated by reference from Exhibit 10.27 to the Registrant’s Form 10-K, originally filed on
February 14, 2017).*
10.27 Amendment No. 2 to the Assurant Executive 401(k) Plan, as Amended and Restated, effective as of
January 1, 2017 (incorporated by reference from Exhibit 10.29 to the Registrant’s Form 10-K, originally
filed on February 14, 2018). *
10.28 Form of Assurant, Inc. Change in Control Agreement, dated May 13, 2016 (incorporated by reference from
Exhibit 10.5 to the Registrant’s Form 10-Q, originally filed on August 2, 2016). *
10.29 American Security Insurance Company Investment Plan Document (incorporated by reference from
Exhibit 10.34 to the Registrant’s Form 10-K, originally filed on March 3, 2008). *
10.30 Amended and Restated Credit Agreement dated as of December 15, 2017 among Assurant, Inc., as
borrower, certain lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Wells
Fargo Bank, National Association, as syndication agent. (incorporated by reference from Exhibit 10.1 to
the Registrant's Current Report on Form 8-K, originally filed on December 21, 2017).
10.31 Amendment No. 1, dated as of January 29, 2018, to Amended and Restated Credit Agreement among
Assurant, Inc., as borrower, certain lenders party thereto and JPMorgan Chase Bank, N.A., as
administrative agent. (incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on
Form 8-K originally filed on January 30, 2018.
10.32 Form of Assurant, Inc. Restricted Stock Unit Award Agreement for Time-based Awards under the Assurant,
Inc. 2017 Long Term Equity Incentive Plan, effective March 8, 2018 (incorporated by reference from
Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, originally filed on May 7, 2018). *
10.33 Assurant, Inc. Amended and Restated Directors Compensation Plan, effective as of May 8, 2019
(incorporated by reference from Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, originally
filed on August 8, 2019). *
10.34 Form of Assurant, Inc. Restricted Stock Unit Award Agreement for Performance-based Awards under the
Assurant, Inc. 2017 Long Term Equity Incentive Plan for the Management Committee, effective July 18,
2018 (incorporated by reference from Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q,
originally filed on August 9, 2018). *
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10.35 Form of Assurant, Inc. Restricted Stock Unit Award Agreement for Time-based Awards under the Assurant,
Inc. 2017 Long Term Equity Incentive Plan, effective March 16, 2019 (incorporated by reference from
Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, originally filed on May 8, 2019). *
10.36 Form of Assurant, Inc. Restricted Stock Unit Award Agreement for Performance-based Awards under the
Assurant, Inc. 2017 Long Term Equity Incentive Plan, effective March 16, 2019 (incorporated by reference
from Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q, originally filed on May 8, 2019). *
21.1 Subsidiaries of the Registrant.
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.
101 The following materials from the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2019, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated
Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of
Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholders’ Equity, (v) the
Consolidated Statements of Cash Flows and (vi) Notes to the Consolidated Financial Statements.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
*Management contract or compensatory plan.
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73
Item 16. Form 10-K Summary
Not applicable.
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74
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant
has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on February 19, 2020.
SIGNATURES
ASSURANT, INC.
By:
Name:
Title:
/S/ ALAN B. COLBERG
Alan B. Colberg
Chief Executive Officer
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75
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by
the following persons on behalf of the registrant in the capacities indicated on February 19, 2020.
Signature
/S/ ALAN B. COLBERG
Alan B. Colberg
/S/ RICHARD S. DZIADZIO
Richard S. Dziadzio
/S/ DANIEL A. PACICCO
Daniel A. Pacicco
*
Elaine D. Rosen
*
Paget L. Alves
*
Juan N. Cento
*
Harriet Edelman
*
Lawrence V. Jackson
*
Charles J. Koch
*
Jean-Paul L. Montupet
*
Debra J. Perry
*
Ognjen Redzic
*
Paul J. Reilly
*
Robert W. Stein
*By:
Name:
/S/ RICHARD S. DZIADZIO
Richard S. Dziadzio
Attorney-in-Fact
President, Chief Executive Officer and Director (Principal
Executive Officer)
Title
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Senior Vice President, Chief Accounting Officer and
Controller (Principal Accounting Officer)
Non-Executive Board Chair
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
76
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Assurant, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Assurant, Inc. and its subsidiaries (the “Company”) as of
December 31, 2019 and 2018, and the related consolidated statements of operations, of comprehensive income, of changes in
stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2019, including the related
notes and financial statement schedules listed in the index appearing under Item 15(a)(2) (collectively referred to as the
“consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of
December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is
to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
F-1
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Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation of Claims and Benefits Payable Reserves for Short Duration Insurance Contracts
As described in Notes 2 and 17 to the consolidated financial statements, the Company maintains claims and benefits payable
reserves for short duration insurance contracts. Reserves are established using generally accepted actuarial methods and reflect
judgments about expected future claim payments. The reserve liability is based on the expected ultimate cost of settling the
claims. As of December 31, 2019, the Company’s total liability for claims and benefits payable was $2.69 billion, which
included $1.95 billion of liabilities for short duration contracts. Claims and benefits payable reserves include case reserves for
known claims which are unpaid as of the balance sheet date; incurred but not reported reserves for claims where the insured
event has occurred but has not been reported as of the balance sheet date; and loss adjustment expense reserves for the expected
handling costs of settling the claims. Factors used in the calculation of the reserves include experience derived from historical
claim payments and actuarial assumptions. As described by management, the best estimate of ultimate loss and loss adjustment
expense is generally selected from a blend of different actuarial methods that are applied consistently each period, considering
significant assumptions including projected loss development factors and expected loss ratios.
The principal considerations for our determination that performing procedures relating to the valuation of claims and benefits
payable reserves for short duration insurance contracts is a critical audit matter are (i) there was significant judgment by
management when determining their estimates, which led to a high degree of auditor judgment and subjectivity in performing
procedures relating to the valuation; (ii) there was significant auditor effort and judgment in evaluating audit evidence relating
to the actuarial methods and projected loss development factors and expected loss ratio assumptions; and (iii) the audit effort
included the involvement of professionals with specialized skill and knowledge to assist in performing these procedures and
evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
valuation of claims and benefits payable reserves for short duration insurance contracts, including controls over the selection of
actuarial methods, completeness and accuracy of claims data and the development of the significant assumptions. On a test
basis, these procedures also included, among others, the involvement of professionals with specialized skill and knowledge to
assist in either (i) evaluating the appropriateness of management’s actuarial methods and the reasonableness of projected loss
development factors and expected loss ratio assumptions; or (ii) developing an actuarially determined independent estimate
utilizing actual historical data and loss development patterns, as well as industry data and other benchmarks, and comparing
this independent estimate to management’s actuarially determined reserves. These procedures also involved testing the
completeness and accuracy of historical claims data provided by management.
Valuation of Future Policy Benefits and Claims and Benefits Payable for Certain Long Duration Insurance Contracts
As described in Notes 2 and 17 to the consolidated financial statements, the Company maintains future policy benefits and
expense reserves for preneed investment-type annuities and preneed life insurance policies with discretionary death benefits,
along with universal life insurance policies, variable life insurance policies and investment-type annuity contracts of the
disposed and runoff businesses consisting of policy account balances before applicable surrender charges and certain deferred
policy initiation fees. The Company also maintains future policy benefits and expense reserves for other preneed life insurance
contracts, for policies fully covered by reinsurance and certain life, annuity, group life conversion, and medical insurance
policies no longer offered which are equal to the present value of future benefits to policyholders plus related expenses less the
present value of future net premiums. The Company also maintains claims and benefits payable for policies fully covered by
reinsurance and certain life, annuity, group life conversion, and medical insurance policies no longer offered which are equal to
the present value of future benefit payments and related expenses. As of December 31, 2019, future policy benefits and
expenses for preneed long duration contracts was $6.33 billion, future policy benefits and expenses for business disposed
through reinsurance and in runoff was $3.38 billion and claims and benefits payable for long-duration business disposed
through reinsurance and in runoff was $705.2 million. Factors used in the calculation of the reserves include experience
derived from historical claim payments, expected future premiums and actuarial assumptions. The reserve assumptions include
mortality, morbidity, inflation, lapse, margin, withdrawal and discount rates for future policy benefits and expense reserves, and
inflation, mortality, morbidity, and discount rates for claims and benefits payable that are based on the Company’s experience.
F-2
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The principal considerations for our determination that performing procedures relating to the valuation of future policy benefits
and expenses and claims and benefits payable for certain long duration insurance contracts is a critical audit matter are (i) there
was significant judgment by management when determining their estimates, which led to a high degree of auditor judgment and
subjectivity in performing procedures relating to the valuation; (ii) there was significant auditor effort and judgment in
evaluating audit evidence relating to the actuarial methods and inflation, mortality, morbidity, margin, and discount rate
assumptions; and (iii) the audit effort included the involvement of professionals with specialized skill and knowledge to assist
in performing these procedures and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
valuation of future policy benefits and expenses, as well as claims and benefits payable for certain long duration contracts,
including controls over the selection of actuarial methods, completeness and accuracy of data and the development of
significant assumptions. On a test basis, these procedures also included, among others, the involvement of professionals with
specialized skill and knowledge to assist in evaluating the reasonableness of management’s mortality, morbidity, margin and
discount rate assumptions for future policy benefits and expenses, and management’s inflation, mortality, morbidity and
discount rate assumptions for claims and benefits payable. These professionals with specialized skill and knowledge also
evaluated the appropriateness of the actuarial methods used, which included performing testing of the valuation models for
future policy benefits and expense reserves. These procedures also involved testing the completeness and accuracy of historical
claims and premiums data provided by management.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 19, 2020
We have served as the Company’s auditor since 2000.
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F-3
Assurant, Inc.
Consolidated Balance Sheets
As of December 31, 2019 and 2018
Assets
Investments:
Fixed maturity securities available for sale, at fair value (amortized cost – $11,064.8 and $10,834.0 at
December 31, 2019 and 2018, respectively)
Equity securities at fair value
Commercial mortgage loans on real estate, at amortized cost
Short-term investments
Other investments
Total investments
Cash and cash equivalents
Premiums and accounts receivable, net
Reinsurance recoverables
Accrued investment income
Deferred acquisition costs
Property and equipment, at cost less accumulated depreciation
Goodwill
Value of business acquired
Other intangible assets, net
Other assets
Assets held in separate accounts
Assets of consolidated investment entities (1)
Total assets
Liabilities
Future policy benefits and expenses
Unearned premiums
Claims and benefits payable
Commissions payable
Reinsurance balances payable
Funds held under reinsurance
Accounts payable and other liabilities
Debt
Liabilities related to separate accounts
Liabilities of consolidated investment entities (1)
Total liabilities
Commitments and contingencies (Note 27)
Stockholders’ equity
6.50% Series D mandatory convertible preferred stock, par value $1.00 per share, 2,875,000 shares authorized,
2,875,000 issued and outstanding at December 31, 2019 and 2018
Common stock, par value $0.01 per share, 800,000,000 shares authorized, 161,607,866 and 161,153,454 shares
issued and 59,945,893 and 61,908,979 shares outstanding at December 31, 2019 and 2018, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income
Treasury stock, at cost; 101,661,973 and 99,244,475 shares at December 31, 2019 and 2018, respectively
Total Assurant, Inc. stockholders’ equity
Non-controlling interest
Total equity
Total liabilities and equity
December 31,
2019
2018
(in millions except number of shares
and per share amounts)
$
12,322.4
$
11,257.1
388.5
815.0
402.5
638.9
378.8
759.6
373.2
635.2
14,567.3
13,403.9
$
$
$
$
1,867.1
1,692.8
9,593.4
131.1
6,668.0
433.7
2,343.4
2,004.3
540.2
590.1
1,839.7
2,020.1
44,291.2
9,807.3
16,603.6
2,687.7
540.5
358.5
319.4
2,758.5
2,006.9
1,839.7
1,687.0
38,609.1
2.9
1.6
4,537.7
5,966.4
411.5
(5,267.3)
5,652.8
29.3
5,682.1
$
44,291.2
$
1,254.0
1,643.5
9,166.0
125.5
5,103.0
392.5
2,321.8
3,157.8
622.4
603.8
1,609.7
1,685.4
41,089.3
9,240.9
15,648.0
2,813.7
338.6
330.9
272.0
2,240.5
2,006.0
1,609.7
1,455.1
35,955.4
2.9
1.6
4,495.6
5,759.7
(155.4)
(4,992.4)
5,112.0
21.9
5,133.9
41,089.3
(1)
The following table presents information on assets and liabilities related to consolidated investment entities as of December 31, 2019 and 2018.
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F-4
Assets
Cash and cash equivalents
Investments, at fair value
Other receivables
Total assets
Liabilities
Collateralized loan obligation notes, at fair value
Other liabilities
Total liabilities
December 31,
2019
2018
(in millions)
$
$
$
$
32.9
$
1,957.9
29.3
2,020.1
1,603.1
83.9
1,687.0
$
$
$
62.6
1,576.2
46.6
1,685.4
1,316.7
138.4
1,455.1
See the accompanying Notes to the Consolidated Financial Statements
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F-5
Assurant, Inc.
Consolidated Statements of Operations
Years Ended December 31, 2019, 2018 and 2017
Revenues
Net earned premiums
Fees and other income
Net investment income
Net realized gains (losses) on investments, excluding other-than-
temporary impairment losses
Other-than-temporary impairment losses recognized in earnings
Amortization of deferred gains on disposal of businesses
Total revenues
Benefits, losses and expenses
Policyholder benefits
Amortization of deferred acquisition costs and value of business
acquired
Underwriting, general and administrative expenses
Iké net losses (Note 5)
Interest expense
Loss on extinguishment of debt
Total benefits, losses and expenses
Income before provision (benefit) for income taxes
Provision (benefit) for income taxes
Net income
Less: Net income attributable to non-controlling interest
Net income attributable to stockholders
Less: Preferred stock dividends
Net income attributable to common stockholders
Earnings Per Common Share
Basic
Diluted
Share Data
Weighted average common shares outstanding used in basic per common
share calculations
Plus: Dilutive securities
Weighted average common shares used in diluted per common share
calculations
Years Ended December 31,
2019
2018
2017
(in millions except number of shares and per share
amounts)
$
$
8,020.0
1,311.2
675.0
$
6,156.9
1,308.1
598.4
68.9
(2.6)
14.3
10,086.8
(62.1)
(0.6)
56.9
8,057.6
4,404.1
1,383.1
493.8
31.0
(0.9)
103.9
6,415.0
2,654.7
2,342.6
1,870.6
3,322.1
3,250.5
163.0
110.6
31.4
9,532.3
554.5
167.7
386.8
(4.2)
382.6
(18.7)
363.9
5.87
5.84
$
$
$
2,300.8
2,980.4
—
100.3
—
7,724.1
333.5
80.9
252.6
(1.6)
251.0
(14.2)
236.8
4.00
3.98
$
$
$
1,340.0
2,710.4
—
49.5
—
5,970.5
444.5
(75.1)
519.6
—
519.6
—
519.6
9.45
9.39
$
$
$
61,942,969
370,499
59,239,608
305,916
54,986,654
324,378
62,313,468
59,545,524
55,311,032
See the accompanying Notes to the Consolidated Financial Statements
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F-6
Assurant, Inc.
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2019, 2018 and 2017
Net income
Other comprehensive (loss) income:
Change in unrealized gains on securities, net of taxes of $(153.1),
$93.7 and $(66.3) for the years ended December 31, 2019, 2018 and
2017, respectively
Change in unrealized gains on derivative transactions, net of taxes of
$0.4 and $(4.9) for the years ended December 31, 2019 and 2018,
respectively
Change in other-than-temporary impairment losses, net of taxes of
$(0.1), $1.8 and $1.5 for the years ended December 31, 2019, 2018
and 2017, respectively
Change in foreign currency translation, net of taxes of $(1.1), $2.6 and
$(2.3) for the years ended December 31, 2019, 2018 and 2017,
respectively
Amortization of pension and postretirement unrecognized net periodic
benefit cost and change in funded status, net of taxes of $1.1, $3.4 and
$11.0 for the years ended December 31, 2019, 2018 and 2017,
respectively
Total other comprehensive (loss) income
Total comprehensive (loss) income
Less: Comprehensive income attributable to non-controlling interest
Total comprehensive (loss) income attributable to common
stockholders
Years Ended December 31,
2019
2018
(in millions)
2017
$
386.8
$
252.6
$
519.6
555.5
(342.3)
121.9
(1.3)
18.4
—
0.4
(6.7)
(2.7)
16.7
(94.2)
40.6
(4.4)
566.9
953.7
(4.2)
(12.7)
(437.5)
(184.9)
(1.6)
(20.4)
139.4
659.0
—
$
949.5
$
(186.5) $
659.0
See the accompanying Notes to the Consolidated Financial Statements
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F-7
Assurant, Inc.
Consolidated Statements of Changes in Stockholders’ Equity
Years Ended December 31, 2019, 2018 and 2017
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income
Treasury
Stock
Non-
controlling
Interest
Total
(in millions, except per share amounts)
Balance, January 1, 2017
$
— $
1.5
$
3,175.9
$
5,296.7
$
94.6
$ (4,470.6) $
— $
4,098.1
Stock plan exercises
Stock plan compensation
expense
Common stock dividends
($2.15 per share)
Acquisition of common stock
Net income
Change in equity of non-
controlling interests
Other comprehensive income
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(13.5)
35.5
—
—
—
—
—
—
—
(119.0)
—
519.6
—
—
—
—
—
—
—
—
139.4
—
—
—
(389.5)
—
—
—
—
—
—
—
—
10.9
—
(13.5)
35.5
(119.0)
(389.5)
519.6
10.9
139.4
Balance, December 31,2017
$
— $
1.5
$
3,197.9
$
5,697.3
$
234.0
$ (4,860.1) $
10.9
$
4,281.5
Cumulative effect of change in
accounting principles, net of
taxes (1)
Stock plan exercises
Stock plan compensation
expense
Common stock dividends
($2.28 per share)
Acquisition of common stock
Net income
Issuance of preferred stock
Issuance of common stock
Preferred stock dividends
($4.93 per share)
Change in equity of non-
controlling interest
Other comprehensive loss
—
—
—
—
—
—
2.9
—
—
—
—
—
—
—
—
—
—
—
0.1
—
—
—
—
(40.6)
48.1
(8.3)
57.1
—
—
—
273.5
975.4
—
—
—
—
—
(133.8)
—
251.0
—
—
(14.2)
—
—
—
—
—
—
—
—
—
—
—
(437.5)
—
—
—
—
(132.3)
—
—
—
—
—
—
—
—
—
—
—
1.6
—
—
—
9.4
—
7.5
(8.3)
57.1
(133.8)
(132.3)
252.6
276.4
975.5
(14.2)
9.4
(437.5)
Balance, December 31, 2018
$
2.9
$
1.6
$
4,495.6
$
5,759.7
$
(155.4) $ (4,992.4) $
21.9
$
5,133.9
Stock plan exercises
Stock plan compensation
expense
Common stock dividends
($2.43 per share)
Acquisition of common stock
Net income
Preferred stock dividends
($6.52 per share)
Change in equity of non-
controlling interest
Other comprehensive income
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(13.8)
55.9
—
—
—
—
—
—
—
—
(151.4)
—
382.6
(18.7)
(5.8)
—
—
—
—
—
—
—
—
566.9
—
—
—
(274.9)
—
—
—
—
—
—
—
—
4.2
—
3.2
—
(13.8)
55.9
(151.4)
(274.9)
386.8
(18.7)
(2.6)
566.9
Balance, December 31, 2019
$
2.9
$
1.6
$
4,537.7
$
5,966.4
$
411.5
$ (5,267.3) $
29.3
$
5,682.1
(1) Amounts relate to: (i) the requirement to recognize the changes in fair value of equity securities directly within income (resulting in a reclassification of
unrealized gains as of December 31, 2017 between accumulated other comprehensive income (“AOCI”) and retained earnings); (ii) the impact of
adoption of the new revenue recognition standard for revenues from service contracts and sales of products; and (iii) the reclassification from AOCI to
retained earnings for stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act. See Note 2 for additional information.
See the accompanying Notes to the Consolidated Financial Statements
F-8
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Assurant, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, 2019, 2018 and 2017
Operating activities
Net income attributable to stockholders
Adjustments to reconcile net income to net cash provided by operating
activities:
Noncash revenues, expenses, gains and losses included in income:
Deferred tax expense (benefit)
Amortization of deferred gains on disposal of businesses
Depreciation and amortization
Net realized (gains) losses on investments
Loss on extinguishment of debt
Net losses on sales of businesses and buildings
Stock based compensation expense
Other intangible asset impairment
Iké net losses (Note 5)
Changes in operating assets and liabilities:
Change in insurance policy reserves and expenses
Change in premiums and accounts receivable
Change in commissions payable
Change in reinsurance recoverable
Change in reinsurance balance payable
Change in funds withheld under reinsurance
Change in deferred acquisition costs and value of business acquired (1)
Change in other assets and other liabilities
Change in taxes payable
Other
Net cash provided by operating activities
Investing activities
Sales of:
Years Ended December 31,
2019
2018
2017
(in millions)
$
382.6
$
251.0
$
519.6
89.5
(14.3)
125.8
(66.3)
31.4
17.0
55.9
16.2
163.0
1,680.5
(63.7)
102.3
(396.9)
24.8
44.6
(889.4)
100.1
26.6
(16.3)
1,413.4
20.4
(56.9)
126.9
62.7
—
21.9
57.1
20.8
—
549.6
(220.2)
(10.7)
609.0
3.8
(104.7)
(602.4)
(209.9)
137.3
1.0
656.7
(4.2)
(103.9)
115.7
(30.1)
—
—
35.5
2.0
—
1,388.2
(10.3)
(22.8)
(936.1)
52.5
64.6
(358.8)
(27.9)
(105.5)
(48.1)
530.4
Fixed maturity securities available for sale
2,105.8
3,513.8
2,923.1
Equity securities
Other invested assets
Property, buildings and equipment
Subsidiaries, net of cash transferred (2)
Maturities, calls, prepayments, and scheduled redemption of:
Fixed maturity securities available for sale
Commercial mortgage loans on real estate
Purchases of:
Fixed maturity securities available for sale
Equity securities
Commercial mortgage loans on real estate
Other invested assets
Property and equipment and other
F-9
118.1
128.9
3.3
—
713.8
65.5
66.7
90.6
0.1
60.6
820.8
120.6
97.5
62.8
26.2
—
831.9
122.7
(2,960.6)
(87.1)
(117.3)
(76.5)
(110.3)
(4,373.6)
(62.4)
(215.4)
(54.8)
(82.8)
(3,547.2)
(24.4)
(165.0)
(46.5)
(62.1)
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Subsidiary, net of cash transferred (3)
Consolidated investment entities (4):
Purchases of investments
Sale of investments
Change in short-term investments
Other
Net cash used in investing activities
Financing activities
Issuance of mandatory convertible preferred stock, net of issuance costs (Note
20)
Issuance of debt, net of issuance costs (Note 19)
Repayment of debt, including tender offer premium (Note 19)
Issuance of collateralized loan obligation notes (4)
Issuance of debt for consolidated investment entities (4)
Repayment of debt for consolidated investment entities (4)
Payment of contingent liability (5)
Acquisition of common stock
Common stock dividends paid
Preferred stock dividends paid
Withholding on stock based compensation
Proceeds from transfer of rights to ACA recoverables (Note 4)
Non-controlling interest
Other
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental information:
Income taxes paid
Interest on debt paid
Years Ended December 31,
2019
2018
2017
(in millions)
(7.6)
(1,110.7)
(129.1)
(1,311.0)
935.1
(24.4)
4.5
(619.8)
(1,774.8)
848.5
(52.2)
2.5
(2,202.5)
—
346.7
(379.6)
398.6
189.1
(319.3)
(19.3)
(271.8)
(151.3)
(18.7)
19.7
26.7
—
—
(179.2)
(1.3)
613.1
1,254.0
1,867.1
93.1
103.2
$
$
$
$
$
$
276.4
1,285.7
(350.0)
842.5
637.3
(591.6)
—
(139.3)
(133.8)
(14.2)
15.7
—
9.2
0.1
1,838.0
(35.0)
257.2
996.8
1,254.0
93.9
79.5
$
$
$
(663.8)
81.9
(53.9)
4.7
(541.2)
—
—
—
368.0
303.9
(221.1)
—
(388.9)
(119.0)
—
19.5
—
10.9
—
(26.7)
2.3
(35.2)
1,032.0
996.8
18.8
48.1
(1)
(2)
Refer to Notes 13 and 16 for further detail on amortization of DAC and VOBA, respectively.
The year ended December 31, 2018 represents cash received, net of cash transferred, from the sale of Mortgage Solutions ($36.7 million) and Time
Insurance Company ($23.9 million). For additional information, refer to Note 4.
(3) Amounts for the year ended December 31, 2018 primarily consist of $1.49 billion of cash used to fund a portion of the total purchase price of the TWG
acquisition, inclusive of the $595.9 million repayment of pre-existing TWG debt at the acquisition date, net of $380.1 million of TWG cash acquired.
Refer to Note 3 for further information.
Relates to cash flows from our variable interest entities. Refer to Note 9 for further information.
Relates to the current year settlement of a contingent payable from the Company’s acquisition of certain renewal rights in a prior year.
(4)
(5)
See the accompanying Notes to the Consolidated Financial Statements
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F-10
Assurant, Inc.
Notes to the Consolidated Financial Statements
(in millions except number of shares and per share amounts)
1. Nature of Operations
Assurant, Inc. (the “Company”) is a global provider of lifestyle and housing solutions that support, protect and connect
major consumer purchases. The Company partners with leading brands to develop innovative products and services and to
deliver enhanced customer experience. The Company operates in North America, Latin America, Europe and Asia Pacific
through three operating segments: Global Lifestyle, Global Housing and Global Preneed. Through its Global Lifestyle segment,
the Company provides mobile device solutions and extended service products and related services for consumer electronics and
appliances (referred to as “Connected Living”); vehicle protection and related services (referred to as “Global Automotive”);
and credit and other insurance products (referred to as “Global Financial Services and Other”). Through its Global Housing
segment, the Company provides lender-placed homeowners insurance, lender-placed manufactured housing insurance and
lender-placed flood insurance (referred to as “Lender-placed Insurance”); renters insurance and related products (referred to as
“Multifamily Housing”); and voluntary manufactured housing insurance, voluntary homeowners insurance and other specialty
products (referred to as “Specialty and Other”). Through its Global Preneed segment, the Company provides pre-funded funeral
insurance, final need insurance and related services.
The Company’s common stock is traded on the New York Stock Exchange under the symbol “AIZ”.
2. Summary of Significant Accounting Policies
Basis of Presentation
The Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”). Amounts are presented in United States of America (“U.S.”) Dollars and all
amounts are in millions, except for number of shares, per share amounts and number of securities. Certain prior period amounts
have been reclassified to conform to the 2019 presentation. The Consolidated Financial Statements include the results of TWG
from June 1, 2018.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company, all of the controlled subsidiaries (generally
through a greater than 50% ownership of voting rights and voting interests) and variable interest entities (“VIEs”) of which the
Company is the primary beneficiary. Equity investments in entities that the Company does not consolidate, but where the
Company has significant influence or where the Company has more than a minor influence over the entity’s operating and
financial policies, are accounted for under the equity method. Non-controlling interest consists of equity that is not attributable
directly or indirectly to the Company. All material inter-company transactions and balances are eliminated in consolidation. In
order to facilitate the Company’s closing process, financial information from certain foreign subsidiaries and affiliates is
reported on a one to three-month lag.
Use of Estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the reported
amounts. The items affected by the use of estimates include but are not limited to, investments, reinsurance recoverables,
deferred acquisition costs (“DAC”), value of business acquired (“VOBA”), deferred income taxes and associated valuation
allowances, goodwill, intangible assets, future policy benefits and expenses, unearned premiums, claims and benefits payable,
deferred gain on disposal of businesses, pension and post-retirement liabilities and commitments and contingencies. The
estimates are sensitive to market conditions, investment yields, mortality, morbidity, commissions and other acquisition
expenses, policyholder behavior and other factors. Actual results could differ from the estimates recorded. The Company
believes all amounts reported are reasonable and adequate.
Fair Value
The Company uses an exit price for its fair value measurements. An exit price is defined as the amount received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In measuring
fair value, the Company gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. See Note 10 for additional information.
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Foreign Currency
For foreign affiliates where the local currency is the functional currency, unrealized foreign currency translation gains and
losses net of deferred income taxes have been reflected in accumulated other comprehensive income (“AOCI”). Other than for
two of the Company’s Canadian subsidiaries, deferred taxes have not been provided for unrealized currency translation gains
and losses since the Company intends to indefinitely reinvest the earnings in these other jurisdictions. Transaction gains and
losses on assets and liabilities denominated in foreign currencies are recorded in underwriting, general and administrative
expenses in the consolidated statements of operations during the period in which they occur.
Management generally identifies highly inflationary markets as those markets whose cumulative inflation rates over a
three-year period exceeds 100%, in addition to considering other qualitative and quantitative factors. Beginning July 1, 2018, as
a result of the classification of Argentina’s economy as highly inflationary, the functional currency of our Argentina subsidiaries
was changed from the local currency to U.S. Dollars. The subsidiaries’ non-U.S. Dollar denominated monetary assets and
liabilities were subject to remeasurement for the period between July 1, 2018 and December 31, 2018. For the years ended
December 31, 2019 and 2018, the remeasurement resulted in $18.4 million and $17.2 million, respectively, of net pre-tax losses
which the Company classified within underwriting, general and administrative expenses in the consolidated statements of
operations. Based on the relative size of the subsidiaries’ operations and net assets subject to remeasurement, the Company
does not anticipate the ongoing remeasurement to have a material impact on the Company’s results of operations or financial
condition.
Variable Interest Entities
The Company may enter into agreements with other entities that are deemed to be VIEs. Entities that do not have
sufficient equity at risk to allow the entity to finance its activities without additional financial support or in which the equity
investors, as a group, do not have the characteristic of a controlling financial interest are referred to as VIEs. A VIE is
consolidated by the variable interest holder that is determined to have the controlling financial interest (the “primary
beneficiary”) as a result of having both the power to direct the activities that most significantly impact the VIE’s economic
performance and the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to
the VIE. The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a
qualitative assessment of the VIE’s capital structure, contractual terms, the nature of the VIE’s operations and purpose and the
Company’s relative exposure to the related risks of the VIE on the date it becomes initially involved in the VIE. The Company
holds both consolidated and non-consolidated VIEs. The consolidated collateralized loan obligation (“CLO”) entities meet the
definition of a collateralized financing entity in the consolidation guidance. See Note 9 for additional information. Financial
information from certain consolidated VIEs are reported on a lag including CLOs and real estate funds that are reported on a
three-month lag.
Investments
Fixed maturity securities are classified as available-for-sale as defined in the investments guidance and are reported at fair
value. If the fair value is higher than the amortized cost for fixed maturity securities, the excess is an unrealized gain; and, if
lower than amortized cost, the difference is an unrealized loss. Net unrealized gains and losses on securities classified as
available-for-sale, less deferred income taxes, are included in AOCI.
Equity securities that have readily determinable fair values are measured at fair value with changes in fair value
recognized in net realized gains (losses) on investments on the Company’s consolidated statements of operations. The
Company has certain equity investments that do not have readily determinable fair values and the Company has elected the
measurement alternative to carry such investments at cost, as adjusted for periodic impairment and changes resulting from
observable prices in orderly transactions for the identical or similar investments of the same issuer. Prior to the adoption of new
accounting guidance effective January 1, 2018, equity securities were measured at fair value, with aggregate changes in fair
value recorded through other comprehensive income.
Commercial mortgage loans on real estate are reported at unpaid principal balances, adjusted for amortization of premium
or discount, less allowance for losses. The allowance is based on management’s analysis of factors including actual loan loss
experience, specific events based on geographical, political or economic conditions, industry experience, loan groupings that
have probable and estimable losses and individually impaired loan loss analysis. A loan is considered individually impaired
when it becomes probable that the Company will be unable to collect all amounts due, including principal and interest,
according to the contractual terms of the loan agreement. Indicative factors of impairment include, but are not limited to,
whether the loan is current, the value of the collateral and the financial position of the borrower. If a loan is individually
impaired, the Company uses one of the following valuation methods based on the individual loan’s facts and circumstances to
measure the impairment amount: (1) the present value of expected future cash flows, (2) the loan’s observable market price, or
(3) the fair value of collateral. Changes in the allowance for loan losses are recorded in net realized losses on investments,
excluding other-than-temporary impairment (“OTTI”) losses.
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The Company places loans on non-accrual status after 90 days of delinquent payments (unless the loans are both well
secured and in the process of collection). A loan may be placed on non-accrual status before this time if information is available
that suggests its impairment is probable.
Short-term investments include securities and other investments with durations of one year or less, but greater than three
months, between the date of purchase and maturity. These amounts are reported at cost or amortized cost, which approximates
fair value.
Other investments consist primarily of investments in joint ventures, partnerships, equity investments that do not have
readily determinable fair values, invested assets associated with a modified coinsurance arrangement, invested assets associated
with the Assurant Investment Plan (the “AIP”), the American Security Insurance Company Investment Plan (the “ASIC”) and
the Assurant Deferred Compensation Plan (the “ADC”), as well as policy loans. The joint ventures and partnerships are valued
according to the equity method of accounting. In applying the equity method, the Company uses financial information provided
by the investee, generally on a three-month lag. The invested assets related to the modified coinsurance arrangement, the AIP,
the ASIC and the ADC are classified as trading securities. The equity investments are accounted for under the measurement
alternative. Policy loans are reported at unpaid principal balances, which do not exceed the cash surrender value of the
underlying policies.
Realized gains and losses on sales of investments are recognized on the specific identification basis.
Investment income is recorded as earned and reported net of investment expenses. The Company uses the interest method
to recognize interest income on its commercial mortgage loans.
The Company anticipates prepayments of principal in the calculation of the effective yield for mortgage-backed securities
and structured securities. The retrospective method is used to adjust the effective yield for the majority of the Company’s
mortgage-backed and structured securities. For credit-sensitive structured securities, which represent beneficial interests in
Company issued CLOs that are not of high credit quality or other structured securities that have been impaired, the effective
yield is recalculated on a prospective basis.
Total Other-Than-Temporary Impairment Losses
For debt securities with credit losses and non-credit losses or gains, total OTTI losses is the total of the decline in fair
value from either the most recent OTTI determination or a prior period end in which the fair value declined until the current
period end valuation date. This amount does not include any securities that had fair value increases. For debt securities that the
Company has either the intent to sell or it is more likely than not that it will be required to sell below amortized cost, total
other-than-temporary impairment losses is the amount by which the fair value of the security is less than its amortized cost
basis at the period end valuation date and the decline in fair value is deemed to be other-than-temporary.
For debt securities determined to have an OTTI, the difference between the amortized cost of the security and the present
value of projected future cash flows expected to be collected represents a credit loss that is recognized in earnings. If the
estimated fair value is less than the present value of projected future cash flows expected to be collected, this portion of OTTI
represents a non-credit loss that is recorded in other comprehensive income.
Cash and Cash Equivalents
The Company considers all highly liquid securities and other investments with durations of three months or less between
the date of purchase and maturity to be cash equivalents. These amounts are carried 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 exist, the cash accounts are netted with other positive cash accounts of the same bank provided 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
and other liabilities.
Restricted cash and cash equivalents, of $12.8 million and $23.8 million at December 31, 2019 and 2018, respectively,
principally related to cash deposits involving insurance programs with restrictions as to withdrawal and use, are classified
within cash and cash equivalents in the consolidated balance sheets.
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 recognized as a
reduction to premiums earned over the terms of the underlying reinsured 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 the consolidated balance sheets. The cost of reinsurance related to long-duration contracts is recognized over the life
of the underlying reinsured policies. The ceding of insurance does not discharge the Company’s primary liability to insureds,
thus a credit exposure exists to the extent that any reinsurer is unable to meet the obligation assumed in the reinsurance
F-13
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agreements. To mitigate this exposure to reinsurer insolvencies, the Company evaluates the financial condition of its reinsurers
and typically holds collateral (in the form of funds withheld, trusts and letters of credit) as security under the reinsurance
agreements. An allowance for doubtful accounts is recorded on the basis of periodic evaluations of balances due from
reinsurers (net of collateral), reinsurer solvency, management’s experience and current economic conditions.
Funds held under reinsurance represent amounts contractually held from assuming companies in accordance with
reinsurance agreements.
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.
Deferred Acquisition Costs
Only direct incremental costs associated with the successful acquisition of new or renewal insurance contracts are
deferred to the extent that such costs are deemed recoverable from future premiums or gross profits. Acquisition costs primarily
consist of commissions and premium taxes. Certain direct response advertising expenses are deferred when the primary
purpose of the advertising is to elicit sales to customers who can be shown to have specifically responded to the advertising and
the direct response advertising results in probable future benefits.
Premium deficiency testing is performed annually and generally reviewed quarterly. Such testing involves the use of
assumptions including the anticipation of investment income to determine if anticipated future policy premiums are adequate to
recover all DAC and related claims, benefits and expenses. To the extent a premium deficiency exists, it is recognized
immediately by a charge to the consolidated statement of operations and a corresponding reduction in DAC. If the premium
deficiency is greater than unamortized DAC, a loss (and related liability) is recorded for the excess deficiency.
Short Duration Contracts
Acquisition costs relating to extended service contracts, vehicle service contracts, mobile device protection, credit
insurance, lender-placed homeowners insurance and flood, multifamily housing and manufactured housing insurance are
amortized over the term of the contracts in relation to premiums earned. These acquisition costs consist primarily of advance
commissions paid to agents.
Acquisition costs relating to disposed lines of business consist primarily of compensation to sales representatives. Such
costs are deferred and amortized over the estimated terms of the underlying contracts.
Long Duration Contracts
Acquisition costs for pre-funded funeral (“preneed”) life insurance policies issued prior to 2009 and certain life insurance
policies no longer offered are deferred and amortized in proportion to anticipated premiums over the premium-paying period.
These acquisition costs consist primarily of first year commissions paid to agents.
For preneed investment-type annuities, preneed life insurance policies with discretionary death benefit growth issued after
January 1, 2009, universal life insurance policies, and investment-type annuities no longer offered, DAC is amortized in
proportion to the present value of estimated gross profits from investment, mortality, expense margins and surrender charges
over the estimated life of the policy or contract. Estimated gross profits include the impact of unrealized gains or losses on
investments as if these gains or losses had been realized, with corresponding credits or charges included in AOCI. The
assumptions used for the estimates are consistent with those used in computing the policy or contract liabilities.
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, a maximum of seven years for furniture and a
maximum of five 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.
Property and equipment also includes capitalized software costs, comprised of purchased software as well as certain
internal and external costs incurred during the application development stage that directly relate to obtaining, developing or
upgrading internal use software. Such costs are capitalized and amortized using the straight-line method over their estimated
useful lives, not to exceed 15 years. Property and equipment are assessed for impairment when impairment indicators exist.
Goodwill
Goodwill represents the excess of acquisition costs over the net fair value of identifiable assets acquired and liabilities
assumed in a business combination. Goodwill is deemed to have an indefinite life and is not amortized, but rather is tested at
least annually for impairment. The Company performs the annual goodwill impairment test as of October 1 each year, or more
frequently if indicators of impairment exist. Such indicators include: a significant adverse change in legal factors, an adverse
F-14
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action or assessment by a regulator, unanticipated competition, loss of key personnel or a significant decline in the Company’s
expected future cash flows due to changes in company-specific factors or the broader business climate. The evaluation of such
factors requires considerable management judgment.
Goodwill is tested for impairment at the reporting unit level, which is either at the operating segment or one level below,
if that component is a business for which discrete financial information is available and segment management regularly reviews
such information. Components within an operating segment can be aggregated into one reporting unit if they have similar
economic characteristics.
At the time of the annual goodwill test, the Company has the option to first assess qualitative factors to determine whether
it is necessary to perform a quantitative goodwill impairment test. The Company is required to perform an additional
quantitative step if it determines qualitatively that it is more likely than not (likelihood of more than 50 percent) that the fair
value of a reporting unit is less than its carrying amount, including goodwill. Otherwise, no further testing is required.
If the Company determines that it is more likely than not that the reporting unit’s fair value is less than the carrying value,
or otherwise elects to perform the quantitative testing, the Company compares the estimated fair value of the reporting unit
with its net book value. If the reporting unit’s estimated fair value exceeds its net book value, goodwill is deemed not to be
impaired. If the reporting unit’s net book value exceeds its estimated fair value, an impairment loss will be recognized for the
amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill in
that reporting unit. Refer to Note 15 for further details on goodwill impairment testing for 2019.
Other Intangible Assets
Intangible assets that have finite lives, including but not limited to, customer contracts, customer relationships and
marketing relationships, are amortized over their estimated useful lives based on the pattern in which the intangible asset is
consumed, which may be other than straight-line. Estimated useful lives of finite intangible assets are required to be reassessed
on at least an annual basis. For intangible assets with finite lives, impairment is recognized if the carrying amount is not
recoverable and exceeds the fair value of the other intangible asset. Generally other intangible assets with finite lives are only
tested for impairment if there are indicators of impairment (“triggers”) identified. Triggers include, but are not limited to, a
significant adverse change in the extent, manner or length of time in which the intangible asset is being used or a significant
adverse change in legal factors or in the business climate that could affect the value of the other intangible asset. In certain
cases, the Company performs an annual impairment test for other intangible assets with finite lives even if there are no triggers
present.
VOBA represents the value of expected future profits in unearned premium for insurance contracts acquired in an
acquisition. For vehicle service contracts and extended service contracts, such as those purchased in connection with the TWG
acquisition, the amount is determined using estimates, for premium earnings patterns, paid loss development patterns, expense
loads and discount rates applied to cash flows that include a provision for credit risk. The amount determined represents the
purchase price paid to the seller for producing the business. For vehicle service contracts and extended service contracts,
VOBA is amortized consistent with the premium earning patterns of the underlying in-force contracts. For limited payment
policies, preneed life insurance policies, universal life policies and annuities, the amount is determined using estimates for
mortality, lapse, maintenance expenses, investment returns and other applicable purchase assumptions at the date of purchase
and is amortized over the expected life of the policies. VOBA is tested at least annually in the fourth quarter for recoverability.
Amortization expense and impairment charges are included in underwriting, general and administrative expenses in the
consolidated statements of operations.
Other Assets
Other assets consist primarily of dealer loans, investments in unconsolidated entities, inventory associated with the
Company’s mobile protection business and prepaid items. Dealer loans are carried at unpaid principal balances, adjusted for
amortization of premium or discount, less allowance for losses. Dealer loans are comprised of loans to producers of reinsured
warranty contract sales. The full carrying values of dealer loans are secured by the producers’ interest in the future profits in the
reinsured business. The Company accounts for investments in unconsolidated entities using the equity method of accounting
since the Company can exert significant influence over the investee but does not have effective control over the investee. The
Company’s equity in the net income (loss) from equity method investments is recorded as income (loss) with a corresponding
increase (decrease) in the investment. Judgment regarding the level of influence over each equity method investee includes
considering factors such as ownership interest, board representation and policy making decisions. In applying the equity
method, the Company uses financial information provided by the investee, which may be received on a lag basis of up to three
months.
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F-15
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
(with matching liabilities) 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 because the underlying accounts involve investment-type
annuity contracts and/or are subject to reinsurance.
Reserves
Reserves are established using generally accepted actuarial methods and reflect judgments about expected future premium
and claim payments. Factors used in their calculation include experience derived from historical claim payments, expected
future premiums and actuarial assumptions. Calculations incorporate assumptions about the incidence of incurred claims, the
extent to which all claims have been reported, reporting lags, expenses, inflation rates, future investment earnings, internal
claims processing costs and other relevant factors. While the methods of making such estimates and establishing the related
liabilities are periodically reviewed and updated, the estimation of reserves includes an element of uncertainty given that
management is using historical information and methods to project future events and reserve outcomes.
The recorded reserves represent the Company’s best estimate at a point in time of the ultimate costs of settlement and
administration of a claim or group of claims based upon actuarial assumptions and projections using facts and circumstances
known at the time of calculation. The adequacy of reserves may 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, including but
not limited to: changes in the economic cycle, inflation, changes in repair costs, natural or human-made catastrophes, judicial
trends, legislative changes and claims handling procedures.
Many of these items are not directly quantifiable and not all future events can be anticipated when reserves are
established. Reserve estimates are refined as experience develops. Adjustments to reserves, both positive and negative, are
reflected in the consolidated statement of operations in the period in which such estimates are updated. Because establishment
of reserves is an inherently complex process involving significant judgment and estimates, there can be no certainty that future
settlement amounts for claims incurred through the financial reporting date will not vary from reported claims reserves. Future
loss development could require reserves to be increased or decreased, which could have a material effect on the Company’s
earnings in the periods in which such increases or decreases are made. However, based on information currently available, the
Company believes its reserve estimates are adequate.
The following table provides reserve information as of December 31, 2019 and 2018:
December 31, 2019
December 31, 2018
Claims and Benefits
Payable
Claims and Benefits
Payable
Future
Policy
Benefits and
Expenses
Unearned
Premiums
Case
Reserves
Incurred
But Not
Reported
Reserves
Future
Policy
Benefits and
Expenses
Unearned
Premiums
Case
Reserves
Incurred
But Not
Reported
Reserves
Long Duration
Contracts:
Global Preneed
Disposed and runoff
businesses
All other
Short Duration
Contracts:
Global Lifestyle
Global Housing
Disposed and runoff
businesses
$
6,327.6
$
25.4
$
22.3
$
7.6
$
5,943.7
$
322.6
$
18.8
$
3,382.3
97.4
19.2
0.1
—
—
—
15,115.7
1,436.0
7.2
646.0
1.7
136.6
171.2
647.4
59.2
1.4
359.5
480.4
154.4
3,185.0
112.2
20.1
0.2
—
—
—
13,819.6
1,472.5
13.0
655.7
2.0
133.2
183.3
777.3
8.8
64.0
1.3
326.9
468.0
174.4
Total
$
9,807.3
$
16,603.6
$
1,625.2
$
1,062.5
$
9,240.9
$
15,648.0
$
1,770.3
$
1,043.4
Long Duration Contracts
The Company’s long duration contracts that are actively being sold are preneed life insurance policies and annuity
contracts.
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Future policy benefits and expense reserves for preneed investment-type annuities and preneed life insurance policies
with discretionary death benefits, along with universal life insurance policies, variable life insurance policies and investment-
type annuity contracts of the disposed and runoff businesses, 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. Unearned revenue reserves for the preneed life insurance contracts represent 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
estimated gross profits.
Future policy benefits and expense reserves for other preneed life insurance contracts are equal to 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 inflation, mortality, margins and discount rates which are locked in unless a premium
deficiency exists. These assumptions reflect current trends, are based on Company experience and include provision for adverse
deviation. An unearned revenue reserve is also recorded for these contracts and 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.
Future policy benefits and expense reserves for policies fully covered by reinsurance and certain life, annuity, group life
conversion, and medical insurance policies no longer offered are equal to the present value of future benefits to policyholders
plus related expenses less the present value of future net premiums. These amounts are estimated based on assumptions as to
the discount, 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 adverse deviations.
Claims and benefits payable for policies fully covered by reinsurance and certain life, annuity, group life conversion, and
medical insurance policies no longer offered are equal to the present value of future benefit payments and related expenses.
These amounts are estimated based on assumptions as to inflation, mortality, morbidity and discount rates as well as other
assumptions that are based on the Company’s experience.
Changes in the estimated liabilities are reported as a charge or credit to policyholder benefits as the estimates are updated.
Short Duration Contracts
The Company’s short duration contracts include products and services in the Global Housing and Global Lifestyle
segments, and Assurant Employee Benefits policies fully covered by reinsurance and certain medical policies no longer offered.
The main product lines for Global Housing include lender-placed homeowners and flood, Multifamily Housing and
manufactured housing. For Global Lifestyle, the main product lines include extended service contracts, vehicle services
contracts, mobile device protection and credit insurance. 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. Factors
used in the calculation include experience derived from historical claim payments and actuarial assumptions including loss
development factors and expected loss ratios.
The Company has exposure to asbestos, environmental and other general liability claims arising from its participation in
various reinsurance pools from 1971 through 1985. This exposure arose from a short duration contract that the Company
discontinued writing many years ago. The Company carries case reserves for these liabilities as recommended by the various
pool managers and IBNR reserves. 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
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.
Changes in the estimated liabilities are recorded as a charge or credit to policyholder benefits as estimates are updated.
Fees paid by the National Flood Insurance Program for processing and adjudication services are reported as a reduction of
underwriting, general and administrative expenses.
Debt
The Company reports debt net of acquisition costs, unamortized discount or premium and repurchases. Interest expense
related to debt is expensed as incurred. See Note 19 for additional information.
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Contingencies
A loss contingency is recorded if reasonably estimable and probable. The Company establishes reserves for these
contingencies at the best estimate, or if no one estimated amount within the range of possible losses is more probable than any
other, the Company records an estimated reserve at the low end of the estimated range. Contingencies affecting the Company
primarily relate to legal and regulatory matters, which are inherently difficult to evaluate and are subject to significant changes.
Premiums
Long Duration Contracts
The Company’s long duration contracts that are actively being sold are preneed life insurance policies. The preneed life
insurance policies include provisions for death benefit growth that are either pegged to changes in the Consumer Price Index or
determined periodically at the discretion of management. For preneed life insurance policies issued prior to 2009, revenues are
recognized when due from policyholders. For preneed life insurance policies with discretionary death benefits and preneed
investment-type annuity contracts, revenues consist of charges assessed against policy balances. Revenues are recognized
ratably as earned income over the premium-paying periods of the policies for group worksite insurance products.
For traditional life insurance contracts previously sold by the Global Preneed business, revenue is recognized when due
from policyholders.
For universal life insurance and investment-type annuity contracts previously sold by the Global Lifestyle segment,
revenues consist of charges assessed against policy balances.
Premiums for the Company’s previously sold long-term care insurance and traditional life insurance contracts are
recognized as revenue when due from the policyholder. For universal life insurance and investment-type annuity contracts,
revenues consist of charges assessed against policy balances. All of these premiums (related to the Company’s former Fortis
Financial Group and Long-Term Care businesses that were previously sold) are ceded.
Short Duration Contracts
The Company’s short duration contracts revenue is recognized over the contract term in proportion to the amount of
insurance protection provided. The Company’s short duration contracts primarily include extended service contracts, vehicle
services contracts, mobile device protection, credit insurance, lender-placed homeowners and flood insurance, Multifamily
Housing, manufactured housing, the Assurant Employee Benefits policies fully covered by reinsurance (group term life, group
disability, dental and vision) and individual medical contracts no longer offered.
Reinsurance reinstatement premiums are recognized in the same period as the loss event that gave rise to the
reinstatement premium and are netted against net earned premiums in the consolidated statements of operations.
Fees and Other Income
The Company derives fees and other income from providing administrative services, mobile related services and
mortgage property risk management services. These fees are recognized as the services are performed.
The Company reports revenues related to long duration and short duration insurance contracts as premiums, including
insurance contracts written by non-insurance affiliates, such as certain extended service contracts, consistent with the
Company’s principal business of insurance. Components of consideration paid by the insured are generally not separated as
fees and other income. However, when a component of the consideration paid by an insured both does not involve fulfilling the
insurance obligation (in that it does not involve acquisition, claims or other administrative aspects of the insurance contract)
and the related service could have been written as a separate contract, it is reported in fees and other income.
Preneed life insurance policies with discretionary death benefits are considered universal life-type contracts for which
consideration paid is not reported as premiums. Therefore, income earned is presented within fees and other income.
Dealer obligor service contracts are sales in which an unaffiliated retailer/dealer is the obligor and the Company provides
administrative services only. For these contract sales, the Company recognizes administrative fee revenue on a pro-rata basis
over the terms of the service contract which correspond to the period in which the services are performed.
The unexpired portion of fee revenues are deferred and amortized over the term of the contracts. These unexpired
amounts are reported in accounts payable and other liabilities on the consolidated balance sheets.
Underwriting, General and Administrative Expenses
Underwriting, general and administrative expenses consist primarily of commissions, premium taxes, licenses, fees,
salaries and personnel benefits and other general operating expenses and are expensed as incurred.
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Income Taxes
Current federal income taxes are recognized based upon amounts estimated to be payable or recoverable as a result of
taxable operations for the current year. Deferred income taxes are recorded 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 the Company expects the temporary differences to reverse. A valuation allowance is established for deferred
tax assets when it is more likely than not that an amount will not be realized. The impact of changes in tax rates on all deferred
tax assets and liabilities are required to be reflected within income on the enactment date, regardless of the financial statement
component where the deferred tax originated.
The Company classifies net interest expense related to tax matters and any applicable penalties as a component of income
tax expense.
Earnings Per Common Share
Basic earnings per common share is computed by dividing net income by the weighted average number of common
shares outstanding for the period. Diluted earnings per common share reflects the potential dilution that could occur if
securities or other contracts that can be converted into common stock were exercised as of the end of the period, if dilutive.
Restricted stock and restricted stock units that have non-forfeitable rights to dividends or dividend equivalents are included in
calculating basic and diluted earnings per common share under the two-class method.
Comprehensive Income
Comprehensive income is comprised of net income, net unrealized gains and losses on foreign currency translation, net
unrealized gains and losses on securities classified as available for sale, net unrealized gains and losses on other-than-
temporarily impaired securities and expenses for pension and post-retirement plans, less deferred income taxes.
Uncollectible Receivable Balance
The Company maintains allowances for doubtful accounts for probable losses resulting from the inability to collect
payments.
Deferred Gain on Disposal of Businesses
On March 1, 2016, the Company sold its Assurant Employee Benefits business using coinsurance contracts. On April 2,
2001, the Company sold its Fortis Financial Group business using a modified coinsurance contract. On March 1, 2000, the
Company sold its Long-Term Care business using a coinsurance contract. Since the form of these sales did not discharge the
Company’s primary liability to the insureds, the gain on these disposals was deferred and reported as a liability. The liability is
amortized and recognized as revenue over the estimated life of the contracts’ terms. The Company reviews and evaluates the
estimates affecting the deferred gain on disposal of the respective businesses at least annually, and adjusts the recognition of
gain accordingly.
Leases
The Company records expenses for operating leases on a straight-line basis over the lease term. The Company also
accounts for the lease liability, deferred rent liability and right of use assets consistent with its newly adopted accounting policy
as referenced below.
Recent Accounting Pronouncements – Adopted
Lease accounting: On January 1, 2019 the Company adopted the new lease guidance on a modified retrospective basis
and therefore did not restate comparative periods. The new guidance requires that entities recognize assets and liabilities
associated with leases on the balance sheet and disclose key information about leasing arrangements. The Company and its
subsidiaries lease office space and equipment under operating lease arrangements for which the Company is the lessee.
Therefore, the primary change at the time of adoption involved the recognition of right-of-use assets and lease liabilities related
to operating leases with terms in excess of 12 months in which the Company is the lessee. Upon adoption, the Company elected
the package of practical expedients permitted under the transition guidance, which allowed the carryforward of 1) historical
lease classifications, 2) the prior assessment of whether a contract is or contains a lease, and 3) initial direct costs for any leases
that existed prior to adoption. As of January 1, 2019, the new lease liability and right-of-use asset was $85.3 million and $78.0
million, respectively. Deferred rent liability of $7.3 million, which was required under the previous guidance, was reversed.
There was an immaterial impact on equity upon adoption.
Revenue recognition from contracts with customers: On January 1, 2018, the Company adopted the new guidance related
to revenue recognition from contracts with customers. The new guidance was adopted using the modified retrospective
approach, whereby the cumulative effect of adoption to retained earnings was recognized as of January 1, 2018 and the
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comparative information was not restated and continues to be reported under the accounting standards in effect for those
periods.
The guidance affects any entity that either enters into contracts with customers to transfer goods or services or enters into
contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. Insurance and
similar contracts issued by insurance entities are specifically excluded from the scope of the amended revenue recognition
guidance. As such, this standard only applies to the Company’s service contracts and sales of products, including those related
to providing administrative services, mobile device related services, mortgage property risk management services and similar
fee for service arrangements. Revenues from these contracts constituted approximately 15% of the Company’s total revenues
for the year ended December 31, 2018. The standard utilizes a five-step approach that emphasizes the recognition of revenue
when the performance obligations are met by the Company in order to reflect the transfer of promised goods or services to
customers in an amount that reflects the consideration the Company expects to receive.
As of the adoption date, accounts payable and other liabilities decreased by $10.0 million, other assets decreased by $0.3
million, retained earnings increased by $7.5 million and deferred taxes increased by $2.2 million due to a change in the revenue
recognition associated with certain mobile upgrade programs. The change reflects the recognition of mobile device upgrade
revenue in proportion to the pattern of rights expected to be exercised as opposed to recognition when the event (upgrade or
end of term) occurs. The comparable mobile upgrade programs impacted by this change were immaterial in prior periods.
Upon adoption of the new revenue recognition guidance, the Company’s revenues for service contracts and sales of
products became subject to additional disclosure requirements, such as those related to providing disaggregated revenue
disclosure, changes in contract balances, enhanced description of performance obligations, basis of determining costs and
related significant judgments used in determining appropriate revenue recognition procedures. Refer to Note 7 for additional
information on contract revenues.
Financial instruments measurement and classification: On January 1, 2018, the Company adopted the amended guidance
on the measurement and classification of financial instruments whereby all common and preferred stocks are measured at fair
value with changes in fair value recognized through income. Upon adoption, the Company recorded a cumulative effect
adjustment to increase retained earnings by $33.9 million, which represents a reclassification of the unrealized gains on
common and preferred stock as of the date of adoption from AOCI.
Income tax consequences for intra-entity transfers of assets: On January 1, 2018, the Company adopted the amended
guidance on tax accounting for intra-entity transfers of assets. The amended guidance requires an entity to recognize the
income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs as opposed to
when it has been sold to an outside party. Additionally, the amended guidance eliminated the exception for an intra-entity
transfer of an asset other than inventory. The adoption of this amended guidance did not have an impact on the Company’s
financial position and results of operations.
Statement of cash flows presentation and classification: On January 1, 2018, the Company adopted the amended guidance
on presentation and classification in the statement of cash flows. The amended guidance addresses certain specific cash flow
issues including debt prepayment and debt extinguishment costs; settlement of zero-coupon or insignificant coupon debt
instruments; contingent consideration payments made after a business combination; proceeds from the settlement of insurance
claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies);
distributions received from equity method investees; beneficial interests in securitization transactions; and guidance related to
the identification of the primary source for separately identifiable cash flows. The adoption of this amended guidance did not
have an impact on the Company’s financial position and results of operations.
Accounting for hedging activities: On January 1, 2018, the Company adopted the amended guidance related to hedge
effectiveness testing requirements, income statement presentation and disclosure and hedge accounting qualification criteria.
The amended guidance requires realized gains and losses on forecasted transactions to be recorded in the financial statement
line item to which the underlying forecasted transactions relates; simplifies the ongoing effectiveness testing; and reduces the
complexity of hedge accounting requirements for new derivative contracts. The adoption of this amended guidance did not
have a material impact on the Company’s financial position and results of operations.
Classification of certain tax effects from AOCI: In February 2018, the Financial Accounting Standards Board (the
“FASB”) issued amended guidance on reclassifying the stranded tax effects from the U.S. Tax Cuts and Jobs Act (the “TCJA”)
from AOCI to retained earnings. During the three months ended September 30, 2018, the Company early adopted the new
guidance with application in the period of adoption and reclassified $(82.0) million from AOCI to retained earnings, with no
impact on net income or total stockholders’ equity. Accounting standards require the effect of a change in tax laws or rates on
deferred tax liabilities or assets be included in net income in the reporting period that includes the enactment date, even though
the related income tax effects may have been originally charged or credited to AOCI. The amounts reclassified relate to the
difference between the original tax effect of items included in other comprehensive income, such as unrealized gains or losses
on securities and unamortized net losses on pension plans, and the revised tax effects from the TCJA. We use a portfolio
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approach to release the stranded or disproportionate income tax effects in AOCI related to our available-for sale securities.
When the underlying portfolios are sold, mature, or are otherwise impaired on an other-than-temporary basis, the assigned
portion of the disproportionate tax effect is reclassified from AOCI to income from continuing operations.
Recent Accounting Pronouncements – Not Yet Adopted
Measurement of credit losses on financial instruments held at amortized cost (“CECL”): In June 2016, the FASB issued
amended guidance on reporting credit losses for assets held at amortized cost and available for sale debt securities. For assets
held at amortized cost, the amended guidance eliminates the probable recognition threshold and instead requires an entity to
reflect the current estimate of all expected credit losses. For available for sale debt securities, credit losses will be measured in a
manner similar to current accounting requirements; however, the amended guidance requires that credit losses be presented as
an allowance rather than as a permanent impairment. The amendments affect loans, debt securities, trade receivables, net
investments in leases, off balance sheet credit exposures, premium receivables, reinsurance receivables, and any other financial
assets not excluded from the scope that have the contractual right to receive cash. The Company adopted this standard as of
January 1, 2020. Based on the asset composition and economic conditions as at that date, the cumulative impact of the adoption
was not material to the Company’s balance sheet or equity and is not expected to be material to the Company’s results of
operations or cash flows.
Financial Instruments – Credit Losses: Targeted Transition Relief: In May 2019, the FASB issued guidance which
provides transition relief for entities adopting CECL. The transition relief will allow companies to irrevocably elect, upon
adoption of CECL, the fair value option on financial instruments that were previously measured at amortized cost basis.
Entities are required to make this election on an instrument-by-instrument basis.
The effective date of the guidance will be the same as the effective date for CECL. An entity may early adopt the
guidance in any interim period after its issuance if the entity has adopted CECL. The transition amendments should be applied
on a modified-retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings
balance in the statement of financial position as of the date that an entity adopted the amendments in CECL. The Company has
decided to not adopt the transition relief from this guidance in its overall adoption of the guidance under CECL.
Targeted improvements to the accounting for long-duration contracts: In August 2018, the FASB issued guidance that
provides targeted improvements to the accounting for long-duration contracts. The guidance includes the following primary
changes: assumptions supporting benefit reserves will no longer be locked-in but must be updated at least annually with the
impact of changes to the liability reflected in earnings (except for discount rates); the discount rate assumptions will be based
on upper-medium grade (low credit risk) fixed-income instrument yield instead of the earnings rate of invested assets; the
discount rate must be evaluated at each reporting date and the impact of changes to the liability estimate as a result of updating
the discount rate assumption is required to be recognized in other comprehensive income; the provision for adverse deviation is
eliminated; and premium deficiency testing is eliminated. Other noteworthy changes include the following: differing models for
amortizing deferred acquisition costs will become uniform for all long-duration contracts based on a constant rate over the
expected term of the related in-force contracts; all market risk benefits associated with deposit contracts must be reported at fair
value with changes reflected in income except for changes related to credit risk which will be recognized in other
comprehensive income; and disclosures will be expanded to include disaggregated roll forwards of the liability for future policy
benefits, policyholder account balances, market risk benefits, separate account liabilities, and deferred acquisition costs, as well
as information about significant inputs, judgments, assumptions and methods used in measurement.
The guidance is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal
years. Early adoption is permitted. Generally, the amendments are applied retrospectively as of the beginning of the earliest
period presented with two transition options available for changing the assumptions.
This guidance will apply to the Company’s preneed life insurance policies, as well as its annuity and universal life
products (which are no longer offered and are in runoff). The Company is evaluating the requirements of this guidance and the
potential impact on the Company’s financial position and results of operations.
Customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract: In
August 2018, the FASB issued guidance aligning the requirements for capitalizing implementation costs incurred in a hosting
arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain
internal-use software. For these arrangements, the guidance also limits the period to expense capitalized implementation costs
based on the term of the hosting agreement, including the noncancellable period of the arrangement plus periods covered by
options to extend the arrangement that are reasonably certain of exercise. The accounting for the service element of a hosting
arrangement that is a service contract is not affected by the amendments. The Company will adopt the guidance on its effective
date of January 1, 2020. The guidance is required to be applied either retrospectively or prospectively to all implementation
costs incurred after the date of adoption. The Company has evaluated the requirements of this guidance and determined that it
has no material impact on its financial position and results of operations.
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Simplifying the Accounting for Income Taxes: In 2019, the FASB issued new guidance to simplify the accounting for
income taxes by removing certain exceptions to the general principles and also simplification of areas such as franchise taxes,
step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate
changes. The standard will be effective for our annual reporting periods beginning after December 15, 2020, including interim
reporting periods within those fiscal years. Early adoption is permitted, including adoption in any interim period. The Company
is evaluating the impact of adopting this new accounting guidance on the consolidated financial statements.
3. Acquisitions
TWG Acquisition
On May 31, 2018 (the “Acquisition Date”), the Company acquired TWG for a total enterprise value of $2.47 billion. This
amount included $894.9 million in cash, the repayment of $595.9 million of TWG’s pre-existing debt and issuance of $975.5
million of Assurant, Inc. common stock. As a result, the equityholders of TWG, including TPG Capital, received a total of
10,399,862 shares of Assurant, Inc. common stock. TWG specializes in the underwriting, administration and marketing of
service contracts on a wide variety of consumer goods, including automobiles, consumer electronics and major home
appliances. The Company financed the cash consideration and repayment of TWG’s pre-existing debt through a combination of
available cash and external financing. Refer to Notes 19 and 20 for more information on the issuances of debt and mandatory
convertible preferred stock, respectively, related to the financing of the acquisition.
Fair Value of Net Assets Acquired and Liabilities Assumed
The initial accounting for the net assets acquired and liabilities assumed included certain provisional amounts recorded as
of June 30, 2018 (the end of the reporting period in which the TWG acquisition occurred). During the measurement period
(which included the period from June 1, 2018 to May 31, 2019), the Company adjusted the provisional amounts to reflect new
information obtained about facts and circumstances that existed as of the Acquisition Date, which, if known, would have
affected the measurement of the amounts recognized as of that date. Such adjustments impacted certain identifiable assets
acquired and liabilities assumed, resulting in a net increase to total identifiable net assets acquired and a corresponding decrease
in goodwill of $25.7 million. The adjustments to income that would have been recognized in previous periods if the
measurement period adjustments had been completed as of the Acquisition Date were immaterial.
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F-22
Assets acquired and (liabilities) assumed
Fixed maturity securities available for sale
Equity securities
Short-term investments
Other investments
Cash and cash equivalents
Premiums and accounts receivable, net
Reinsurance recoverables
Accrued investment income
Property and equipment
Value of business acquired
Other intangible assets
Other assets
Unearned premiums and contract fees
Claims and benefits payable
Commissions payable
Reinsurance balances payable
Funds held under reinsurance
Accounts payable and other liabilities
Non-controlling interest
Total identifiable net assets acquired
Goodwill
Total acquisition consideration
$
2,268.8
49.4
165.5
100.9
380.1
286.2
1,908.7
31.6
15.4
3,973.0
459.7
200.0
(7,512.6)
(419.9)
(106.8)
(186.1)
(202.2)
(381.7)
(1.8)
1,028.2
1,438.1
2,466.3
$
Total goodwill of $1.44 billion is mainly attributable to expected growth and profitability, none of which is expected to be
deductible for income tax purposes.
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F-23
VOBA and Other Intangible Assets
The following table shows the purchase price allocation to VOBA and other intangible assets, including the effect of
measurement period adjustments to provisional estimates as described above.
Value of business acquired (1)
Finite life (1):
Customer related intangibles (distribution network)
Technology based intangibles
Total finite life other intangible assets
Indefinite life:
Contract based intangibles
Total other intangible assets
Amount
3,973.0
390.3
57.8
448.1
11.6
459.7
$
$
$
$
$
(1)
Refer to future estimated amortization table below for the amortization pattern of VOBA and other intangible assets with finite lives.
Total amortization of VOBA related to TWG was $1.13 billion and $818.2 million for the years ended December 31, 2019
and 2018, respectively. Total amortization of other intangible assets related to TWG was $18.4 million and $9.5 million for the
years ended December 31, 2019 and 2018, respectively. For more information on VOBA and other intangible assets, refer to
Note 16. At December 31, 2019, the estimated amortization of VOBA and other intangible assets with finite lives related to
TWG for the next five years and thereafter is as follows:
Year
2020
2021
2022
2023
2024
Thereafter
Total
Acquisition-related Costs
VOBA
Other Intangible Assets
(With Finite Lives)
$
$
795.3
$
558.2
343.4
199.6
89.7
7.5
1,993.7
$
25.9
30.4
34.9
36.1
36.5
253.6
417.4
Transaction costs related to the acquisition were expensed as incurred. These costs included advisory, legal, accounting,
valuation and other professional and consulting fees, as well as general and administrative costs. Transaction costs incurred to
date in connection with the acquisition of TWG totaled $40.4 million, including $0.6 million and $30.6 million for the years
ended December 31, 2019 and 2018, respectively, which were reported through the underwriting, general and administrative
expenses line item in the consolidated statements of operations.
As a part of the ongoing integration of TWG’s operations, the Company has incurred, and will continue to incur, costs
associated with restructuring systems, processes and workforce. These costs include such items as severance, retention,
facilities and consulting. Integration costs incurred to date in connection with the acquisition of TWG totaled $58.2 million,
including $27.6 million and $29.8 million for the years ended December 31, 2019 and 2018, respectively, which were reported
through the underwriting, general and administrative expenses line item in the consolidated statements of operations.
Financial Results
The following table summarizes the results of the acquired TWG operations from June 1, 2018 through December 31,
2018 that have been included within the Company’s consolidated statements of operations (based on how TWG was allocated
to the Company’s reportable segments).
F-24
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Total revenues
Net income attributable to stockholders
June 1, 2018 to December 31, 2018
Global Lifestyle
(1)
Corporate and
Other (2)
$
$
1,536.1
84.0
$
$
(8.4) $
(21.6) $
Total
1,527.7
62.4
(1)
(2)
The TWG net income allocated to the Global Lifestyle segment included $9.3 million after-tax of client recoverables related to a contract termination
payment.
The TWG net income allocated to Corporate and Other included $11.0 million of net losses as a result of the remeasurement of the Argentina
subsidiary’s non-U.S. Dollar denominated monetary assets and liabilities, $10.7 million integration expenses and $8.4 million net realized losses on
investments, partially offset by income tax benefits, which include a $5.7 million tax structuring benefit. Refer to Note 2 for further information on the
net losses due to remeasurement and Note 12 for further information on the income tax benefit.
Unaudited Supplemental Pro Forma Consolidated Financial Information
The following table provides unaudited supplemental pro forma consolidated financial information for the years ended
December 31, 2018 and 2017, as if TWG had been acquired as of January 1, 2017. The unaudited supplemental pro forma
consolidated financial information is presented solely for informational purposes and is not necessarily indicative of the
consolidated results of operations that might have been achieved had the transaction been completed as of the date indicated,
nor are they meant to be indicative of any anticipated consolidated results of operations that the combined company will
experience in the future.
Total revenues
Net income attributable to stockholders
Basic earnings per common share
Diluted earnings per common share
Years Ended December 31,
2018
2017
$
$
$
$
9,108.0
333.1
4.95
4.93
$
$
$
$
8,607.0
582.5
8.62
8.49
For the year ended December 31, 2017, pro forma net income includes $30.6 million of non-recurring transaction and
integration costs, net of taxes. For the pro forma presentation, given the assumed acquisition date of January 1, 2017,
transaction and integration costs that were incurred at or subsequent to the actual acquisition date have been included in the
calculation of pro forma net income for the year ended December 31, 2017, whereas transaction and integration costs that were
incurred prior to the Acquisition Date have been excluded from the calculation of pro forma net income.
4. Dispositions and Exit Activities
Dispositions
Time Insurance Company: On December 3, 2018, the Company sold Time Insurance Company (“TIC”), a subsidiary of
the runoff Assurant Health business, to Haven Holdings, Inc. for cash consideration of $30.9 million. During the year ended
December 31, 2018, the Company recorded a gain on the sale of $18.4 million, with $17.7 million classified in underwriting,
general and administrative expenses and $0.7 million classified as an offset to net realized losses on investments in the
consolidated statements of operations.
Mortgage Solutions: On August 1, 2018, the Company sold its valuation and field services business (referred to as
“Mortgage Solutions”) to Xome, an indirect wholly owned subsidiary of WMIH Corp., for $36.7 million (comprised of $35.0
million cash consideration and a $1.7 million working capital adjustment based on the terms of the transaction agreement) and
potential future payments based on revenue retention targets and certain types of new business. The sale included Assurant
Services, LLC and its wholly owned subsidiaries Assurant Field Services, Assurant Valuations Originations, Assurant
Valuations Default and Assurant Title. The Company entered into a transition services agreement to provide ongoing services
for one year for fees approximating the cost of such services. During the year ended December 31, 2018, the Company
recorded total pre-tax losses of $40.3 million on the sale. The loss is classified in underwriting, general and administrative
expenses in the consolidated statements of operations.
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F-25
Assurant Employee Benefits: On March 1, 2016, the Company completed the sale of its Assurant Employee Benefits
segment through a series of transactions with Sun Life Assurant Company of Canada (“Sun Life”) for net cash consideration of
$942.2 million (including contingent consideration), which resulted in an estimated gain of $656.5 million. The transaction was
primarily structured as a reinsurance arrangement that included a ceding commission and other consideration as well as the sale
of certain legal entities. The reinsurance transaction did not extinguish the Company’s primary liability on the policies issued or
assumed by subsidiaries that are parties to the reinsurance agreements, thus any gains associated with the prospective
component of the reinsurance transaction were deferred and amortized over the contract period, including contractual renewal
periods, in proportion to the amount of insurance coverage provided. The Company also had a performance obligation to
continue to write and renew certain policies for a period of time until Sun Life began policy writing and renewal.
The proceeds were allocated based on the relative fair value of the transaction components. Most of the expected gains
resulting from the transaction related to compensation for in-force policies (prospective component), sales of net assets
underlying the continuing business and future compensation for the performance obligation to write and renew certain policies
for a period of time. The reinsurance for existing claim liabilities (retroactive component) resulted in a loss when considering
the amounts paid for reinsurance premiums (assets transferred to Sun Life) exceeded the recorded liabilities related to the
underlying reinsurance contracts. The Company also recognized realized gains associated with the fair value of assets
transferred to Sun Life (which offset losses on the retroactive component).
The terms “deferred gain” and “amortization of deferred gain” presented in the consolidated financial statements broadly
reflect the multiple transaction elements and earnings thereon, inclusive of the expected and actual income resulting from the
reinsurance subject to prospective accounting, income expected to be earned related to the deferred gains associated with long-
duration contracts, and the expected recognition of deferred revenues associated with the performance obligations.
The total deferred gain (representing $520.4 million of the total $656.5 million of original estimated gains) has been and
will continue to be recognized as revenue over the contract period in proportion to the amount of insurance coverage provided,
including estimated contractual renewals pursuant to rate guarantees.
The years ended December 31, 2019, 2018 and 2017 included $13.8 million, $46.9 million and $92.8 million,
respectively, related to the amortization of deferred gains associated with the 2016 sale of Assurant Employee Benefits. The
year ended December 31, 2017 includes $16.0 million of income related to realization of contingent consideration. The
remaining unamortized deferred gain as of December 31, 2019 was $2.6 million.
Exit Activities
The Company substantially completed its exit from the health insurance market as of December 31, 2016, a process that
began in 2015. Between 2014 and 2016, the Company participated in the reinsurance, risk adjustment and risk corridor
programs introduced by the Patient Protection and Affordable Health Care Act of 2010 (“ACA”). In connection with these
programs, the Company held a $106.7 million gross risk corridor receivable due to the Company’s participation in the risk
corridor program in 2015, which was reduced by a full valuation allowance because payments from the U.S. Department of
Health and Human Services were considered unlikely, resulting in no net receivable. In December 2018, the Company
subsidiary that held the receivable rights, TIC, was sold to a third party. In connection with the sale, the Company and TIC
entered into a participation agreement (the “Participation Agreement”) in which the Company was granted a 100% participation
interest in the future claim proceeds, if any, of the risk corridor receivable recovered by TIC.
The collection prospects of the risk corridor receivables began to improve following litigation challenging the legal basis
for non-payment under the ACA program. This led to increasing levels of market participant interest in the purchase of the
interests in such receivables, despite the remaining uncertainty of the outcome of the pending litigation.
During the fourth quarter of 2019, the Company entered into an agreement with a third-party in which it received upfront
cash proceeds of $26.7 million and a claim to 20% of any future claim proceeds in excess of $26.7 million received by the
Company pursuant to the Participation Agreement, net of legal and other fees. The third-party is entitled to the remaining 80%
of any such proceeds. The Company also granted the third party a security interest in the Company’s rights to payment under
the Participation Agreement and certain related assets.
The amount received by the Company is non-recourse. The Company deemed the amount to be indicative of recovery of
its interests in the risk corridor receivables and accordingly adjusted the valuation allowance by $26.7 million. The Company
recorded the effect as a reduction to underwriting, general and administrative expenses in the consolidated statement of
operations for the year ended December 31, 2019 with a corresponding increase in other assets in the consolidated balance
sheet as of December 31, 2019. The Company also recorded a $26.7 million liability within accounts payable and other
liabilities in the consolidated balance sheet reflecting the third-party’s security interest in such receivable as of December 31,
2019.
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5. Investment in Iké
In 2014, the Company made an approximately 40% investment in Iké Grupo, Iké Asistencia and certain of their affiliates
(collectively, “Iké”), a services assistance business, for which it paid approximately $110.0 million. At the same time, the
Company also entered into a shareholders agreement that provided the right to acquire the remainder of Iké from the majority
shareholders and the majority shareholders the right to put their interests in Iké to the Company (together, the “put/call”) in
mid-2019. During 2019, the Company entered into a cooperation agreement with the majority shareholders of Iké to extend the
put/call to January 31, 2020 and explore strategic alternatives which led to the third quarter decision to pursue the sale of our
interests in Iké. In January 2020, we entered a formal agreement to sell our interests in Iké with an expected close in the
second quarter of 2020.
The Company has determined that Iké is a variable interest entity (“VIE”); however, we do not have the controlling
financial interest to direct the activities of the VIE that most significantly impact the VIE’s economic performance.
Accordingly, the investment in Iké is recorded under the equity method of accounting and is included in other assets in the
consolidated balance sheets. The Company’s income from its investment in Iké is included in fees and other income in the
consolidated statements of operations. The estimated fair value of the put/call is remeasured each quarter and is included in
accounts payable and other liabilities of the consolidated balance sheets and any gain or loss from changes in fair value is
recorded in the consolidated statements of operations (presented as net Iké losses in 2019).
Impairment of Investment and Charge on Put/Call
The Company’s investment in Iké is assessed for possible impairment when events indicate that the fair value of the
investment may be below the carrying value. Based on the Company’s plan to sell its interests in Iké and the expected sales
price, the Company determined that carrying value exceeds fair value and such impairment is other than temporary. For the
year ended December 31, 2019, the Company recorded an impairment on its 40% equity method investment in Iké of $78.3
million that includes consideration of cumulative foreign currency translation losses of $38.4 million recorded in other
comprehensive income. In addition, the Company recorded a pre-tax charge of $84.7 million related to the change in value of
the put/call for the year ended December 31, 2019.
Valuation Allowance of Deferred Tax Assets Related to Investment in Iké
The losses in 2019 generated deferred tax assets of $48.8 million when applying the applicable effective tax rate. The
Company’s ability to realize the deferred tax assets depends on its ability to generate sufficient taxable income of the same
character within the carryback or carryforward periods in the impacted jurisdiction. In assessing future taxable income, the
Company considered all sources of taxable income available to realize the deferred tax assets, including the future reversal of
existing temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable
income in carryback years and tax-planning strategies. The Company must record a valuation allowance to fully offset deferred
tax assets if based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax
assets will not be realized. Based on an evaluation of the Iké 2019 losses and limited future sources of income in the impacted
jurisdictions, the Company recognized a full valuation allowance on the $48.8 million that arose in 2019 and $0.9 million
established against the Iké deferred tax asset as of December 31, 2018.
In total, the Company recorded pre-tax charges of $163.0 million (presented as net Iké losses in the consolidated
statements of operations) and after-tax charges of $163.9 million for the year ended December 31, 2019 related to its interests
in Iké.
6. Segment Information
As of December 31, 2019, the Company had four reportable segments, which are defined based on the manner in which
the Company’s chief operating decision maker, the Chief Executive Officer (“CEO”), reviews the business to assess
performance and allocate resources, and which align to the nature of the products and services offered:
• Global Lifestyle: provides mobile device solutions and extended service products and related services for consumer
electronics and appliances (referred to as “Connected Living”); vehicle protection and related services (referred to as
“Global Automotive”); and credit and other insurance products (referred to as “Global Financial Services and Other”);
• Global Housing: provides lender-placed homeowners insurance, lender-placed manufactured housing insurance and
lender-placed flood insurance (referred to as “Lender-placed Insurance”); renters insurance and related products
(referred to as “Multifamily Housing”); and voluntary manufactured housing insurance, voluntary homeowners
insurance and other specialty products (referred to as “Specialty and Other”);
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• Global Preneed: provides pre-funded funeral insurance, final need insurance and related services; and
• Corporate and Other: includes activities of the holding company, financing and interest expenses, net realized gains
(losses) on investments, interest income earned from short-term investments held and income (expenses) primarily
related to the Company’s frozen benefit plans. Corporate and Other also includes the amortization of deferred gains
associated with the sales of businesses through reinsurance agreements, expenses related to the acquisition of TWG,
foreign currency gains (losses) from remeasurement of monetary assets and liabilities, the gain or loss on the sale of
businesses, gains or losses associated with the valuation of the investment in Iké and other unusual or infrequent
items. Additionally, the Corporate and Other segment includes amounts related to businesses previously disposed of
through reinsurance and the runoff of the Assurant Health business.
The Company determined its reportable segments using the management approach described in accounting guidance
regarding disclosures about segments of an enterprise and related information. These reportable segment groupings are
consistent with information used by our chief operating decision maker to assess performance and allocate resources. The
accounting policies of the reportable segments are the same as those described in the summary of significant accounting
policies. See Note 2 for additional information.
The following tables summarize selected financial information by segment for the periods indicated:
Year Ended December 31, 2019
Global
Lifestyle
Global Housing Global Preneed
Corporate
and Other
Consolidated
$
6,073.7
$
1,885.1
$
61.2
$
— $
Revenues
Net earned premiums
Fees and other income
Net investment income
Net realized gains on investments
Amortization of deferred gains on disposal of
businesses (1)
Total revenues
Benefits, losses and expenses
Policyholder benefits (2)
Amortization of deferred acquisition costs and
value of business acquired
Underwriting, general and administrative
expenses (3)
Iké net losses
Interest expense
Loss on extinguishment of debt
1,020.5
250.8
—
—
148.6
95.2
—
—
7,345.0
2,128.9
1,516.2
3,015.7
2,277.6
—
—
—
869.5
221.5
711.6
—
—
—
139.7
285.3
—
—
486.2
269.0
84.9
67.3
—
—
—
Total benefits, losses and expenses
6,809.5
1,802.6
421.2
Segment income (loss) before provision (benefit)
for income taxes
Provision (benefit) for income taxes
Segment income (loss) after taxes
Less: Net income attributable to non-controlling
interest
Net income (loss) attributable to stockholders
Less: Preferred stock dividends
Net income (loss) attributable to common
stockholders
Segment assets:
326.3
67.6
258.7
—
258.7
—
258.7
4,046.1
$
$
65.0
12.8
52.2
—
52.2
—
52.2
7,440.1
535.5
126.2
409.3
—
409.3
—
409.3
22,893.7
$
$
F-28
$
$
2.4
43.7
66.3
14.3
126.7
—
—
194.0
163.0
110.6
31.4
499.0
(372.3)
(38.9)
(333.4)
(4.2)
(337.6)
(18.7)
8,020.0
1,311.2
675.0
66.3
14.3
10,086.8
2,654.7
3,322.1
3,250.5
163.0
110.6
31.4
9,532.3
554.5
167.7
386.8
(4.2)
382.6
(18.7)
$
$
(356.3) $
363.9
9,911.3
$
44,291.2
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Revenues
Net earned premiums
Fees and other income
Net investment income
Net realized gains on investments
Amortization of deferred gains on disposal of
businesses (1)
Total revenues
Benefits, losses and expenses
Policyholder benefits (2)
Amortization of deferred acquisition costs and
value of business acquired
Underwriting, general and administrative
expenses (3)
Interest expense
Total benefits, losses and expenses
Segment income (loss) before provision (benefit)
for income taxes
Provision (benefit) for income taxes
Segment income (loss) after taxes
Less: Net income attributable to non-controlling
interest
Net income (loss) attributable to stockholders
Less: Preferred stock dividends
Net income (loss) attributable to common
stockholders
Segment assets:
$
$
Year Ended December 31, 2018
Global
Lifestyle
Global Housing Global Preneed
Corporate
and Other
Consolidated
$
4,291.8
$
1,806.2
$
58.4
$
891.5
189.4
—
—
283.0
80.8
—
—
5,372.7
2,170.0
1,145.6
2,025.8
1,812.6
—
4,984.0
388.7
91.0
297.7
—
297.7
—
938.4
204.5
837.1
—
1,980.0
190.0
39.2
150.8
—
150.8
—
131.1
278.0
—
—
467.5
263.3
70.5
60.1
—
393.9
73.6
15.9
57.7
—
57.7
—
$
0.5
2.5
50.2
(62.7)
56.9
47.4
6,156.9
1,308.1
598.4
(62.7)
56.9
8,057.6
(4.7)
2,342.6
—
2,300.8
270.6
100.3
366.2
(318.8)
(65.2)
(253.6)
(1.6)
(255.2)
(14.2)
2,980.4
100.3
7,724.1
333.5
80.9
252.6
(1.6)
251.0
(14.2)
297.7
$
150.8
$
57.7
$
(269.4) $
236.8
21,254.5
$
3,949.9
$
6,975.2
$
8,909.7
$
41,089.3
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F-29
Revenues
Net earned premiums
Fees and other income
Net investment income
Net realized gains on investments
Amortization of deferred gains on disposal of
businesses (1)
Total revenues
Benefits, losses and expenses
Policyholder benefits (2)
Amortization of deferred acquisition costs and
value of business acquired
Underwriting, general and administrative
expenses (3)
Interest expense
Total benefits, losses and expenses
Segment income (loss) before provision (benefit)
for income taxes
Provision (benefit) for income taxes (4)
Year Ended December 31, 2017
Global
Lifestyle
Global Housing Global Preneed
Corporate
and Other
Consolidated
$
2,576.5
$
1,761.4
$
59.5
$
6.7
$
819.7
114.6
—
—
413.6
75.6
—
—
3,510.8
2,250.6
700.4
1,083.3
1,480.8
—
3,264.5
246.3
68.3
958.4
194.9
953.0
—
2,106.3
144.3
46.9
97.4
$
28.3
41.6
30.1
103.9
210.6
4,404.1
1,383.1
493.8
30.1
103.9
6,415.0
(47.3)
1,870.6
—
1,340.0
213.5
49.5
215.7
(5.1)
(209.7)
204.6
$
2,710.4
49.5
5,970.5
444.5
(75.1)
519.6
121.5
262.0
—
—
443.0
259.1
61.8
63.1
—
384.0
59.0
19.4
39.6
Segment net income
$
178.0
$
(1) The years ended December 31, 2019, 2018 and 2017 included $13.8 million, $46.9 million and $92.8 million, respectively, related to the amortization of
deferred gains associated with the 2016 sale of Assurant Employee Benefits. The remaining Assurant Employee Benefits unamortized deferred gain as of
December 31, 2019 was $2.6 million.
(2) Corporate and Other includes the impact of the total current period net utilization of the Assurant Health premium deficiency reserves for claim costs and
claim adjustment expenses in policyholder benefits, as well as maintenance costs, which are included within underwriting, general and administrative
expenses. For the years ended December 31, 2019, 2018, and 2017, the Assurant Health premium deficiency reserve liability decreased $0.1 million, $1.0
million and $35.7 million, respectively, through an offset to policyholder benefit expense. In addition, there was favorable claims development
experienced through December 31, 2018 and 2017, in excess of actual benefit expense, which contributed to the credit balance within policyholder
benefits expenses.
(3) The year ended December 31, 2019 for Corporate and Other included a $7.4 million loss on assets held for sale associated with an office building
previously used as the headquarters for a business in runoff. The years ended December 31, 2019 and 2018 for Corporate and Other included $18.2
million and $17.2 million, respectively, of net losses from foreign exchange related to the remeasurement of net monetary assets in Argentina as a result
of the classification of Argentina’s economy as highly inflationary beginning July 1, 2018; and impairment losses of $15.6 million and $20.8 million,
respectively, on intangible assets. The year ended December 31, 2018 for Corporate and Other included an $17.7 million gain on the sale of Time
Insurance Company and a $40.3 million loss on the sale of Mortgage Solutions. The year ended December 31, 2017 for Corporate and Other included an
expense of $17.4 million related to a post-close adjustment pertaining to an estimated indemnification that is expected to be due on a previous disposition.
(4) The consolidated net benefit for income taxes for the year ended December 31, 2017 included a $177.0 million one-time benefit from the reduction of net
deferred tax liabilities following the enactment of the TCJA. The remeasurement of deferred tax assets and liabilities was recorded using our best estimate
of deferred tax balances as of December 22, 2017, the enactment date of the TCJA. The total benefit for income taxes was reported through the Corporate
segment; however, the remeasured deferred tax assets and liabilities were adjusted within each segment. During the year ended December 31, 2018, the
Company finalized the provisional adjustment, recording an expense of $1.5 million. Refer to Note 12 for further detail.
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F-30
The Company principally operates in the U.S., as well as Europe, Latin America, Canada and Asia. The following table
summarizes selected financial information by geographic location for the years ended or as of December 31, 2019, 2018 and
2017:
Location
2019
United States
Foreign countries
Total
2018
United States
Foreign countries
Total
2017
United States
Foreign countries
Total
Revenues
Long-lived
Assets
$
$
$
$
$
$
7,883.2
2,203.6
10,086.8
6,217.0
1,840.6
8,057.6
4,980.8
1,434.2
6,415.0
$
$
$
$
$
$
391.2
42.5
433.7
378.8
13.7
392.5
339.5
8.1
347.6
Revenue is based in the country where the product was sold and the physical location of long-lived assets, which are
primarily property and equipment. There are no reportable major customers that accounted for 10% or more of the Company’s
consolidated revenues for the years ended December 31, 2019, 2018 or 2017.
The Company’s net earned premiums, fees and other income by segment and product are as follows for the periods
indicated:
Global Lifestyle:
Connected Living (mobile and service contracts)
Global Automotive
Global Financial Services and Other
Total
Global Housing:
Lender-placed Insurance
Multifamily Housing
Specialty and Other
Mortgage Solutions
Total
Global Preneed
7. Contract Revenues
Years Ended December 31,
2019
2018
2017
$
$
$
$
$
3,768.4
2,873.6
452.2
7,094.2
1,109.2
429.2
495.3
—
2,033.7
200.9
$
$
$
$
$
2,800.6
1,909.2
473.5
5,183.3
1,149.7
406.1
417.3
116.1
2,089.2
189.5
$
$
$
$
$
2,156.0
782.8
457.4
3,396.2
1,224.9
366.3
326.1
257.7
2,175.0
181.0
The Company partners with clients to provide consumers a diverse range of protection products and services. The
Company’s revenues from protection products are accounted for as insurance contracts and are recognized over the term of the
insurance protection provided. Revenues from service contracts and sales of products are recognized as the contractual
performance obligations are satisfied or the products are delivered. Revenue is measured as the amount of consideration the
Company expects to be entitled to in exchange for performing the services or transferring products. If payments are received
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before the related revenue is recognized, the amount is recorded as unearned revenue or advance payment liabilities, until the
performance obligations are satisfied or the products are transferred.
The disaggregated revenues from service contracts included in fees and other income on the consolidated statement of
operations are $852.8 million and $693.1 million for Global Lifestyle and $104.1 million and $241.9 million for Global
Housing for the years ended December 31, 2019 and 2018, respectively.
Global Lifestyle
In the Company’s Global Lifestyle segment, revenues from service contracts and sales of products are primarily from the
Company’s Connected Living business. Through partnerships with mobile carriers, the Company provides administrative
services related to its mobile device protection products, including program design and marketing strategy, risk management,
data analytics, customer support and claims handling, supply chain and service delivery, repair and logistics, and device
disposition. Administrative fees are generally billed monthly based on the volume of services provided during the billing period
(for example, based on the number of mobile subscribers) with payment due within a short-term period. Each service or bundle
of services, depending on the contract, is an individual performance obligation with a standalone selling price. The Company
recognizes revenue as it invoices, which corresponds to the value transferred to the customer.
The Company also sells repaired or refurbished mobile and other electronic devices. Revenue from products sold is
recognized when risk of ownership transfers to customers, generally upon shipment. Each product has a standalone selling
price that is determined through analysis of various factors including market data, historical costs and product lifecycle status.
Payments are generally due prior to shipment or within a short-term period.
Global Housing
In the Company’s Global Housing segment, revenues from service contracts and sales of products are primarily from the
Company’s Lender-placed Insurance business. Under the Company’s Lender-placed Insurance business, the Company provides
loan and claim payment tracking services for lenders. Until the sale of the Mortgage Solutions business on August 1, 2018, the
Company previously offered valuation and title services and products across the origination, home equity and default markets,
as well as field services, inspection services, restoration and real estate owned asset management services to mortgage servicing
clients and investors. The Company generally invoices its customers weekly or monthly based on the volume of services
provided during the billing period with payment due within a short-term period. Each service is an individual performance
obligation with a standalone selling price. The Company recognizes revenue as it invoices, which corresponds to the value
transferred to the customer.
Contract Balances
The receivables and unearned revenue under these contracts were $185.0 million and $87.6 million, respectively, as of
December 31, 2019, and $183.7 million and $88.7 million, respectively, as of December 31, 2018. These balances are included
in premiums and accounts receivable and the accounts payable and other liabilities, respectively, in the consolidated balance
sheets. Revenue from service contracts and sales of products recognized during the years ended December 31, 2019 and 2018
that was included in unearned revenue as of December 31, 2018 and 2017 were $57.9 million and $15.3 million, respectively.
In certain circumstances, the Company defers upfront commissions and other costs in connection with client contracts in
excess of one year where the Company can demonstrate future economic benefit. For these contracts, expense is recognized as
revenues are earned. The Company periodically assesses recoverability based on the performance of the related contracts. As of
December 31, 2019 and 2018, the Company had approximately $25.8 million and $29.0 million, respectively, of such
intangible assets that will be expensed over the term of the client contracts.
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F-32
8. Investments
The following tables show the cost or amortized cost, gross unrealized gains and losses, fair value and OTTI included
within AOCI of the Company’s fixed maturity securities as of the dates indicated:
December 31, 2019
Cost or
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
OTTI in
AOCI (1)
Total fixed maturity securities
$
11,064.8
$
1,266.0
$
Fixed maturity securities:
U.S. government and government
agencies and authorities
States, municipalities and political
subdivisions
Foreign governments
Asset-backed
Commercial mortgage-backed
Residential mortgage-backed
U.S. corporate
Foreign corporate
Fixed maturity securities:
U.S. government and government
agencies and authorities
States, municipalities and political
subdivisions
Foreign governments
Asset-backed
Commercial mortgage-backed
Residential mortgage-backed
U.S. corporate
Foreign corporate
$
188.9
$
5.3
$
(0.1) $
194.1
$
216.1
916.9
502.4
212.7
1,235.3
5,679.8
2,112.7
26.4
94.3
3.1
10.2
52.4
818.9
255.4
—
(0.8)
(2.3)
(0.8)
(1.4)
(2.1)
(0.9)
(8.4) $
242.5
1,010.4
503.2
222.1
1,286.3
6,496.6
2,367.2
12,322.4
$
December 31, 2018
Cost or
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
OTTI in
AOCI (1)
$
381.4
$
4.4
$
(1.2) $
384.6
$
238.9
856.3
513.6
79.1
1,399.1
5,337.0
2,028.6
17.6
58.8
0.5
2.2
21.5
315.7
110.7
(0.3)
(3.0)
(9.6)
(1.6)
(14.8)
(59.7)
(18.1)
(108.3) $
256.2
912.1
504.5
79.7
1,405.8
5,593.0
2,121.2
11,257.1
$
—
—
—
—
—
3.1
16.5
—
19.6
—
—
—
—
—
5.0
14.1
—
19.1
Total fixed maturity securities
$
10,834.0
$
531.4
$
(1)
Represents the amount of OTTI recognized in AOCI. Amount includes unrealized gains and losses on impaired securities relating to changes in the
value of such securities subsequent to the impairment measurement date.
The Company’s state, municipality and political subdivision holdings are highly diversified across the U.S., with no
individual state, municipality or political subdivision exposure (including both general obligation and revenue securities)
exceeding 0.3% and 0.4% of the overall investment portfolio as of December 31, 2019 and 2018, respectively. As of
December 31, 2019 and 2018, the securities included general obligation and revenue bonds issued by states, cities, counties,
school districts and similar issuers, including $51.9 million and $58.4 million, respectively, of advance refunded or escrowed-
to-maturity bonds (collectively referred to as “pre-refunded bonds”), which are bonds for which an irrevocable trust has been
established to fund the remaining payments of principal and interest. As of December 31, 2019 and 2018, revenue bonds
accounted for 60% and 56% of the holdings, respectively. Excluding pre-refunded revenue bonds, the activities supporting the
income streams of the Company’s revenue bonds are across a broad range of sectors, primarily water, airport and marina,
specifically pledged tax revenues, leases and other miscellaneous sources such as bond banks, finance authorities and
appropriations.
The Company’s investments in foreign government fixed maturity securities are held mainly in countries and currencies
where the Company has policyholder liabilities, to facilitate matching of assets to the related liabilities. As of December 31,
2019, approximately 58%, 20% and 6% of the foreign government securities were held in Canadian government/provincials
F-33
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and the governments of Brazil and Mexico, respectively. As of December 31, 2018, approximately 55%, 18% and 8% of the
foreign government securities were held in Canadian government/provincials and the governments of Brazil and the United
Kingdom, respectively. No other country represented more than 5% and 6% of the Company’s foreign government securities as
of December 31, 2019 and 2018, respectively.
The Company had European investment exposure in its corporate fixed maturity securities of $802.3 million with a net
unrealized gain of $82.4 million as of December 31, 2019 and $800.9 million with a net unrealized gain of $27.7 million as of
December 31, 2018. Approximately 28% and 27% of the corporate fixed maturity European exposure was held in the financial
industry as of December 31, 2019 and 2018, respectively. The Company’s largest European country exposure (the United
Kingdom) represented approximately 4% and 5% of the fair value of the Company's corporate fixed maturity securities as of
December 31, 2019 and 2018, respectively. The Company’s international investments are managed as part of the overall
portfolio with the same approach to risk management and focus on diversification.
The cost or amortized cost and fair value of fixed maturity securities as of December 31, 2019 by contractual maturity are
shown below. Actual 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.
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Total
Asset-backed
Commercial mortgage-backed
Residential mortgage-backed
Total
December 31, 2019
Cost or
Amortized
Cost
$
394.7
$
2,444.0
2,466.1
3,809.6
9,114.4
502.4
212.7
1,235.3
Fair Value
397.2
2,532.5
2,680.7
4,700.4
10,310.8
503.2
222.1
1,286.3
$
11,064.8
$
12,322.4
The following table shows the major categories of net investment income for the periods indicated:
Fixed maturity securities
Equity securities
Commercial mortgage loans on real estate
Short-term investments
Other investments
Cash and cash equivalents
Revenues from consolidated investment entities (1)
Total investment income
Investment expenses
Years Ended December 31,
2019
2018
2017
$
492.8
$
451.6
$
411.8
22.1
36.6
13.6
49.2
36.1
119.2
769.6
(24.5)
(70.1)
675.0
$
21.5
33.4
22.0
41.6
25.7
77.8
673.6
(23.3)
(51.9)
598.4
$
22.8
31.5
7.2
25.2
15.8
9.8
524.1
(21.9)
(8.4)
493.8
Expenses from consolidated investment entities (1)
Net investment income
$
(1)
The following table shows the revenues net of expenses from consolidated investment entities for the periods indicated. Refer to Note 9 for further
detail.
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F-34
Investment income (loss) from direct investments in:
Real estate funds (1)
CLO entities
Investment management fees
Net investment income from consolidated investment entities
Years Ended December 31,
2019
2018
2017
$
$
25.1
17.0
7.0
$
11.3
$
9.5
5.1
49.1
$
25.9
$
0.5
0.6
0.3
1.4
(1)
The investment income from the real estate funds includes income (loss) attributable to non-controlling interest of $3.8 million and $2.1 million for the
years ended December 31, 2019 and 2018, respectively. There was no income attributable to non-controlling interest for the year ended December 31,
2017.
No material investments of the Company were non-income producing for the years ended December 31, 2019, 2018 and
2017.
The following table summarizes the proceeds from sales of available-for-sale fixed maturity and equity securities and the
gross realized gains and gross realized losses that have been recognized in the statement of operations as a result of those sales
for the periods indicated:
Fixed maturity securities:
Proceeds from sales
Gross realized gains
Gross realized losses
Net realized gains (losses) from sales of fixed maturity securities
Equity securities:
Proceeds from sales
Gross realized gains
Gross realized losses
Net realized gains from sales of equity securities
Years Ended December 31,
2019
2018
2017
$
$
$
$
$
$
2,105.1
35.1
(15.0)
20.1
118.1
7.0
(1.8)
5.2
$
$
$
$
$
$
3,516.9
$
2,920.7
$
18.2
(59.8)
(41.6) $
66.7
4.1
(0.2)
3.9
$
$
$
33.8
(11.8)
22.0
97.5
9.7
(0.4)
9.3
For securities sold at a loss during the year ended December 31, 2019, the average period of time these securities were
trading continuously at a price below book value was approximately 9 months.
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F-35
The following table sets forth the net realized gains (losses), including OTTI, recognized in the statement of operations
for the periods indicated:
Years Ended December 31,
2019
2018
2017
Net realized gains (losses) related to sales and other:
Fixed maturity securities
Equity securities (1)
Commercial mortgage loans on real estate
Other investments
Consolidated investment entities (2)
Total net realized gains (losses) related to sales and other
Net realized losses related to other-than-temporary impairments:
Fixed maturity securities
Other investments
Total net realized losses related to other-than-temporary impairments
Total net realized gains (losses)
$
$
20.4
$
49.6
(0.2)
8.9
(9.8)
68.9
(1.1)
(1.5)
(2.6)
66.3
$
(42.8) $
(14.9)
0.6
2.7
(7.7)
(62.1)
(0.1)
(0.5)
(0.6)
(62.7) $
22.0
7.7
1.3
1.0
(1.0)
31.0
(0.4)
(0.5)
(0.9)
30.1
(1)
(2)
The years ended December 31, 2019 and 2018 include $13.4 million and $16.9 million, respectively, of gains on equity investment holdings accounted
for under the measurement alternative. The carrying value of equity investments accounted for under the measurement alternative was $90.1 million and
$77.6 million as of December 31, 2019 and 2018, respectively. These investments are included within other investments on the consolidated balance
sheets. For the year ended December 31, 2019 there was a $1.5 million impairment related to one equity investment. There was no impairment as of
December 31, 2018. The Company generally considers follow on funding rounds of equity securities with similar ownership interests as the equity
securities held by the Company, and involving new investors, as an observable price in an orderly transaction, which are then reviewed to determine the
fair value adjustment.
Consists of the net realized gains (losses) from the change in fair value of the Company’s direct investment in CLOs. See Note 9 for additional
information.
The following table sets forth the portion of unrealized gains (losses) related to equity securities for the periods indicated:
Net gains (losses) recognized on equity securities
Less: Net realized gains (losses) related to sales of equity securities
Total net unrealized gains (losses) on equity securities held (1)
Years Ended December 31,
2019
2018
$
$
49.6
5.2
44.4
$
$
(14.9)
3.9
(18.8)
(1) Net gains for the year ended December 31, 2019 and 2018 are required to be reported through the income statement in accordance with the 2018
accounting guidance on financial instruments. Net unrealized gains of $12.1 million for the year ended December 31, 2017 was reported through AOCI.
Other-Than-Temporary Impairments
The Company follows the OTTI guidance, which requires entities to separate an OTTI of a debt security into two
components when there are credit related losses associated with the impaired debt security for which the Company asserts that
it does not have the intent to sell, and it is more likely than not that it will not be required to sell before recovery of its cost
basis. Under the OTTI guidance, the amount of the OTTI related to a credit loss is recognized in earnings, and the amount of
the OTTI related to other, non-credit factors (e.g., interest rates, market conditions, etc.) is recorded as a component of other
comprehensive income. In instances where no credit loss exists but the Company intends to sell the security or it is more likely
than not that the Company will have to sell the debt security prior to the anticipated recovery, the decline in market value below
amortized cost is recognized as an OTTI in earnings. In periods after the recognition of an OTTI on debt securities, the
Company accounts for such securities as if they had been purchased on the measurement date of the OTTI at an amortized cost
basis equal to the previous amortized cost basis less the OTTI recognized in earnings. For debt securities for which OTTI was
recognized in earnings, the difference between the new amortized cost basis and the cash flows expected to be collected will be
accreted or amortized into net investment income.
For the years ended December 31, 2019 and 2018, the Company recorded $2.6 million and $0.6 million, respectively, of
OTTI in earnings, all of which was related to credit losses and securities the Company intends to sell.
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F-36
The following table sets forth the amount of credit loss impairments recognized within the results of operations on fixed
maturity securities held by the Company as of the dates indicated, for which a portion of the OTTI loss was recognized in
AOCI, and the corresponding changes in such amounts:
Balance, beginning of year
Reductions for increases in cash flows expected to be collected that
are recognized over the remaining life of the security
Reductions for credit loss impairments previously recognized on
securities which matured, paid down, prepaid or were sold during
the period
Balance, end of year
$
$
Years Ended December 31,
2019
2018
2017
15.5
$
18.1
$
24.9
(1.3)
(2.6)
(2.4)
—
—
14.2
$
15.5
$
(4.4)
18.1
The Company regularly monitors its investment portfolio to ensure that investments that may be other-than-temporarily
impaired are timely identified, properly valued and charged against earnings in the proper period. The determination that a
security has incurred an other-than-temporary decline in value requires the judgment of management. Assessment factors
include, but are not limited to, the length of time and the extent to which the market value has been less than cost, the financial
condition and rating of the issuer, whether any collateral is held, the Company’s intent and ability to retain the investment for a
period of time sufficient to allow for recovery and the Company’s intent to sell or whether it is more likely than not that the
Company will be required to sell for fixed maturity securities. 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 that affect one or more companies, industry sectors or countries could result in
additional impairments in future periods for other-than-temporary declines in value. The impairment of a fixed maturity
security that the Company has the intent to sell or that it is more likely than not that the Company will be required to sell is
deemed other-than-temporary and is written down to its market value at the balance sheet date with the amount of the
impairment reported as a realized loss in that period. For all other-than-temporarily impaired fixed maturity securities that do
not meet either of these two criteria, the Company is required to analyze its ability to recover the amortized cost of the security
by calculating the net present value of projected future cash flows. For these other-than-temporarily impaired fixed maturity
securities, the net amount recognized in earnings equals the difference between the amortized cost of the fixed maturity security
and its net present value.
The Company considers different factors to determine the amount of projected future cash flows and discounting
methods for corporate debt, residential and commercial mortgage-backed securities and asset-backed securities. For corporate
debt securities, the split between the credit and non-credit losses is driven principally by assumptions regarding the amount and
timing of projected future cash flows. The net present value is calculated by discounting the Company’s best estimate of
projected future cash flows at the effective interest rate implicit in the security at the date of acquisition. For residential and
commercial mortgage-backed securities and asset-backed securities, cash flow estimates, including prepayment assumptions,
are based on data from widely accepted third-party data sources or internal estimates. In addition to prepayment assumptions,
cash flow estimates vary based on assumptions regarding the underlying collateral including default rates, recoveries and
changes in value. The net present value is calculated by discounting the Company’s best estimate of projected future cash flows
at the effective interest rate implicit in the fixed maturity security prior to impairment at the balance sheet date. The discounted
cash flows become the new amortized cost basis of the fixed maturity security.
In periods subsequent to the recognition of an OTTI, the Company generally accretes the discount (or amortizes the
reduced premium) into net investment income, up to the non-discounted amount of projected future cash flows, resulting from
the reduction in cost basis, based upon the amount and timing of the expected future cash flows over the estimated period of
cash flows.
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F-37
The investment category and duration of the Company’s gross unrealized losses on fixed maturity securities, as of
December 31, 2019 and 2018 were as follows:
Less than 12 months
December 31, 2019
12 Months or More
Total
Fair Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fixed maturity securities:
U.S. government and government
agencies and authorities
Foreign governments
Asset-backed
Commercial mortgage-backed
Residential mortgage-backed
U.S. corporate
Foreign corporate
$
21.9
$
115.7
66.9
20.0
82.5
87.5
45.8
Total fixed maturity securities
$
440.3
$
(0.1) $
(0.8)
(0.2)
(0.3)
(0.6)
(1.4)
(0.7)
(4.1) $
— $
—
105.1
4.3
82.6
14.4
7.5
213.9
$
— $
—
(2.1)
(0.5)
(0.8)
(0.7)
(0.2)
(4.3) $
Less than 12 months
December 31, 2018
12 Months or More
(0.1)
(0.8)
(2.3)
(0.8)
(1.4)
(2.1)
(0.9)
(8.4)
21.9
$
115.7
172.0
24.3
165.1
101.9
53.3
654.2
$
Total
Fixed maturity securities:
U.S. government and government
agencies and authorities
States, municipalities and political
subdivisions
Foreign governments
Asset-backed
Commercial mortgage-backed
Residential mortgage-backed
U.S. corporate
Foreign corporate
Fair Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair Value
Unrealized
Losses
$
11.2
$
(0.1) $
89.5
$
(1.1) $
100.7
$
(1.2)
31.5
136.4
370.6
29.4
378.2
1,860.4
706.6
(0.1)
(2.8)
(9.6)
(0.7)
(3.7)
(49.5)
(12.9)
(79.4) $
3.1
9.2
—
12.4
309.6
173.1
149.5
746.4
$
(0.2)
(0.2)
—
(0.9)
(11.1)
(10.2)
(5.2)
(28.9) $
34.6
145.6
370.6
41.8
687.8
2,033.5
856.1
4,270.7
$
(0.3)
(3.0)
(9.6)
(1.6)
(14.8)
(59.7)
(18.1)
(108.3)
Total fixed maturity securities
$
3,524.3
$
Total gross unrealized losses represented approximately 1% and 3% of the aggregate fair value of the related securities as
of December 31, 2019 and 2018, respectively. Approximately 49% and 73% of these gross unrealized losses had been in a
continuous loss position for less than twelve months as of December 31, 2019 and 2018, respectively. The total gross
unrealized losses are comprised of 330 and 2,642 individual securities as of December 31, 2019 and 2018, respectively. In
accordance with its policy described above, the Company concluded that for these securities, other-than-temporary impairments
of the gross unrealized losses was not warranted as of December 31, 2019 and 2018.
The cost or amortized cost and fair value of available-for-sale fixed maturity securities in an unrealized loss position as of
December 31, 2019, by contractual maturity, is shown below:
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F-38
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Total
Asset-backed
Commercial mortgage-backed
Residential mortgage-backed
Total
December 31, 2019
Cost or
Amortized
Cost
Fair Value
$
$
34.3
76.3
126.5
59.6
296.7
174.3
25.1
166.5
$
662.6
$
34.3
76.0
124.2
58.3
292.8
172.0
24.3
165.1
654.2
The Company has entered into commercial mortgage loans, collateralized by the underlying real estate, on properties
located throughout the U.S. and Canada. As of December 31, 2019, approximately 39% of the outstanding principal balance of
commercial mortgage loans was concentrated in the states of California, Utah and New York. 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 $0.1 million to $12.3 million as of December 31,
2019 and from less than $0.1 million to $12.5 million as of December 31, 2018.
Credit quality indicators for commercial mortgage loans are loan-to-value and debt-service coverage ratios. Loan-to-
value and debt-service coverage ratios are measures commonly used to assess the credit quality of commercial mortgage loans.
The loan-to-value ratio compares the principal amount of the loan to the fair value of the underlying property collateralizing the
loan, and is commonly expressed as a percentage. The debt-service coverage ratio compares a property’s net operating income
to its debt-service payments and is commonly expressed as a ratio. The loan-to-value and debt-service coverage ratios are
generally updated annually in the third quarter.
The following summarizes the carrying value and average debt-service coverage ratio for the Company’s mortgage loans
that had loan-to-value ratios falling within the stated ranges as of the dates indicated:
Loan-to-Value
70% and less
71 – 80%
81 – 95%
Gross commercial mortgage loans
Less valuation allowance
Net commercial mortgage loans
Loan-to-Value
70% and less
71 – 80%
Gross commercial mortgage loans
Less valuation allowance
Net commercial mortgage loans
December 31, 2019
Carrying
Value
% of Gross
Mortgage
Loans
Average Debt-
Service
Coverage Ratio
97.3%
2.1%
0.6%
100.0%
2.19
1.43
1.07
2.16
793.7
17.3
4.6
815.6
(0.6)
815.0
December 31, 2018
Carrying
Value
% of Gross
Mortgage
Loans
Average Debt-
Service
Coverage Ratio
99.1 %
0.9 %
100.0 %
2.03
1.31
2.02
752.8
7.2
760.0
(0.4)
759.6
$
$
$
$
All commercial mortgage loans that are individually impaired have an established mortgage loan valuation allowance for
losses. An additional valuation allowance is established for incurred, but not specifically identified impairments. Changing
economic conditions affect the Company’s valuation of commercial mortgage loans. Changing vacancies and rents are
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incorporated into the discounted cash flow analysis that the Company performs for monitored loans and may contribute to the
establishment of (or an increase or decrease in) a commercial mortgage loan valuation allowance for losses. In addition, the
Company monitors the entire commercial mortgage loan portfolio to identify risk. Areas of emphasis are properties that have
deteriorating credits or have experienced a reduction in debt-service coverage ratio.
In 2019, the loan valuation allowance was increased by $0.2 million based upon the valuation allowance analysis.
As of December 31, 2019, the Company had mortgage loan commitments outstanding of approximately $1.8 million.
The Company had short term investments and fixed maturity securities of $594.2 million and $546.5 million as of
December 31, 2019 and 2018, respectively, on deposit with various governmental authorities as required by law.
The Company has entered into certain interest rate derivatives that qualify for hedge accounting to manage interest rate
risk on the Company’s debt. See Note 19 for additional information on these derivatives. The Company also utilizes derivatives
on a limited basis to limit interest rate, foreign exchange and inflation risks and bifurcates the options on certain securities
where the option is not clearly and closely related to the host instrument. These derivatives do not qualify as effective hedges
for accounting purposes; therefore, they are marked-to-market and the gain or loss is recorded in the statements of operations in
fees and other income, underwriting, general and administrative expenses and realized gains (losses). Amounts related to
derivative instruments that do not qualify for hedge accounting as of December 31, 2019 and 2018 are assets of $0.6 million
and $4.7 million, respectively, liabilities of $101.8 million and $17.8 million, respectively, all of which are included in the
consolidated balance sheets. The gain (loss) from derivative instruments recorded in the results of operations related to these
derivatives totaled ($89.5) million, $11.0 million and $13.4 million for the years ended December 31, 2019, 2018 and 2017,
respectively. See Note 5 for additional information on the Iké put/call option.
9. Variable Interest Entities
In the normal course of business, the Company is involved with various types of investment entities that may be
considered VIEs. The Company evaluates its involvement with each entity to determine whether consolidation is required. The
Company’s maximum risk of loss is limited to the carrying value and unfunded commitments of its investments in the VIEs.
Consolidated VIEs
One of the Company’s subsidiaries is registered with the U.S. Securities and Exchange Commission (the “SEC”) as an
investment adviser. The subsidiary (or one of its affiliates) manages and invests in CLOs and real estate funds and may conduct
other forms of investment activities. The Company has determined that the CLOs and real estate fund are VIEs and
consolidated each because the Company was deemed to be the primary beneficiary of these entities due to (i) its role as
collateral manager, which gives it the power to direct the activities that most significantly impact the economic performance of
the entities, and (ii) its economic interest in the entities, which exposes it to losses and the right to receive benefits that could
potentially be significant to the entities.
In connection with the formation of CLO structures, the Company forms special purpose entities capitalized by
contributions from the Company’s wholly owned subsidiaries. Subsequent to capitalization, the special purpose entities
purchase senior secured leveraged loans funded by contributions from the Company and a short-term warehousing credit
facility. Borrowings from the warehousing credit facility are non-recourse to the Company and are fully repaid once the CLO
closes. Additionally, the amounts contributed by the Company to fund the initial capitalization are returned after the CLO
closes. The Company may elect to use the return of capital to purchase a direct investment in the CLO.
Collateralized Loan Obligations: The CLO entities are collateralized financing entities. Under the elected measurement
alternative for collateralized financing entities, the carrying value of the CLO debt equals the fair value of the CLO assets
(senior secured leveraged loans) as the assets have more observable fair values. The CLO liabilities are reduced by the fair
value of the beneficial interests the Company retains in the CLO and the carrying value of any beneficial interests that represent
compensation for services. CLO earnings attributable to the Company’s shareholders are measured by the change in the fair
value of the Company’s CLO investments, net investment income earned and investment management and contingent
performance fees earned. Investment management fees are reported as a reduction to investment expenses in the consolidated
statements of operations. The assets of the CLOs are legally isolated from the Company’s creditors and can only be used to
settle obligations of the CLOs. The liabilities of the CLOs are non-recourse to the Company and the Company has no
obligation to satisfy the liabilities of the CLOs.
As of December 31, 2019, the Company and its subsidiaries held a range of 43.8% to 100.0% of the most subordinated
debt tranches of four CLO entities and 5.0% of senior debt tranches in one CLO entity, which represents a range of 6.0% to
8.8% overall ownership in each of the CLO entities. As of December 31, 2019, a fifth CLO structure was funded with $124.9
million in contributions from the Company’s wholly owned subsidiaries. The carrying value of the Company’s investment in
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the CLOs that have closed was $77.4 million and $55.2 million in subordinated debt tranches and $21.1 million and $21.0
million in senior debt tranches as of December 31, 2019 and 2018, respectively.
The Company’s retained beneficial interests in subordinated tranches are measured at fair value using the market or
income valuation techniques using significant unobservable inputs and assumptions, including prepayment, default rate,
recovery lag, reinvestment, collateral liquidation price, discount rate and call date assumptions.
Real Estate Fund: The Company’s real estate fund investments are closed ended funds that include contributions from
third party investors, which are recorded as non-controlling interest. Real estate fund earnings attributable to the Company’s
shareholders are measured by the net investment income of the real estate fund, which includes the change in fair value of the
Company’s investments in the real estate fund and investment management fees earned. The Company has a majority
investment in the real estate fund in the form of an equity interest. The carrying value of the Company’s investment in the real
estate fund was $88.3 million and $91.5 million as of December 31, 2019 and 2018, respectively. The Company’s unfunded
commitment in the real estate fund was $1.6 million as of December 31, 2019.
Due to a change in strategy in the fourth quarter of 2019 the second real estate fund, which was formed during the second
quarter of 2019, no longer met the definition of an investment company as it will not seek third party investors. The Company
determined it is no longer the primary beneficiary as it is unable to control the investee, but is instead able to exert significant
influence over the investee. As a result the second real estate fund, which had not received funds from third party investors, was
deconsolidated as of December 31, 2019. The second real estate fund is included in the disclosures in the Non-Consolidated
VIEs section below.
For all consolidated investment entities, intercompany transactions are eliminated upon consolidation.
Fair Value of VIE Assets and Liabilities
The Company categorizes its fair value measurements according to a three-level hierarchy. See Note 10 for the definition
of the three levels of the fair value hierarchy. The following table presents the Company’s fair value hierarchy for financial
assets and liabilities held by consolidated investment entities measured at fair value on a recurring basis as of the dates
indicated:
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F-41
Financial Assets
Investments:
Cash and cash equivalents
Corporate debt securities
Real estate fund
Total financial assets
Financial Liabilities
Collateralized loan obligation notes
Total financial liabilities
Financial Assets
Investments:
Cash and cash equivalents
Corporate debt securities
Real estate fund
Total financial assets
Financial Liabilities
Collateralized loan obligation notes
Total financial liabilities
(1) Amounts consist of money market funds.
Level 2 Securities
Total
Level 1
Level 2
Level 3
December 31, 2019
$
$
$
$
$
$
$
32.9
1,850.7
107.2
1,990.8
1,603.1
1,603.1
Total
62.6
1,464.2
112.0
1,638.8
1,316.7
1,316.7
$
$
$
$
$
$
$
32.9 (1) $
—
—
—
1,850.7
—
32.9
$
1,850.7
—
—
$
$
1,603.1
1,603.1
December 31, 2018
Level 1
Level 2
62.6 (1) $
—
—
—
1,464.2
—
62.6
$
1,464.2
—
—
$
1,316.7
1,316.7
$
$
$
$
$
$
$
—
—
107.2
107.2
—
—
Level 3
—
—
112.0
112.0
—
—
Corporate debt securities: These assets are comprised of senior secured leveraged loans. The Company values these
securities using estimates of fair value from a pricing service which utilizes the market valuation technique. The primary
observable market inputs used by the pricing service are prices of reported trades from dealers. The fair value is calculated
using a simple average of the prices received.
Collateralized loan obligation notes: As the Company elected the measurement alternative, the carrying value of the
CLO debt is equal to the fair value of the CLO assets. The CLO notes are classified within Level 2 of the fair value hierarchy,
consistent with the classification of the majority of the CLO financial assets.
Level 3 Securities
Real estate fund: These assets are comprised of investments in limited partnerships whose underlying investments are real
estate properties. Management estimates the fair value of these real estate assets using the market, income or cost approach
valuation techniques, using significant unobservable inputs and assumptions, including capitalization rates, discount rates,
market comparable prices, leasing assumptions and replacement costs.
The following table summarizes the change in balance sheet carrying value associated with Level 3 assets held by
consolidated investment entities measured at fair value for the years ended December 31, 2019 and 2018:
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F-42
Balance, beginning of period
Purchases
Sales
Total income included in earnings (1)
Balance, end of period
Years Ended December 31,
2019
2018
$
$
112.0
$
—
(30.0)
25.2
107.2
$
84.7
23.0
(6.8)
11.1
112.0
(1)
Total income included in earnings includes $3.8 million and $2.1 million of pre-tax income related to non-controlling interests for 2019 and 2018,
respectively.
Non-Consolidated VIEs
The Company invests in private equity limited partnerships and real estate joint ventures. These investments are generally
accounted for under the equity method as the primary beneficiary criteria is not met; however, the Company is able to exert
significant influence over the investees operating and financial policies. These investments are included in the consolidated
balance sheets in other investments. As of December 31, 2019, the Company’s maximum exposure to loss is its recorded
carrying value of $235.4 million and unfunded commitments of $27.4 million.
Commercial Mortgage Loan Securitization
In 2016, the Company transferred commercial mortgage loans on real estate into a trust. Upon transfer, the loans were
securitized as a source of funding for the Company and as a means of transferring the economic risk of the loans to third
parties. The securitized assets are legally isolated from the Company’s creditors and can only be used to settle obligations of the
trust. The Company does not have the power to direct the activities of the trust, nor does it provide guarantees or recourse to the
trust other than standard representations and warranties. The Company retained an interest in the trust in the form of
subordinate securities issued by the trust. The trust is a VIE that the Company does not consolidate.
As of December 31, 2019 and 2018, the maximum loss exposure the Company had to the trust was $19.1 million and
$20.2 million, respectively. The Company calculates its maximum loss exposure based on the unlikely event that all the assets
in the trust become worthless and the effect it would have on the Company’s consolidated balance sheets based upon its
retained interest in the trust. The securities purchased from the trust are included within fixed maturity securities available for
sale at fair value on the consolidated balance sheet and are part of the Company’s ongoing OTTI review. See Note 10 for
additional information on the Company’s fair value inputs and valuation techniques.
See Note 2 for additional information on significant accounting policies related to VIEs.
10. Fair Value Disclosures
Fair Values, Inputs and Valuation Techniques for Financial Assets and Liabilities Disclosures
The fair value measurements and disclosures guidance defines fair value and establishes a framework for measuring fair
value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. In accordance with this guidance, the Company has
categorized its recurring fair value basis financial assets and liabilities into a three-level fair value hierarchy based on the
priority of the inputs to the valuation technique.
The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities
(Level 1) and the lowest priority to unobservable inputs (Level 3). The inputs used to measure fair value may fall into
different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value
measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value
measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement
in its entirety requires judgment, and takes into account factors specific to the asset or liability.
The levels of the fair value hierarchy are described below:
• Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company
can access.
• Level 2 inputs utilize other than quoted prices included in Level 1 that are observable for the asset or liability, either
directly or indirectly, for substantially the full term of the asset or liability. Level 2 inputs include quoted prices for
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similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that
are not active and inputs other than quoted prices that are observable in the marketplace for the asset or liability. The
observable inputs are used in valuation models to calculate the fair value for the asset or liability.
• Level 3 inputs are unobservable but are significant to the fair value measurement for the asset or liability, and include
situations where there is little, if any, market activity for the asset or liability. These inputs reflect management’s own
assumptions about the assumptions a market participant would use in pricing the asset or liability.
The Company reviews fair value hierarchy classifications on a quarterly basis. Changes in the observability of valuation
inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.
The following tables present the Company’s fair value hierarchy for assets and liabilities measured at fair value on a
recurring basis as of December 31, 2019 and 2018. The amounts presented below for short-term investments, other
investments, cash equivalents, other receivables, other assets, assets held in and liabilities related to separate accounts and other
liabilities differ from the amounts presented in the consolidated balance sheets because only certain investments or certain
assets and liabilities within these line items are measured at estimated fair value. Other investments are comprised of
investments in the AIP, the ASIC, the ADC, a modified coinsurance arrangement and other derivatives. Other liabilities are
comprised of investments in the AIP, contingent considerations related to business combinations and other derivatives. The fair
value amount and the majority of the associated levels presented for other investments and assets and liabilities held in separate
accounts are received directly from third parties.
Financial Assets
Fixed maturity securities:
Total
December 31, 2019
Level 2
Level 1
Level 3
—
—
0.3
—
—
—
—
—
45.5
22.8
—
271.4 (2)
70.3 (1)
1,277.8 (2)
1,623.7 (1)
3,311.8
$
194.1
242.5
1,010.1
503.2
198.6
1,286.3
6,494.8
2,331.5
—
0.7
317.3
96.1
164.3 (3)
9.7 (3)
182.6 (3)
$
13,031.8
70.3 (1) $
1,623.7 (1)
101.5 (7)
182.6 (3)
1,694.0
$
284.1
$
$
$
$
—
—
—
—
23.5
—
1.8
35.7
—
—
2.2
—
—
—
—
63.2
0.2
—
0.2
U.S. government and government agencies and
authorities
$
194.1
$
States, municipalities and political subdivisions
Foreign governments
Asset-backed
Commercial mortgage-backed
Residential mortgage-backed
U.S. corporate
Foreign corporate
Equity securities:
Mutual funds
Common stocks
Non-redeemable preferred stocks
Short-term investments
Other investments
Cash equivalents
Assets held in separate accounts
Total financial assets
Financial Liabilities
Other liabilities
Liabilities related to separate accounts
Total financial liabilities
242.5
1,010.4
503.2
222.1
1,286.3
6,496.6
2,367.2
45.5
23.5
319.5
367.5
234.6
1,287.5
1,806.3
16,406.8
172.0
1,806.3
1,978.3
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$
$
$
$
$
$
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Financial Assets
Fixed maturity securities:
Total
Level 1
Level 2
Level 3
December 31, 2018
U.S. government and government agencies
and authorities
$
384.6
$
States, municipalities and political
subdivisions
Foreign governments
Asset-backed
Commercial mortgage-backed
Residential mortgage-backed
U.S. corporate
Foreign corporate
Equity securities:
Mutual funds
Common stocks
Non-redeemable preferred stocks
Short-term investments
Other investments
Cash equivalents
Other receivables
Other assets
Assets held in separate accounts
Total financial assets
Financial Liabilities
Other liabilities
Liabilities related to separate accounts
Total financial liabilities
256.2
912.1
504.5
79.7
1,405.8
5,593.0
2,121.2
45.0
15.3
318.5
336.0
224.9
527.7
5.0
2.6
—
—
0.5
—
—
—
—
—
45.0
14.6
—
188.9 (2)
62.9 (1)
523.6 (2)
—
—
$
384.6
$
256.2
911.6
504.5
40.8
1,405.8
5,580.3
2,071.7
—
0.7
316.3
147.1
161.5 (3)
4.1 (3)
—
—
—
—
—
—
38.9
—
12.7
49.5
—
—
2.2
—
0.5
—
5.0
2.6
—
(4)
(6)
(5)
1,575.7
1,400.1 (1)
175.6 (3)
$
14,307.8
$
2,235.6
$
11,960.8
$
111.4
$
$
104.8
1,575.7
1,680.5
$
$
62.9 (1) $
0.7 (5) $
41.2 (6) (7)
1,400.1 (1)
175.6 (3)
1,463.0
$
176.3
$
—
41.2
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Primarily includes mutual funds and related obligations.
Primarily includes money market funds.
Primarily includes fixed maturity securities and related obligations.
Primarily includes fixed maturity securities and other derivatives.
Primarily includes derivative assets and liabilities.
Includes contingent consideration receivables/liabilities.
Includes the put/call related to the investment in Iké. See Note 5 for more information.
The following tables summarize the change in balance sheet carrying value associated with Level 3 financial assets and
liabilities carried at fair value for the years ended December 31, 2019 and 2018:
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F-45
Year Ended December 31, 2019
Total
gains
(losses)
(realized/
unrealized)
included in
earnings (1)
Net
unrealized
gains (losses)
included in
other
comprehensive
income (2)
Balance,
beginning
of period
Purchases
Sales
Transfers
in (3)
Transfers
out (3)
Balance,
end of
period
Financial Assets
Fixed Maturity Securities
Asset-backed
Commercial mortgage-backed
Residential mortgage-backed
U.S. corporate
Foreign corporate
Equity Securities
Non-redeemable preferred stocks
Other investments
Other receivables
Other assets
Financial Liabilities
Other liabilities
—
38.9
—
12.7
49.5
2.2
0.5
5.0
2.6
—
(2.9)
—
(0.1)
0.3
—
(3.4)
(5.0)
(4.1)
(41.2)
(63.3)
Total level 3 assets and liabilities
$
70.2
$
(78.5) $
0.1
(0.2)
—
0.3
2.3
—
—
—
—
23.3
4.0
3.8
4.0
5.2
—
2.9
—
4.4
—
2.5
$
23.5
71.1
—
(13.7)
—
(9.8)
(21.6)
—
—
—
(2.6)
—
1.5
11.9
—
9.0
—
—
—
—
—
—
$
(47.7) $
22.4
$
(24.9)
(14.5)
(3.8)
(14.3)
—
—
—
—
(0.3)
—
23.5
—
1.8
35.7
2.2
—
—
—
80.8
23.0
(0.2)
$
63.0
Year Ended December 31, 2018
Total
gains
(losses)
(realized/
unrealized)
included in
earnings (1)
Net
unrealized
gains (losses)
included in
other
comprehensive
income (2)
Balance,
beginning
of period
Purchases
Sales
Transfers
in (3)
Transfers
out (3)
Balance,
end of
period
Financial Assets
Fixed Maturity Securities
Asset-backed
$
Commercial mortgage-backed
U.S. corporate
Foreign corporate
Equity Securities
Non-redeemable preferred stocks
Other investments
Other receivables
Other assets
Financial Liabilities
Other liabilities
39.4
28.6
21.1
45.3
2.2
10.0
—
2.1
(3.0)
(0.2)
(1.0)
—
34.8
0.1
0.1
$
— $
— $
$
(10.1) $
— $
(108.7) $
79.4
36.3
33.4
28.1
—
10.1
4.9
0.4
(24.1)
(17.2)
(20.5)
—
(54.3)
—
—
1.1
—
(2.2)
—
(0.1)
—
—
—
—
11.0
7.9
—
—
—
—
—
—
(35.4)
(8.1)
—
—
—
—
—
—
38.9
12.7
49.5
2.2
0.5
5.0
2.6
(41.2)
70.2
(56.5)
(6.2)
(10.2)
31.7
Total level 3 assets and liabilities
$
92.2
$
24.6
$
(1.2) $
182.4
$
(94.5) $
18.9
$
(152.2) $
(1)
(2)
(3)
Included as part of net realized gains on investments, excluding other-than-temporary impairment losses, in the consolidated statements of operations.
Included as part of change in unrealized gains on securities in the consolidated statement of comprehensive income.
Transfers are primarily attributable to changes in the availability of observable market information and the re-evaluation of the observability of valuation
inputs.
Three different valuation techniques can be used in determining fair value for financial assets and liabilities: the market,
income or cost approaches. The three valuation techniques described in the fair value measurements and disclosures guidance
are consistent with generally accepted valuation methodologies. The market approach valuation techniques use prices and other
relevant information generated by market transactions involving identical or comparable assets or liabilities. When possible,
quoted prices (unadjusted) in active markets are used as of the period-end date (such as for mutual funds and money market
funds). Otherwise, the Company uses valuation techniques consistent with the market approach including matrix pricing and
comparables. Matrix pricing is a mathematical technique employed principally to value debt securities without relying
exclusively on quoted prices for those securities but, rather, relying on the securities’ relationship to other benchmark quoted
securities. Market approach valuation techniques often use market multiples derived from a set of comparables. Multiples
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might lie in ranges with a different multiple for each comparable. The selection of where within the range the appropriate
multiple falls requires judgment, considering both qualitative and quantitative factors specific to the measurement.
Income approach valuation techniques convert future amounts, such as cash flows or earnings, to a single present amount,
or a discounted amount. These techniques rely on current market expectations of future amounts as of the period-end date.
Examples of income approach valuation techniques include present value techniques, option-pricing models, binomial or lattice
models that incorporate present value techniques and the multi-period excess earnings method.
Cost approach valuation techniques are based upon the amount that would be required to replace the service capacity of
an asset at the period-end date, or the current replacement cost. That is, from the perspective of a market participant (seller), the
price that would be received for the asset is determined based on the cost to a market participant (buyer) to acquire or construct
a substitute asset of comparable utility, adjusted for obsolescence.
While not all three approaches are applicable to all financial assets or liabilities, where appropriate, the Company may use
one or more valuation techniques. For all the classes of financial assets and liabilities included in the above hierarchy,
excluding certain derivatives and certain privately placed corporate bonds, the Company generally uses the market valuation
technique. For certain privately placed corporate bonds and certain derivatives, the Company generally uses the income
valuation technique. For the years ended December 31, 2019 and 2018, the application of the valuation technique applied to the
Company’s classes of financial assets and liabilities has been consistent.
Level 1 Securities
The Company’s investments and liabilities classified as Level 1 as of December 31, 2019 and 2018 consisted of mutual
funds and related obligations, money market funds, foreign government fixed maturity securities and common stocks that are
publicly listed and/or actively traded in an established market.
Level 2 Securities
The Company values Level 2 securities using various observable market inputs obtained from a pricing service. The
pricing service prepares estimates of fair value measurements for the Company’s Level 2 securities using proprietary valuation
models based on techniques such as matrix pricing which include observable market inputs. The fair value measurements and
disclosures guidance defines observable market inputs as the assumptions market participants would use in pricing the asset or
liability developed on market data obtained from sources independent of the Company. The extent of the use of each observable
market input for a security depends on the type of security and the market conditions at the balance sheet date. Depending on
the security, the priority of the use of observable market inputs may change as some observable market inputs may not be
relevant or additional inputs may be necessary. The Company uses the following observable market inputs (“standard inputs”),
listed in the approximate order of priority, in the pricing evaluation of Level 2 securities: benchmark yields, reported trades,
broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market
research data. Further details for Level 2 investment types follow:
U.S. government and government agencies and authorities: U.S. government and government agencies and authorities
securities are priced by the Company’s pricing service utilizing standard inputs. Included in this category are U.S. Treasury
securities which are priced using vendor trading platform data in addition to the standard inputs.
States, municipalities and political subdivisions: States, municipalities and political subdivisions securities are priced by
the Company’s pricing service using material event notices and new issue data inputs in addition to the standard inputs.
Foreign governments: Foreign government securities are primarily fixed maturity securities denominated in local
currencies which are priced by the Company’s pricing service using standard inputs. The pricing service also evaluates each
security based on relevant market information including relevant credit information, perceived market movements and sector
news.
Commercial mortgage-backed, residential mortgage-backed and asset-backed: Commercial mortgage-backed,
residential mortgage-backed and asset-backed securities are priced by the Company’s pricing service using monthly payment
information and collateral performance information in addition to the standard inputs. Additionally, commercial mortgage-
backed securities and asset-backed securities utilize new issue data while residential mortgage-backed securities utilize vendor
trading platform data.
U.S. and foreign corporate: Corporate securities are priced by the Company’s pricing service using standard inputs.
Non-investment grade securities within this category are priced by the Company’s pricing service using observations of equity
and credit default swap curves related to the issuer in addition to the standard inputs. Certain privately placed corporate bonds
are priced by a non-pricing service source using a model with observable inputs including, but not limited to, the credit rating,
credit spreads, sector add-ons, and issuer specific add-ons.
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Non-redeemable preferred stocks: Non-redeemable preferred stocks are priced by the Company’s pricing service using
observations of equity and credit default swap curves related to the issuer in addition to the standard inputs.
Short-term investments, other investments, cash equivalents, assets held in separate accounts and liabilities related to
separate accounts: To price the fixed maturity securities and related obligations in these categories, the pricing service utilizes
the standard inputs.
Other liabilities: Foreign exchange forwards are priced using a pricing model which utilizes market observable inputs
including foreign exchange spot rate, forward points and date to settlement.
Valuation models used by the pricing service can change from period to period, depending on the appropriate observable
inputs that are available at the balance sheet date to price a security. When market observable inputs are unavailable to the
pricing service, the remaining unpriced securities are submitted to independent brokers who provide non-binding broker quotes
or are priced by other qualified sources. If the Company cannot corroborate the non-binding broker quotes with Level 2 inputs,
these securities are categorized as Level 3 securities.
Level 3 Securities
The Company’s investments classified as Level 3 as of December 31, 2019 and 2018 consisted of $63.2 million and
$103.3 million, respectively, of fixed maturity and equity securities. All of the Level 3 fixed maturity and equity securities are
priced using non-binding broker quotes, for which the underlying quantitative inputs are not developed by the Company and
are not readily available or observable. The non-binding quotes are obtained from third-party broker-dealers recognized as
market participants.
Other investments, other receivables, other assets and other liabilities: The Company prices swaptions and Mexican peso
foreign exchange options using a Black-Scholes pricing model incorporating third-party market data, including swap volatility
data. The Company prices credit default swaps using non-binding quotes obtained from third-party broker-dealers recognized
as market participants. Inputs factored into the non-binding quotes include market observable trades related to the actual credit
default swap being priced, trades in comparable credit default swaps, quality of the issuer, structure and liquidity.
For the year ended December 31, 2019, the Company used the market approach to value the investment in Iké, which
included consideration of the observable formal agreement to sell our interests in Iké with an expected close in the second
quarter of 2020. Due to the significant observable inputs used in the valuation, Iké was transferred to a Level 2 asset. See Note
5 for more information. As of December 31, 2018, the net option related to the investment Iké was valued using the income
approach; specifically, a Monte Carlo simulation option pricing model. The inputs to the model include, but are not limited to,
the projected normalized earnings before interest, tax, depreciation, and amortization (EBITDA) and free cash flow for the
underlying asset, the discount rate, and the volatility of and the correlation between the normalized EBITDA and the value of
the underlying asset. Significant increases (decreases) in the projected normalized EBITDA relative to the value of the
underlying asset in isolation would result in a significantly higher (lower) fair value.
The fair value of the contingent consideration is estimated using a discounted cash flow model. Inputs may include future
business performance, earn out caps, and applicable discount rates. A non-pricing service source prices certain derivatives using
a model with inputs including, but not limited to, the time to expiration, the notional amount, the strike price, the forward rate,
implied volatility and the discount rate.
Management evaluates the following factors in order to determine whether the market for a financial asset is inactive.
The factors include, but are not limited to:
• whether there are few recent transactions,
• whether little information is released publicly,
• whether the available prices vary significantly over time or among market participants,
• whether the prices are stale (i.e., not current), and
•
the magnitude of the bid-ask spread.
Illiquidity did not have a material impact in the fair value determination of the Company’s financial assets as of
December 31, 2019 or 2018.
The Company generally obtains one price for each financial asset. The Company performs a monthly analysis to assess if
the evaluated prices represent a reasonable estimate of the financial assets’ fair values. This process involves quantitative and
qualitative analysis and is overseen by investment and accounting professionals. Examples of procedures performed include,
but are not limited to, initial and on-going review of pricing service methodologies, review of the prices received from the
pricing service, review of pricing statistics and trends, and comparison of prices for certain securities with two different
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appropriate price sources for reasonableness. Following this analysis, the Company generally uses the best estimate of fair
value based upon all available inputs. On infrequent occasions, a non-pricing service source may be more familiar with the
market activity for a particular security than the pricing service. In these cases the price used is taken from the non-pricing
service source. The pricing service provides information to indicate which securities were priced using market observable
inputs so that the Company can properly categorize the Company’s financial assets in the fair value hierarchy.
For the net option, the Company performs a periodic analysis to assess if the evaluated price represents a reasonable
estimate of the fair value for the financial liability. This process involves quantitative and qualitative analysis overseen by
finance and accounting professionals. Examples of procedures performed include, but are not limited to, initial and on-going
review of the pricing methodology and review of the projection for the underlying asset including the probability distribution of
possible scenarios.
Disclosures for Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
The Company also measures the fair value of certain assets on a non-recurring basis, generally on an annual basis, or
when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. These assets
include commercial mortgage loans, goodwill and finite-lived intangible assets.
The Company concluded there was no impairment on its goodwill as a result of its 2019 annual goodwill impairment test.
Refer to Note 15 for additional information.
For the years ended December 31, 2019 and 2018, there were impairment charges of $15.6 million and $20.8 million,
respectively, related to the Green Tree acquisition.
Fair Value of Financial Instruments Disclosures
The financial instruments guidance requires disclosure of fair value information about financial instruments, for which it
is practicable to estimate such fair value. Therefore, it requires fair value disclosure for financial instruments that are not
recognized or are not carried at fair value in the consolidated balance sheets. However, this guidance excludes certain financial
instruments, including those related to insurance contracts and those accounted for under the equity method (such as
partnerships).
For the financial instruments included within the following financial assets and financial liabilities, the carrying value in
the consolidated balance sheets equals or approximates fair value. Please refer to the Fair Values Inputs and Valuation
Techniques for Financial Assets and Liabilities Disclosures section above for additional information on the financial
instruments included within the following financial assets and financial liabilities and the methods and assumptions used to
estimate fair value:
• Cash and cash equivalents;
• Fixed maturity securities;
• Equity securities;
• Short-term investments;
• Other investments;
• Other receivables;
• Other assets;
• Assets held in separate accounts;
• Other liabilities; and
• Liabilities related to separate accounts.
In estimating the fair value of the financial instruments that are not recognized or are not carried at fair value in the
consolidated balance sheets, the Company used the following methods and assumptions:
Commercial mortgage loans on real estate: The fair values of commercial mortgage loans on real estate are estimated
using discounted cash flow models. The model inputs include mortgage amortization schedules and loan provisions, an
internally developed credit spreads based on the credit risk associated with the borrower and the U.S. Treasury spot curve.
Mortgage loans with similar characteristics are aggregated for purposes of the calculations.
Other investments: Other investments include private equity investments, Certified Capital Company and low income
housing tax credits, business debentures, credit tenant loans and social impact loans which are recorded at cost or amortized
cost, as well as policy loans. The carrying value reported for these investments approximates fair value.
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Other assets: The carrying value of dealer loans approximates fair value.
Policy reserves under investment products: The fair values for the Company’s policy reserves under investment products
are determined using discounted cash flow analysis. Key inputs to the valuation include projections of policy cash flows,
reserve runoff, market yields and risk margins.
Funds held under reinsurance: The carrying value reported approximates fair value due to the short maturity of the
instruments.
Debt: The fair value of debt is based upon matrix pricing performed by the pricing service utilizing the standard inputs.
The following tables disclose the carrying value, fair value and hierarchy level of the financial instruments that are not
recognized or are not carried at fair value in the consolidated balance sheets as of the dates indicated:
December 31, 2019
Fair Value
Carrying Value
Total
Level 1
Level 2
Level 3
Financial Assets
Commercial mortgage loans on real estate
Other investments
Other assets
Total financial assets
Financial Liabilities
Policy reserves under investment products (Individual and
group annuities, subject to discretionary withdrawal) (1)
Funds held under reinsurance
Debt
Total financial liabilities
$
$
$
$
815.0
$
843.8
$
— $
— $
140.0
28.9
140.0
28.9
30.7
—
—
—
983.9
$
1,012.7
$
30.7
$
— $
843.8
109.3
28.9
982.0
551.6
$
588.4
$
— $
— $
588.4
319.4
2,006.9
319.4
2,190.6
319.4
—
—
2,190.6
—
—
2,877.9
$
3,098.4
$
319.4
$
2,190.6
$
588.4
Financial Assets
Commercial mortgage loans on real estate
Other investments
Other assets
Total financial assets
Financial Liabilities
Policy reserves under investment products (Individual and
group annuities, subject to discretionary withdrawal) (1)
Funds held under reinsurance
Debt
Total financial liabilities
December 31, 2018
Fair Value
Carrying Value
Total
Level 1
Level 2
Level 3
$
$
$
$
759.6
$
124.9
43.0
735.1
124.9
43.0
927.5
$
903.0
$
570.6
$
272.0
2,006.0
556.8
272.0
2,058.7
—
33.9
—
33.9
—
272.0
—
— $
735.1
—
—
91.0
43.0
— $
869.1
— $
556.8
—
2,058.7
—
—
2,848.6
$
2,887.5
$
272.0
$
2,058.7
$
556.8
(1) Only the fair value of the Company’s policy reserves for investment-type contracts (those without significant mortality or morbidity risk) are reflected in
the tables above.
11. Premiums and Accounts Receivable
Receivables are reported net of an allowance for uncollectible amounts. A summary of such receivables is as follows as
of the dates indicated:
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Insurance premiums receivable
Other receivables
Allowance for uncollectible amounts
Total
12. Income Taxes
December 31,
2019
2018
$
$
1,632.9
$
75.2
(15.3)
1,692.8
$
1,579.0
80.6
(16.1)
1,643.5
The components of income tax expense (benefit) were as follows for the periods indicated:
Pre-tax income:
Domestic
Foreign
Total pre-tax income
Current expense (benefit):
Federal and state
Foreign
Total current expense (benefit)
Deferred expense (benefit):
Federal and state
Foreign
Total deferred expense (benefit)
Total income tax expense (benefit)
$
$
$
Years Ended December 31,
2019
2018
2017
523.3
31.2
554.5
$
$
215.8
117.7
333.5
$
$
336.3
108.2
444.5
Years Ended December 31,
2019
2018
2017
19.7
58.5
78.2
92.2
(2.7)
89.5
$
5.7
$
53.8
59.5
31.0
(9.6)
21.4
(111.9)
41.0
(70.9)
8.7
(12.9)
(4.2)
(75.1)
$
167.7
$
80.9
$
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.
A reconciliation of the federal income tax rate to the Company’s effective income tax rate follows for the periods
indicated:
Federal income tax rate:
Reconciling items:
Non-taxable investment income
Foreign earnings (1)
Non-deductible compensation
Change in liability for prior year tax
Tax reform deferred revaluation (2)
Change in valuation allowance (3)
Other
Effective income tax rate:
Years Ended December 31,
2019
2018
2017
21.0%
21.0%
35.0 %
(0.6)
0.8
0.7
—
—
8.7
(0.4)
30.2%
(1.2)
3.5
0.9
(0.5)
0.5
(0.5)
0.6
24.3%
(2.3)
(2.3)
0.2
(6.4)
(39.8)
(1.0)
(0.3)
(16.9)%
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(1)
(2)
(3)
Results for 2019 primarily include the impact of foreign earnings taxed at different rates. Results for 2018 and 2017 include tax benefits associated
with the earnings of certain non-U.S. subsidiaries that are deemed reinvested indefinitely and the realization of foreign tax credits for certain other
subsidiaries. In addition, 2018 and 2017 reflect a benefit of 2.8% and 1.4%, respectively, related to international reorganizations.
The TCJA reduced the corporate tax rate to 21%, effective January 1, 2018. Consequently, the Company has recorded a benefit related to the revaluation
of deferred tax assets and deferred tax liabilities of $177.0 million in 2017, which had a 39.8% impact to the effective tax rate, and an additional expense
of $1.5 million in 2018, which has a 0.5% impact to the effective tax rate.
The change in valuation allowance in 2019 is primarily related to the valuation allowance of $49.7 million established on the deferred taxes that arose
related to losses incurred on our investment in Iké. The changes in valuation allowance in 2018 and 2017 were due to movements in valuation
allowances in other foreign subsidiaries.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31,
2019, 2018 and 2017 is as follows:
Balance at beginning of year
Additions based on tax positions related to the current year
Reductions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Lapses
Balance at end of year
Years Ended December 31,
2019
2018
2017
(11.8) $
(0.5)
—
(0.4)
0.2
—
(12.5) $
(6.7) $
(2.5)
—
(4.1)
0.6
0.9
(11.8) $
(34.2)
(1.0)
—
(0.3)
28.2
0.6
(6.7)
$
$
Total unrecognized tax benefits of $14.0 million, $13.0 million and $6.8 million for the years ended December 31, 2019,
2018 and 2017, respectively, which includes interest and penalties, would impact the Company’s consolidated effective tax rate
if recognized. The liability for unrecognized tax benefits is included in accounts payable and other liabilities on the
consolidated balance sheets.
The Company’s continuing practice is to recognize interest expense related to income tax matters in income tax expense.
During the years ended December 31, 2019, 2018 and 2017, the Company recognized approximately $0.7 million, $0.4 million
and $0.1 million, respectively, of interest expense related to income tax matters. The Company had $0.8 million, $0.5 million
and $0.2 million of interest accrued as of December 31, 2019, 2018 and 2017, respectively. The Company had $0.8 million and
$0.8 million of penalties accrued as of December 31, 2019 and 2018, respectively, and none as of December 31, 2017.
The Company does not anticipate any significant increase or decrease of unrecognized tax benefit within the next 12
months.
The Company and its subsidiaries file income tax returns in the U.S. and various state and foreign jurisdictions. The
Company has substantially concluded all U.S. federal income tax matters for years through 2015. Substantially all non-U.S.
income tax matters have been concluded for years through 2010, and all state and local income tax matters have been
concluded for years through 2008.
The tax effects of temporary differences that result in significant deferred tax assets and deferred tax liabilities are as
follows as of the dates indicated:
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Deferred Tax Assets
Policyholder and separate account reserves
Net operating loss carryforwards
Investments, net
Credit carryforwards
Employee and post-retirement benefits
Compensation related
Capital loss carryforwards
Other
Total deferred tax assets
Less valuation allowance
Deferred tax assets, net of valuation allowance
Deferred Tax Liabilities
Deferred acquisition costs
Net unrealized appreciation on securities
Intangible assets
Total deferred tax liabilities
Net deferred income tax liabilities
December 31,
2019
2018
$
1,063.5
$
147.0
57.3
38.0
32.8
31.6
3.1
123.3
1,496.6
(76.6)
1,420.0
(1,472.0)
(274.0)
(67.5)
(1,813.5)
$
(393.5) $
1,301.8
192.2
53.9
36.4
35.8
29.7
23.2
37.4
1,710.4
(26.4)
1,684.0
(1,658.7)
(92.5)
(76.2)
(1,827.4)
(143.4)
A cumulative valuation allowance of $76.6 million existed as of December 31, 2019 based on management’s assessment
that it is more likely than not that certain deferred tax assets attributable to international subsidiaries will not be realized.
The Company’s ability to realize deferred tax assets depends on its ability to generate sufficient taxable income of the
same character within the carryback or carryforward periods. In assessing future taxable income, the Company considered all
sources of taxable income available to realize its deferred tax asset, including the future reversal of existing temporary
differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in carryback
years and tax-planning strategies. If changes occur in the assumptions underlying the Company’s tax planning strategies or in
the scheduling of the reversal of the Company’s deferred tax liabilities, the valuation allowance may need to be adjusted in the
future.
Other than for certain wholly owned Canadian and LATAM subsidiaries, the Company plans to indefinitely reinvest the
earnings in other jurisdictions. Under current U.S. tax law, no material income taxes are anticipated on future repatriation of
earnings. Therefore, deferred taxes have not been provided.
Global intangible low taxed income (“GILTI”): The TCJA creates a new requirement that certain income (i.e., GILTI)
earned by controlled foreign corporations (“CFCs”) must be included currently in the gross income of the CFCs’ U.S.
shareholder. GILTI is the excess of the U.S. shareholder’s “net CFC tested income” over 10% of the aggregate of the U.S.
shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S.
shareholder. Under GAAP, the Company is allowed to make an accounting policy election of either (1) treating taxes due on
future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred or (2) factoring such
amounts into the company’s measurement of its deferred taxes. The Company has elected to recognize the current tax on GILTI
as a period expense in the period the tax is incurred. Under this policy, the Company has not provided deferred taxes related to
temporary differences that upon their reversal will affect the amount of income subject to GILTI in the period. The GILTI
current period expense is immaterial.
The net operating loss carryforwards by jurisdiction are as follows as of the dates indicated:
Federal net operating loss carryforwards (1)
$
Foreign net operating carryforwards (2)
$
509.8
170.0
730.7
162.0
(1) $286.7 million expires 2038 and $223.1 million has an unlimited carryforward period.
(2) $46.5 million expires between 2020 and 2039 and $123.5 million has an unlimited carryforward period.
December 31,
2019
2018
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13. Deferred Acquisition Costs
Information about deferred acquisition costs is as follows as of the dates indicated:
Beginning balance
Costs deferred
Amortization
Ending balance
14. Property and Equipment
December 31,
2019
2018
2017
$
$
5,103.0
$
3,484.5
$
3,267.4
3,747.3
(2,182.3)
6,668.0
$
3,094.0
(1,475.5)
5,103.0
$
1,549.2
(1,332.1)
3,484.5
Property and equipment consisted of the following as of the dates indicated:
Land
Buildings and improvements
Furniture, fixtures and equipment
Total
Less accumulated depreciation
Total
December 31,
2019
2018
10.9
$
238.4
512.9
762.2
(328.5)
433.7
$
13.2
261.5
491.4
766.1
(373.6)
392.5
$
$
During the year ended December 31, 2019, the Company recorded a $7.4 million loss on assets held for sale associated
with an office building previously used as the headquarters for a business in runoff. During the year ended December 31, 2017,
the Company recorded a net $5.7 million gain from the sale of a building that had been the headquarters of the Assurant
Employee Benefits business, and the sale of a claims training center in Georgia. Depreciation expense for the years ended
December 31, 2019, 2018 and 2017 amounted to $55.3 million, $39.0 million and $34.2 million, respectively. Depreciation
expense is included in underwriting, general and administrative expenses in the consolidated statements of operations.
15. Goodwill
The Company has assigned goodwill to its reporting units for impairment testing purposes. The Corporate and Other
segment is not assigned any goodwill. In 2018, we determined that it was no longer appropriate to aggregate our reporting units
within our Global Lifestyle operating segment due to further differentiation of certain components of underlying products,
including the economics and distribution, as a result of our acquisition of TWG and the related changes in segment leadership.
As a result, the Global Lifestyle reporting unit was disaggregated into the following three reporting units: Connected Living,
Global Automotive and Global Financial Services and Other. The carrying amount of our Global Lifestyle legacy goodwill was
allocated based on the fair value of the three new reporting units. The carrying amount of our goodwill from the TWG
acquisition was allocated to the three new reporting units based on the acquisition multiple and implied forward earnings
contribution of each reporting unit. For Global Housing and Global Preneed, the reporting unit for impairment testing was at
the operating segment level. There were no changes to reporting units in 2019.
Qualitative Impairment Testing
In the fourth quarter of 2019, the Company performed a qualitative assessment for each of its Connected Living, Global
Housing and Global Preneed reporting units due to high margins between fair value and book value based on quantitative
analysis in 2018 and increased growth based on past performance and future plans. In conducting a qualitative assessment, the
Company analyzed actual and projected growth trends for revenues and profit for each reporting unit, as well as historical
performance versus plan and the results of prior quantitative tests performed. Additionally, the Company assessed critical areas
that may impact its business, including macroeconomic conditions and the related impact, any plans to market for sale all or a
portion of their business, competitive changes, or any potential risks to their projected financial results. Based on this
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assessment, the Company determined that it was more likely than not that the reporting units’ fair values were more than their
respective carrying amounts and therefore quantitative impairment testing was not necessary for these reporting units.
Quantitative Impairment Testing
The Company performed quantitative tests on its Global Automotive and Global Financial Services and Other reporting
units due to declining growth in profits and reduced margins between fair value and book value based on quantitative
impairment testing performed in the prior year.
The following describes the various valuation methodologies used in the quantitative test which were weighted using our
judgment as to which were the most representative in determining the estimated fair value of our reporting units.
A Dividend Discount Method (“DDM”) was used to value each of the two reporting units based upon the present value of
expected cash flows available for distribution over future periods. Cash flows were estimated for a discrete projection period
based on detailed assumptions, and a terminal value was calculated to reflect the value attributable to cash flows beyond the
discrete period. Cash flows and the terminal value were then discounted using the reporting unit’s estimated cost of capital. The
estimated fair value of the reporting unit represented the sum of the discounted cash flows and terminal value.
A Guideline Company Method, in which we identified a group of peer companies that have similar operations to the
reporting unit, was used; however, direct peer comparisons for our reporting units were limited. This method was used to value
each reporting unit based upon its relative performance to peer companies, based on several measures, including price to
trailing 12 month earnings, price to projected earnings, price to tangible net worth and return on equity.
A Guideline Transaction Method was used to value each reporting unit based on available data concerning the purchase
prices paid in acquisitions of similar companies operating in the insurance industry. The application of certain financial
multiples calculated from these transactions provided an indication of estimated fair value of the reporting units.
While all three valuation methodologies were considered in assessing fair value, the DDM was weighed more heavily
since management believes that expected cash flows are the most important factor in the valuation of a business enterprise.
Based on the quantitative assessment, the Company concluded that the estimated fair values exceeded their respective book
values and therefore determined that goodwill was not impaired for these reporting units.
A roll forward of goodwill by reportable segment is provided below as of and for the years indicated:
Balance at December 31, 2017 (2)
Acquisitions (3)
Impairments (4)
Foreign currency translation and other
Balance at December 31, 2018 (2)
Acquisitions (3)
Foreign currency translation and other
Balance at December 31, 2019 (2)
Global
Lifestyle (1)
Global Housing Global Preneed
Consolidated
$
392.8
$
386.7
$
138.2
$
917.7
1,421.1
—
(9.2)
1,804.7
20.2
1.0
—
(7.2)
—
379.5
—
—
—
—
(0.6)
137.6
—
0.4
1,421.1
(7.2)
(9.8)
2,321.8
20.2
1.4
$
1,825.9
$
379.5
$
138.0
$
2,343.4
(1) As of December 31, 2019, $461.5 million, $1,291.7 million and $72.7 million of goodwill was assigned to the Connected Living, Global Automotive
and Global Financial Services and Other reporting unit, respectively. As of December 31, 2018, $451.2 million, $1,281.3 million and $72.2 million of
goodwill was assigned to the Connected Living, Global Automotive and Global Financial Services and Other reporting unit, respectively
Consolidated goodwill reflects $1,268.1 million of accumulated impairment loss at December 31, 2019 and 2018, and $1,260.9 million of accumulated
impairment losses at December 31, 2017.
Includes goodwill from the TWG acquisition (including the application of measurement period adjustments). Refer to Note 3 for additional information.
Refer to Note 4 for additional information on the impairment loss on the Mortgage Solutions business.
(3)
(4)
(2)
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16. VOBA and Other Intangible Assets
VOBA
Information about VOBA is as follows for the periods indicated:
Beginning balance
Additions
Amortization, net of interest accrued
Foreign currency translation and other
Ending balance
Years Ended December 31,
2019
2018
2017
$
$
3,157.8
(4.0)
(1,127.4)
(22.1)
2,004.3
$
$
24.4
3,972.6
(825.2)
(14.0)
3,157.8
$
$
32.1
—
(7.9)
0.2
24.4
As of December 31, 2019, the outstanding VOBA balance is primarily attributable to the TWG acquisition within the
Global Lifestyle segment. Refer to Note 3 for additional information.
As of December 31, 2019, the estimated amortization of VOBA for the next five years and thereafter is as follows:
Year
2020
2021
2022
2023
2024
Thereafter
Total
Amount
$
801.5
559.0
344.2
200.2
90.3
9.1
$
2,004.3
Other Intangible Assets
Information about other intangible assets is as follows as of the dates indicated:
As of December 31,
2019
2018
Carrying
Value
Accumulated
Amortization
Net Other
Intangible
Assets
Carrying
Value
Accumulated
Amortization
Net Other
Intangible
Assets
Contract based intangibles (1) (2)
$
437.0
$
Customer related intangibles
Marketing related intangibles
Technology based intangibles
382.0
5.6
62.0
Total
$
886.6
$
(41.3) $
(285.4)
(5.6)
(14.1)
(346.4) $
395.7
$
472.9
$
96.6
—
47.9
413.0
5.6
62.0
540.2
$
953.5
$
(46.6) $
(272.2)
(5.5)
(6.8)
(331.1) $
426.3
140.8
0.1
55.2
622.4
(1) As of December 31, 2019 and 2018, contract based intangibles included $13.7 million of indefinite-lived intangible assets.
(2) As of December 31, 2019 and 2018, the net amount was reduced for a $15.6 million and a $20.8 million intangible asset impairment charge related to
Green Tree, respectively.
Total amortization of other intangible assets for the years ended December 31, 2019, 2018 and 2017 was $62.2 million,
$77.9 million and $72.6 million, respectively.
Other intangible assets that have finite lives, including customer relationships, customer contracts and other intangible
assets, are amortized over their useful lives. The estimated amortization of other intangible assets with finite lives for the next
five years and thereafter is as follows:
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F-56
Year
2020
2021
2022
2023
2024
Thereafter
Total other intangible assets with finite lives
17. Reserves
Short Duration Contracts
Amount
65.6
60.5
50.3
48.1
41.0
261.0
526.5
$
$
Continuing Business (Global Lifestyle and Global Housing)
The Company’s short duration contracts are comprised of products and services included in the Global Lifestyle and
Global Housing segments. The main product lines for Global Lifestyle include extended service contracts, vehicle service
contracts, mobile device protection and credit insurance, and for Global Housing the main product lines include lender-placed
homeowners and flood, Multifamily Housing and manufactured housing.
Total IBNR reserves are determined by subtracting case basis incurred losses from the ultimate loss and loss adjustment
expense estimates. Ultimate loss and loss adjustment expenses are estimated utilizing generally accepted actuarial loss
reserving methods. The reserving methods employed by the Company include the Chain Ladder, Munich Chain Ladder and
Bornhuetter-Ferguson methods. Reportable catastrophe losses are analyzed and reserved for separately using a frequency and
severity approach. The methods all involve aggregating paid and case-incurred loss data by accident quarter (or accident year)
and accident age for each product grouping. As the data ages, loss development factors are calculated that measure emerging
claim development patterns between reporting periods. By selecting loss development factors indicative of remaining
development, known losses are projected to an ultimate incurred basis for each accident period. The underlying premise of the
Chain Ladder method is that future claims development is best estimated using past claims development, whereas the
Bornhuetter-Ferguson method employs a combination of past claims development and an estimate of ultimate losses based on
an expected loss ratio. The Munich Chain Ladder method takes into account the correlations between paid and incurred
development in projecting future development factors, and is typically more applicable to products experiencing greater
variability in incurred to paid ratios.
The best estimate of ultimate loss and loss adjustment expense is generally selected from a blend of the different methods
that are applied consistently each period considering significant assumptions, including projected loss development factors and
expected loss ratios. There have been no significant changes in the methodologies and assumptions utilized in estimating the
liability for unpaid loss and loss adjustment expenses for any of the periods presented.
Disposed and Runoff Short Duration Insurance Lines
The Company has runoff exposure to asbestos, environmental and other general liability claims arising from the
Company’s participation in certain reinsurance pools from 1971 through 1985 from contracts discontinued many years ago. The
amount of carried case reserves are based on recommendations of the various pool managers. Using information currently
available, and after consideration of the reserves reflected in the consolidated financial statements, the Company does not
believe or expect that changes in reserve estimates for these claims are likely to be material.
Disposed business includes certain medical policies no longer offered and Assurant Employee Benefits policies disposed
of via reinsurance. Reserves and reinsurance recoverables for previously disposed business are included in the consolidated
balance sheets. See Note 18 for additional information.
Long Duration Contracts
Continuing Business (Global Preneed)
The Company’s long duration contracts are primarily comprised of preneed life insurance and annuity policies. Future
policy benefits make up the largest portion of Global Preneed liabilities. Claims and benefits payable reserves are less
significant. Reserve assumptions for mortality, inflation, lapse, margin and discount rates are company-specific based on
pricing assumptions and experience studies.
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For business issued during the years ended December 31, 2019 and 2018, discount rates ranged between 1.5% and 4.25%.
Death benefit increases for business issued during the years ended December 31, 2019 and 2018 ranged between 0.0% and
3.6%. Canadian annuity products typically have surrender charges that vary by product series and premium paying period.
Surrender charges on U.S. annuity contracts generally range from 7.0% to 0.0% and grade to zero over a period of seven years.
Disposed and Runoff Long Duration Insurance Lines
The Company has universal life and annuity products that are no longer offered and are in runoff. Reserves have been
established based on the following assumptions. Interest rates credited on annuities were at guaranteed rates, ranging from
3.5% to 4.0%, except for a limited number of policies with guaranteed crediting rates of 4.5%. All annuity policies are past the
surrender charge period. Crediting interest rates on universal life fund are at guaranteed rates of 4.0% to 4.1%. Universal life
funds are subject to surrender charges that vary by product, age, sex, year of issue, risk class, face amount and grade to zero
over a period not longer than 20 years.
On December 3, 2018, the Company sold Time Insurance Company, a legal entity associated with the previously exited
Assurant Health business that resulted in a $1.58 billion decrease in future policy benefits and expenses upon sale. See Note 4
for additional information.
Reserve Roll Forward
The following table provides a roll forward of the Company’s beginning and ending claims and benefits payable balances.
Claims and benefits payable is the liability for unpaid loss and loss adjustment expenses and are comprised of case and IBNR
reserves.
Since unpaid loss and loss adjustment expenses are estimates, the Company’s actual losses incurred may be more or less
than the Company’s previously developed estimates, which is referred to as either unfavorable or favorable development,
respectively.
The best estimate of ultimate loss and loss adjustment expense is generally selected from a blend of methods that are
applied consistently each period. There have been no significant changes in the methodologies and assumptions utilized in
estimating the liability for unpaid loss and loss adjustment expenses for any of the periods presented.
Years Ended December 31,
2019
2018
2017
Claims and benefits payable, at beginning of year
$
Less: Reinsurance ceded and other
Net claims and benefits payable, at beginning of year
Acquired reserves as of Acquisition Date (1)
Incurred losses and loss adjustment expenses related to:
Current year
Prior years
Total incurred losses and loss adjustment expenses
Paid losses and loss adjustment expenses related to:
Current year
Prior years
Total paid losses and loss adjustment expenses
Net claims and benefits payable, at end of year
Plus: Reinsurance ceded and other (2)
$
2,813.7
(2,053.7)
760.0
—
$
3,782.2
(3,193.3)
588.9
140.7
2,670.9
(16.2)
2,654.7
2,097.8
529.2
2,627.0
787.7
1,900.0
2,353.0
(7.4)
2,345.6
1,887.1
428.1
2,315.2
760.0
2,053.7
Claims and benefits payable, at end of year (2) (3)
$
2,687.7
$
2,813.7
$
3,301.2
(2,718.2)
583.0
—
1,965.0
(58.5)
1,906.5
1,536.4
364.2
1,900.6
588.9
3,193.3
3,782.2
(1) Acquired reserves from TWG on Acquisition Date include $419.9 million of gross claims and benefits payable and $279.2 million of ceded claims and
(2)
benefits payable. The reserve roll forward includes the activity of TWG for the relevant periods since the Acquisition Date.
Includes reinsurance recoverables and claims and benefits payable of $86.8 million, $119.8 million and $555.0 million as of December 31, 2019, 2018
and 2017, respectively, which was ceded to the U.S. government. The Company acts as an administrator for the U.S. government under the voluntary
National Flood Insurance Program.
(3) Claims and benefits payable and related reinsurance ceded were reduced by $730.0 million in December 2018 as a result of the sale of Time Insurance
Company, a legal entity associated with the previously exited Assurant Health business.
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F-58
The Company experienced net favorable prior year development in each of the years ended December 31, 2019, 2018 and
2017. A comparison of net (favorable) unfavorable prior year development is shown below across the Company’s current and
former segments and businesses.
Global Lifestyle (excluding TWG)
TWG (1)
Global Housing
Global Preneed
Assurant Health
All Other
Total
Prior Year Incurred Loss Development for the Years Ending December 31,
2019
2018
2017
$
$
(18.8) $
(5.2)
13.6
(0.3)
—
(5.5)
(16.2) $
(17.0) $
0.4
16.3
(0.5)
(1.3)
(5.3)
(7.4) $
(30.0)
—
(9.6)
(0.6)
(8.8)
(9.5)
(58.5)
(1) TWG continues to be shown separate from the rest of Global Lifestyle in this presentation and in the claims development claims supplemental
information below to enhance comparability across years.
Global Lifestyle (excluding TWG) experienced similar amounts of favorable development in 2019 and 2018. Favorable
development in 2017 included the outcome of reserve assumptions associated with extended service contracts and credit
products as compared to actual experience. TWG experienced favorable development in 2019 due to favorable experience in
vehicle service contracts. Global Housing experienced adverse development in 2019 and 2018 primarily due to adverse
development from Hurricane Maria of $11.3 million in 2019 and $18.4 million in 2018. A more detailed explanation of the
claims development from Global Lifestyle and Global Housing is presented below, including claims development by accident
year. Reserves for the longer-tail property coverages included in All Other (e.g., asbestos, environmental and other general
liability) had no material changes in estimated amounts for incurred claims in prior years.
The following tables represent the Global Lifestyle and Global Housing segments’ incurred claims and allocated claim
adjustment expenses, net of reinsurance, less cumulative paid claims and allocated claim adjustment expenses, net of
reinsurance to reconcile to total claims and benefits payable, net of reinsurance as of December 31, 2019. The tables provide
undiscounted information about claims development by accident year for the significant short duration claims and benefits
payable balances in Global Lifestyle and Global Housing.
The following factors are relevant to the loss development information included in the tables below:
• Table Presentation: The tables are organized by accident year. For certain categories of claims and for reinsurance
recoverables, losses may sometimes be reclassified to an earlier or later accident year as more information about the
date of occurrence becomes available to us. These reclassifications are shown as development in the respective years
in the tables below. Predominantly, the Company writes short-tail lines that are written on occurrence basis. Five years
of claims development information is provided since most of the claims are fully developed after five years, as shown
in the average payout ratio tables.
• Table Groupings: The groupings have homogeneous risk characteristics with similar development patterns and would
generally be subject to similar trends and reflect our reportable segments.
• Impact of Reinsurance: The reinsurance program varies by exposure type. Historically, the Company has leveraged
facultative and treaty reinsurance, both on pro-rata and excess of loss basis. The reinsurance program may change
from year to year, which may affect the comparability of the data presented in the tables.
• IBNR: Includes development from past reported losses in IBNR.
• Information excluded from tables: Unallocated loss adjustment expenses are excluded from the tables.
• Foreign exchange rates: The loss development for operations outside of the U.S. is presented for all accident years
using the current exchange rate at December 31, 2019. Although this approach requires restating all prior accident year
information, the changes in exchange rates do not impact incurred and paid loss development trends.
• Acquisitions: Includes acquisitions from all accident years presented in the tables. For purposes of this disclosure, we
have applied the retrospective method for the acquired reserves, including incurred and paid claim development
histories throughout the relevant tables. The TWG acquisition is presented retrospectively separately below to improve
comparability across the years presented. It should be noted that historical reserves for the acquired business were
established by the acquired companies using methods, assumptions and procedures then in effect which may differ
from our current reserving bases. Accordingly, it may not be appropriate to extrapolate future reserve adequacy based
on the aggregated historical results shown in the tables.
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• Dispositions: Excludes dispositions from all accident years presented in the tables.
• Claim counts: Considers a reported claim to be one claim for each claimant or feature for each loss occurrence.
Reported claims for losses from assumed reinsurance contracts are not available and hence not included in the
reported claims. There are limitations that should be considered on the reported claim count data in the tables below,
including:
Claim counts are presented only on a reported (not an ultimate) basis;
The tables below include lines of business and geographies at a certain aggregated level which may indicate
different frequency and severity trends and characteristics, and may not be as meaningful as the claim count
information related to the individual products within those lines of business and geographies;
Certain lines of business are more likely to be subject to occurrences involving multiple claimants and
features, which can distort measures based on the reported claim counts in the table below; and
Reported claim counts are not adjusted for ceded reinsurance, which may distort the measure of frequency or
severity.
• Required Supplemental Information: The information about incurred and paid loss development for all periods
preceding year ended December 31, 2019 and the related historical claims payout percentage disclosure is unaudited
and is presented as required supplementary information.
Global Lifestyle (Excluding TWG) Net Claims Development Tables
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
December 31, 2019
Accident Year
2015
Unaudited
2016
Unaudited
2017
Unaudited
2018
Unaudited
2019
Years Ended December 31,
Total of Incurred-but-Not
Reported Liabilities Plus
Expected Development on
Reported Claims (1)
Cumulative Number of
Reported Claims (2)
2015
2016
2017
2018
2019
$
657.0 $
619.4 $
618.4 $
618.2 $
618.5
$
668.0
639.4
699.2
637.6
683.3
772.9
637.7
682.1
754.3
878.9
Total $
3,571.5
0.1
0.3
0.6
2.9
82.8
8,484,983
9,123,395
8,289,103
7,595,793
7,327,244
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year
2015
Unaudited
2016
Unaudited
2017
Unaudited
2018
Unaudited
2019
Years Ended December 31,
$
523.2 $
612.0 $
616.5 $
617.6 $
541.6
632.1
568.1
636.1
677.4
649.2
2015
2016
2017
2018
2019
617.9
637.2
680.5
747.8
754.9
Outstanding claims and benefits payable before 2015, net of reinsurance
Claims and benefits payable, net of reinsurance $
1.1
134.3
Total $
3,438.3
Year 1 Unaudited
84.8%
Average Annual Payout of Incurred Claims by Age, Net of Reinsurance
Year 3 Unaudited
Year 2 Unaudited
Year 4 Unaudited
14.4%
0.6%
0.2%
Year 5 Unaudited
—%
Includes a provision for development on case reserves.
(1)
(2) Number of paid claims plus open (pending) claims. Claim count information related to ceded reinsurance is not reflected as it cannot be reasonably
defined or quantified, given that the Company’s reinsurance includes non-proportional treaties.
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Using the December 31, 2019 foreign exchange rates for all years, Global Lifestyle (excluding TWG) experienced $18.8
million of favorable loss development for the year ended December 31, 2019, compared to favorable loss development of $17.0
million and $30.0 million for the years ended December 31, 2018 and 2017, respectively. These amounts are based on the
change in net incurred losses from the claims development tables above, plus additional impacts from accident years prior to
2015. Many of these contracts and products contain retrospective commission (profit sharing) provisions that would result in
offsetting increases or decreases in expense dependent on if the development was favorable or unfavorable.
For the year ended December 31, 2019, Global Lifestyle experienced favorable development primarily from mobile
device protection products and extended service contract products written in North America. In particular, new mobile business
was favorable relative to prior expectations. For the year ended December 31, 2018, favorable development was attributable to
extended service contracts sold in the United States, lower than expected frequency for credit insurance sold in Canada and
Puerto Rico, and lower than expected frequency and severity for mobile device protection products sold in South America. For
the year ended December 31, 2017, favorable development was attributable to extended service contracts and credit products
whereby claims developed favorable to expectations derived from previous history. A change in client mix over time has also
reduced the magnitude of favorable development since 2017.
Foreign exchange rate movements over time caused some of the reserve differences shown in the reserve roll forward and
prior year incurred loss tables to vary from what is reflected in the claims development tables for Global Lifestyle (excluding
TWG). The impacts by year were $(0.3) million, $1.1 million, and $(1.7) million for the years ended December 31, 2019, 2018
and 2017, respectively. The claims development tables above remove the impact due to changing foreign exchange rates over
time for comparability.
TWG Net Claims Development Tables
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
December 31, 2019
Accident Year
2015
Unaudited
2016
Unaudited
2017
Unaudited
2018
Unaudited
2019
Years Ended December 31,
Total of Incurred-but-Not
Reported Liabilities Plus
Expected Development on
Reported Claims (1)
Cumulative Number of
Reported Claims (2)
2015
2016
2017
2018
2019
$
432.5 $
425.4 $
428.4 $
432.3 $
433.3
$
442.5
442.8
512.1
450.5
503.9
609.9
451.0
504.4
602.2
652.8
Total $
2,643.7
0.1
0.7
3.5
11.5
64.8
2,241,827
1,878,736
1,908,302
2,051,670
1,802,327
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year
2015
Unaudited
2016
Unaudited
2017
Unaudited
2018
Unaudited
2019
Years Ended December 31,
$
359.6 $
421.3 $
425.6 $
427.7 $
370.3
438.6
418.1
445.7
494.6
504.7
2015
2016
2017
2018
2019
429.1
444.6
498.2
583.7
549.2
Outstanding claims and benefits payable before 2015, net of reinsurance
Claims and benefits payable, net of reinsurance $
6.9
145.8
Total $
2,504.8
Year 1 Unaudited
83.8%
Average Annual Payout of Incurred Claims by Age, Net of Reinsurance
Year 3 Unaudited
Year 2 Unaudited
Year 4 Unaudited
14.5%
0.9%
0.5%
Year 5 Unaudited
0.3%
Includes a provision for development on case reserves.
(1)
(2) Number of paid claims plus open (pending) claims. Claim count information related to ceded reinsurance is not reflected as it cannot be reasonably
defined or quantified, given that the Company’s reinsurance includes non-proportional treaties.
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The claims development tables for TWG are presented on a retrospective basis to improve comparability across the years
presented. Using the December 31, 2019 foreign exchange rates for all years, TWG experienced $5.2 million of favorable loss
development for the year ended December 31, 2019, compared to unfavorable loss development of $6.7 million and $9.6
million for the years ended December 31, 2018 and 2017, respectively. These amounts are based on the change in net incurred
losses from the claims development tables above, plus additional impacts from accident years prior to 2015. For the year ended
December 31, 2019, TWG experienced favorable development from vehicle service contracts in North America in accident
year 2018 due to experience and lower than expected claim frequency on asset protection products related to Hurricanes
Florence and Michael. For the years ended December 31, 2018 and December 31, 2017, unfavorable claims experience from
vehicle service contracts in North America was the main source of the prior year development.
Foreign exchange rate movements over time caused some of the reserve differences shown in the reserve roll forward and
year incurred loss tables to vary from what is reflected in the claims development tables for TWG. The impacts by year were
$(0.1) million for both the years ended December 31, 2019 and 2018. The claims development tables above remove the impact
due to changing foreign exchange rates over time for comparability.
Global Housing Net Claims Development Tables
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
December 31, 2019
Accident Year
2015
Unaudited
2016
Unaudited
2017
Unaudited
2018
Unaudited
2019
Years Ended December 31,
Total of Incurred-but-Not
Reported Liabilities Plus
Expected Development on
Reported Claims (1)
Cumulative Number of
Reported Claims (2)
2015
2016
2017
2018
2019
$
792.4 $
753.1 $
758.8 $
756.9 $
757.6
$
852.5
834.9
963.5
839.8
975.0
916.8
843.1
990.3
915.3
850.0
Total $
4,356.3
3.0
6.4
39.6
41.0
227.2
198,316
201,007
250,352
199,940
181,204
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year
2015
Unaudited
2016
Unaudited
2017
Unaudited
2018
Unaudited
2019
Years Ended December 31,
$
518.7 $
703.0 $
733.2 $
745.1 $
599.4
781.6
699.9
817.6
901.2
621.9
2015
2016
2017
2018
2019
752.4
832.5
942.0
853.7
544.3
Outstanding claims and benefits payable before 2015, net of reinsurance
Claims and benefits payable, net of reinsurance $
4.5
435.9
Total $
3,924.9
Year 1 Unaudited
69.8%
Average Annual Payout of Incurred Claims by Age, Net of Reinsurance
Year 3 Unaudited
Year 2 Unaudited
Year 4 Unaudited
23.3%
4.2%
1.7%
Year 5 Unaudited
1.0%
Includes a provision for development on case reserves.
(1)
(2) Number of paid claims plus open (pending) claims. Claim frequency is determined at a claimant reporting level. Depending on the nature of the product
and related coverage triggers, it is possible for a claimant to contribute multiple claim counts in a given policy period. Claim count information related to
ceded reinsurance is not reflected as it cannot be reasonably defined or quantified, given that the Company’s reinsurance includes non-proportional
treaties.
For the year ended December 31, 2019, Global Housing experienced $13.6 million of unfavorable loss development,
compared to unfavorable loss development of $16.3 million for the year ended December 31, 2018 and favorable development
of $9.6 million for the year ended December 31, 2017. These amounts are based on the change in net incurred losses from the
claims development data above, plus additional impacts from accident years prior to 2015. For the year ended December 31,
2019, Global Housing experienced unfavorable development in accident year 2017 due to rising severity trends from Hurricane
Maria leading to an $11.3 million increase. Non-catastrophe claims were higher than expected in accident year 2018 due to
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higher than expected losses from small commercial and sharing economy products. For the year ended December 31, 2018,
Global Housing experienced unfavorable development from Hurricane Maria of $18.4 million as projected losses exceeded
available reinsurance limits. Excluding catastrophes, favorable development decreased due to rising severity trends for water
damage and non-catastrophe related weather claims on lender-placed homeowners products. For the year ended December 31,
2017, favorable development was attributable to a $5.2 million reduction in the ultimate loss estimate for Hurricane Matthew
and favorable trends in theft and vandalism claims across lender-placed homeowners products.
Reconciliation of the Disclosure of Net Incurred and Paid Claims Development to the Liability for Unpaid Claims and
Benefits Payable
December 31, 2019
Net outstanding liabilities
Global Lifestyle (excluding TWG)
TWG
Global Housing
Other short-duration insurance lines (1)
Disposed short-duration insurance lines (Assurant Health)
Claims and benefits payable, net of reinsurance
Reinsurance recoverable on unpaid claims
Global Lifestyle (excluding TWG)
TWG (2)
Global Housing
Other short-duration insurance lines (3)
Disposed short-duration insurance lines (Assurant Employee Benefits and Assurant Health)
Total reinsurance recoverable on unpaid claims
Insurance lines other than short-duration
Unallocated claim adjustment expense
Total claims and benefits payable
$
$
134.3
145.8
435.9
31.1
2.4
749.5
128.5
311.7
204.8
3.6
542.8
1,191.4
738.2
8.6
2,687.7
(1) Asbestos and pollution reserves made up $20.7 million of the other short-duration insurance lines.
(2) Disposed of property and casualty business make up $230.7 million of $311.7 million in reinsurance recoverables for TWG.
(3) Asbestos and pollution recoveries accounted for all the other short-duration insurance lines.
18. 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 as of the dates indicated:
Ceded future policyholder benefits and expense
Ceded unearned premium
Ceded claims and benefits payable
Ceded paid losses
Total
December 31,
2019
2018
$
3,329.3
$
4,248.1
1,895.5
120.5
$
9,593.4
$
3,132.3
3,876.3
2,046.1
111.3
9,166.0
A key credit quality indicator for reinsurance is the A.M. Best Company (“A.M. Best”) financial strength ratings of the
reinsurer. A.M. Best financial strength ratings are an independent opinion of a reinsurer’s ability to meet ongoing obligations to
policyholders. The A.M. Best ratings for new reinsurance agreements where there is material credit exposure are reviewed at
the time of execution. The A.M. Best ratings for existing reinsurance agreements are reviewed on a quarterly basis, or sooner
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based on developments. The following table provides the reinsurance recoverable as of December 31, 2019 grouped by A.M.
Best financial strength ratings:
A.M. Best Rating of
Reinsurer
A++ or A+
A or A-
B++ or B+
B or B-
C and below
Not Rated (1)
Total
Less: Allowance
Ceded future
policyholder
benefits and
expense
$
1,960.7
$
131.6
502.2
—
—
734.8
3,329.3
—
Ceded
unearned
premiums
Ceded claims
and benefits
payable
Ceded paid
losses
86.3
92.7
20.5
—
—
4,048.6
4,248.1
—
$
1,328.3
$
77.5
17.6
—
—
472.1
1,895.5
—
Total
$
3,392.0
16.7
50.5
0.3
—
—
55.8
123.3
(2.8)
120.5
$
352.3
540.6
—
—
5,311.3
9,596.2
(2.8)
9,593.4
Net reinsurance recoverable
$
3,329.3
$
4,248.1
$
1,895.5
$
(1) Not Rated ceded claims and benefits payable included reinsurance recoverables of $86.8 million as of December 31, 2019 which were ceded to the U.S.
government. The Company acts as an administrator for the U.S. government under the voluntary National Flood Insurance Program.
The Company has used reinsurance to exit certain businesses, including the Assurant Employee Benefits business and
blocks of individual life, annuity, and long-term care business. The reinsurance recoverables relating to these dispositions
amounted to $4.86 billion as of December 31, 2019, of which $4.46 billion was attributable to the four reinsurers with the
largest reinsurance recoverable balances relating to these dispositions: Sun Life, John Hancock, Talcott Resolution (formerly
owned by The Hartford) and Employers Reassurance Corporation (“ERAC”). The A.M. Best financial strength ratings of the
first three reinsurers was A+, A+ and B++, respectively. A.M. Best currently maintains a stable outlook on the financial strength
ratings of Sun Life, John Hancock and Talcott Resolution. A.M. Best withdrew its rating for ERAC in March 2019. General
Electric Company (“GE”), the ultimate parent of ERAC, has a capital maintenance agreement in place to maintain ERAC’s
risk-based capital (“RBC”) ratios at an acceptable regulatory level, which has been maintained in recent years through capital
infusions into ERAC. Most of the assets backing reserves relating to reinsurance recoverables from Sun Life, John Hancock
and Talcott Resolution are held in trust. There are no assets or other collateral backing reserves relating to reinsurance
recoverables from ERAC.
A substantial portion of the Not Rated category is related to Global Lifestyle’s and Global Housing’s agreements to
reinsure premiums and risks related to business generated by certain clients to the clients’ own captive insurance companies or
to reinsurance subsidiaries in which the clients have an ownership interest. To mitigate exposure to credit risk for these
reinsurers, the Company evaluates the financial condition of the reinsurer and typically holds substantial collateral (in the form
of funds withheld, trusts and letters of credit) as security. The Not Rated category also includes recoverables from the National
Flood Insurance Program and the Florida Hurricane Catastrophe Fund.
An allowance for doubtful accounts related to reinsurance recoverables is recorded on the basis of periodic evaluations of
balances due from reinsurers (net of collateral), reinsurer solvency, management’s experience and current economic conditions.
The allowance for doubtful accounts was $2.8 million and $0.3 million at December 31, 2019 and 2018, respectively. During
the year ended December 31, 2019, $2.5 million was added to the allowance. There were no additions or write-downs charged
against the allowance during the year ended December 31, 2018.
The effect of reinsurance on premiums earned and benefits incurred was as follows for the periods indicated:
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F-64
Long
Duration
2019
Short
Duration
Total
Long
Duration
2018
Short
Duration
Total
Long
Duration
2017
Short
Duration
Total
Years Ended December 31,
Direct earned
premiums
Premiums assumed
Premiums ceded
Net earned
premiums
Direct policyholder
benefits
Policyholder
benefits assumed
Policyholder
benefits ceded
Net policyholder
benefits
$
244.9
$ 14,192.4
$ 14,437.3
$
412.8
$ 11,291.0
$ 11,703.8
$
440.3
$
9,090.5
$
9,530.8
3.0
213.8
216.8
3.3
150.0
153.3
3.7
150.2
153.9
(175.9)
(6,458.2)
(6,634.1)
(346.0)
(5,354.2)
(5,700.2)
(372.1)
(4,908.5)
(5,280.6)
$
$
72.0
916.0
$
$
7,948.0
5,479.6
$
$
8,020.0
6,395.6
$
$
70.1
1,252.8
$
$
6,086.8
5,050.1
$
$
6,156.9
6,302.9
$
$
71.9
918.2
$
$
4,332.2
5,521.3
$
$
4,404.1
6,439.5
13.1
213.4
226.5
14.9
93.9
108.8
14.6
213.5
228.1
(651.6)
(3,315.8)
(3,967.4)
(995.7)
(3,073.4)
(4,069.1)
(668.8)
(4,128.2)
(4,797.0)
$
277.5
$
2,377.2
$
2,654.7
$
272.0
$
2,070.6
$
2,342.6
$
264.0
$
1,606.6
$
1,870.6
The Company had $534.4 million and $553.5 million of invested assets held in trusts or by custodians as of December
31, 2019 and 2018, respectively, 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
Global Lifestyle and Global Housing segments, 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.
For those product lines where there is exposure to losses from catastrophe events, the Company closely monitors and
manages its aggregate risk exposure by geographic area. The Company has entered into reinsurance treaties to manage
exposure to these types of events.
Business Divestitures
The Company has used reinsurance to sell certain businesses, such as the disposals of Assurant Employee Benefits, Fortis
Financial Group and Long-Term Care. Reinsurance was used in these cases to facilitate the transactions because the businesses
shared legal entities with operating segments that the Company retained. Assets supporting liabilities ceded relating to these
businesses are mainly held in trusts and the separate accounts relating to Fortis Financial Group are still reflected in the
Company’s consolidated balance sheets.
If the reinsurers became insolvent, the Company would be exposed to the risk that the assets in the trusts and/or the
separate accounts, if any, would be insufficient to support the liabilities that would revert back to the Company. The reinsurance
recoverable from Sun Life was $606.1 million and $761.7 million as of December 31, 2019 and 2018, respectively. The
reinsurance recoverable from Talcott Resolution was $511.2 million and $525.7 million as of December 31, 2019 and 2018,
respectively. The reinsurance recoverable from John Hancock was $2.49 billion and $2.34 billion as of December 31, 2019 and
2018, respectively.
The reinsurance agreement associated with the Fortis Financial Group sale also stipulates that Talcott Resolution
contributes 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 Talcott Resolution fails to fulfill these obligations, the
Company will be obligated to make these payments.
In addition, the Company would be responsible for administering this business in the event of reinsurer insolvency. The
Company does not currently have the administrative systems and capabilities to process this business. Accordingly, the
Company would need to obtain those capabilities in the event of an insolvency of one or more of the reinsurers of these
businesses. The Company might be forced to obtain such capabilities on unfavorable terms with a resulting material adverse
effect on our results of operations and financial condition.
As of December 31, 2019, the Company was not aware of any regulatory actions taken with respect to the solvency of the
insurance subsidiaries of Sun Life, Talcott Resolution or John Hancock that reinsure the Assurant Employee Benefits, Fortis
Financial Group and Long-Term Care businesses, and the Company has not been obligated to fulfill any of such reinsurers’
obligations.
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Sun Life, John Hancock and Talcott Resolution have paid their obligations when due and there have been no disputes.
Segment Client Risk and Profit Sharing
The Global Lifestyle and Global Housing segments write business produced by their clients, such as mobile providers,
mortgage lenders and servicers, and financial institutions, and reinsure all or a portion of such business to insurance
subsidiaries of some clients. Such arrangements allow significant flexibility in structuring the sharing of risks and profits on the
underlying business.
A substantial portion of Global Lifestyle’s and Global Housing’s reinsurance activities are related to agreements to
reinsure premiums and risks related to business generated by certain clients to the clients’ own captive insurance companies or
to reinsurance subsidiaries in which the clients have an ownership interest. Through these arrangements, the Company’s
insurance subsidiaries share some of the premiums and risk related to client-generated business. When the reinsurance
companies are not authorized to do business in the state of domicile of the Company’s insurance subsidiary, the Company’s
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 statutory financial credit in the domiciliary state for the
reinsurance.
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 mitigate its exposure to reinsurance insolvencies, the Company evaluates the financial condition of its reinsurers and
typically holds substantial collateral (in the form of funds withheld, trusts and letters of credit) as security under the reinsurance
agreements.
19. Debt
The following table shows the principal amount and carrying value of the Company’s outstanding debt, less unamortized
discount and issuance costs as applicable, as of December 31, 2019 and 2018:
December 31, 2019
December 31, 2018
Principal Amount
Carrying Value
Principal Amount
Carrying Value
Floating Rate Senior Notes due March 2021 (1)
$
50.0
$
49.9
$
300.0
$
4.00% Senior Notes due March 2023
4.20% Senior Notes due September 2023
4.90% Senior Notes due March 2028
3.70% Senior Notes due February 2030
6.75% Senior Notes due February 2034
7.00% Fixed-to-Floating Rate Subordinated Notes
due March 2048 (2)
Total debt
350.0
300.0
300.0
350.0
275.0
400.0
348.5
297.8
296.8
346.8
272.1
395.0
2,006.9
$
350.0
300.0
300.0
—
375.0
400.0
298.1
348.1
296.8
297.6
—
370.9
394.5
2,006.0
$
(1)
(2)
Bears floating interest at a rate equal to three-month LIBOR plus 1.25%.
Bears a 7.00% annual interest rate from March 2018 to March 2028 and an annual interest rate equal to three-month LIBOR plus 4.135% thereafter.
For the years ended December 31, 2019, 2018 and 2017, interest expense was $110.6 million, $100.3 million and $49.5
million, respectively. In 2019 and 2018, interest expense includes derivative related activities described in the interest rate
derivatives section below. There was $30.2 million and $28.2 million of accrued interest at December 31, 2019 and 2018,
respectively.
Debt Issuances
2030 Senior Notes: In August 2019, the Company issued senior notes with an aggregate principal amount of $350.0
million which bear interest at a rate of 3.70% per year, mature in February 2030 and were issued at a 0.035% discount to the
public (the “2030 Senior Notes”). Interest is payable semi-annually in arrears beginning in February 2020. Prior to November
2029, the Company may redeem the 2030 Senior Notes at any time in whole or from time to time in part at a make-whole
premium plus accrued and unpaid interest. On or after that date, the Company may redeem the 2030 Senior Notes at any time in
whole or from time to time in part at a redemption price equal to 100% of the principal amount being redeemed plus accrued
and unpaid interest.
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The Company used the net proceeds from the offering, together with cash on hand, to purchase $100.0 million of its
6.75% senior notes due 2034 in a cash tender offer, to redeem $250.0 million of its floating rate senior notes due 2021 (the
“2021 Senior Notes”) and to pay related premiums, fees and expenses. In connection with the tender offer, the Company
recognized a loss on extinguishment of debt of $31.4 million, primarily related to incremental consideration required to be paid
to debtholders as a result of the interest rate differential over the remaining term as compared to current rates. Additionally, the
Company recognized a $2.6 million loss from the settlement of the three-year interest rate swap that hedged interest rate
exposure on the portion of the 2021 Senior Notes that were redeemed in September 2019. The $2.6 million loss was reclassified
out of accumulated other comprehensive income and recorded through interest expense.
In connection with the issuance of the 2030 Senior Notes, the Company recognized $3.0 million of interest expense
related to premiums paid for a series of derivative transactions that were entered into in July 2019 to hedge the related interest
rate risk.
2021, 2023 and 2028 Senior Notes: In March 2018, the Company issued the following three series of senior notes with an
aggregate principal amount of $900.0 million:
•
•
•
2021 Senior Notes: The first series of senior notes is $300.0 million in principal amount, bears floating interest rate
equal to three-month LIBOR plus 1.25% (3.21% as of December 31, 2019) and matures in March 2021. Interest on the
2021 Senior Notes is payable quarterly. Commencing on or after March 2019, the Company may redeem the 2021
Senior Notes at any time in whole or from time to time in part at a redemption price equal to 100% of the principal
amount being redeemed plus accrued and unpaid interest. In August 2019, the Company redeemed $250.0 million of
the $300.0 million then outstanding aggregate principal amount of the 2021 Senior Notes.
2023 Senior Notes: The second series of senior notes is $300.0 million in principal amount, bears interest at 4.20% per
year, matures in September 2023 and was issued at a 0.233% discount to the public (the “2023 Senior Notes”). Interest
on the 2023 Senior Notes is payable semi-annually. Prior to August 2023, the Company may redeem the 2023 Senior
Notes at any time in whole or from time to time in part at a make-whole premium plus accrued and unpaid interest. On
or after that date, the Company may redeem the 2023 Senior Notes at any time in whole or from time to time in part at
a redemption price equal to 100% of the principal amount being redeemed plus accrued and unpaid interest.
2028 Senior Notes: The third series of senior notes is $300.0 million in principal amount, bears interest at 4.90% per
year, matures in March 2028 and was issued at a 0.383% discount to the public (the “2028 Senior Notes”). Interest on
the 2028 Senior Notes is payable semi-annually. Prior to December 2027, the Company may redeem the 2028 Senior
Notes at any time in whole or from time to time in part at a make-whole premium plus accrued and unpaid interest. On
or after that date, the Company may redeem the 2028 Senior Notes at any time in whole or from time to time in part at
a redemption price equal to 100% of the principal amount being redeemed plus accrued and unpaid interest.
The interest rate payable on each of the 2021 Senior Notes, 2023 Senior Notes, 2028 Senior Notes and 2030 Senior Notes
will be subject to adjustment from time to time, if either Moody’s Investor Service, Inc. (“Moody’s”) or S&P Global Ratings, a
division of S&P Global Inc. (“S&P”) downgrades the credit rating assigned to such series of senior notes to Ba1 or below or to
BB+ or below, respectively, or subsequently upgrades the credit ratings once the senior notes are at or below such levels. The
following table details the increase in interest rate over the issuance rate by rating with the impact equal to the sum of the
number of basis points next to such rating for a maximum increase of 200 basis points over the issuance rate:
Rating Levels
Moody’s (1)
Rating Agencies
1
2
3
4
Ba1
Ba2
Ba3
B1 or below
B+ or below
S&P (1)
BB+
BB
BB-
Interest Rate Increase (2)
25 basis points
50 basis points
75 basis points
100 basis points
Including the equivalent ratings of any substitute rating agency.
(1)
(2) Applies to each rating agency individually.
Subordinated Notes
In March 2018, the Company issued fixed-to-floating rate subordinated notes due March 2048 with principal amount of
$400.0 million (the “Subordinated Notes”), which bear interest from March 2018 to March 2028 at an annual rate of 7.00%,
payable semi-annually. The Subordinated Notes will bear interest at an annual rate equal to three-month LIBOR plus 4.135%,
payable quarterly, beginning in June 2028. On or after March 2028, the Company may redeem the Subordinated Notes in whole
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at any time or in part from time to time, at a redemption price equal to their principal amount plus accrued and unpaid interest
provided that if they are not redeemed in whole, a minimum amount must remain outstanding. At any time prior to March 2028,
the Company may redeem the Subordinated Notes in whole but not in part after the occurrence of a tax event, rating agency
event or regulatory capital event as defined in the global note representing the Subordinated Notes, at a redemption price equal
to (i) with respect to a rating agency event, 102% of their principal amount and (ii) with respect to a tax event or regulatory
capital event, their principal amount plus accrued and unpaid interest.
In addition, so long as no event of default with respect to the Subordinated Notes has occurred and is continuing, the
Company has the right, on one or more occasions, to defer the payment of interest on the Subordinated Notes for one or more
consecutive interest periods for up to five years as described in the global note representing the Subordinated Notes. During a
deferral period, interest will continue to accrue on the Subordinated Notes at the then-applicable interest rate. At any time when
the Company has given notice of its election to defer interest payments on the Subordinated Notes, the Company generally may
not make payments on or redeem or purchase any shares of the Company’s capital stock or any of its debt securities or
guarantees that rank upon the Company’s liquidation on a parity with or junior to the Subordinated Notes, subject to certain
limited exceptions.
The Company used the proceeds from the 2021 Senior Notes, the 2023 Senior Notes, the 2028 Senior Notes and the
Subordinated Notes, together with the proceeds from the issuance of its 6.50% Series D Mandatory Convertible Preferred
Stock, par value of $1.00 per share (the “MCPS”), available cash on hand at closing and common stock consideration, to fund
the TWG acquisition and pay related fees and expenses. A portion of the aggregate proceeds was used to repay the Company’s
then-outstanding $350.0 million of 2.50% Senior Notes upon maturity in March 2018.
Other Notes
In March 2013, the Company issued two series of senior notes with an aggregate principal amount of $700.0 million. The
first series was $350.0 million in principal amount, bore interest at 2.50% per year and was repaid at maturity in March 2018.
The second series is $350.0 million in principal amount and was issued at a 0.365% discount to the public. This series bears
interest at 4.00% per year and matures in March 2023. Interest is payable semi-annually. The Company may redeem the
outstanding series of senior notes in whole or in part at any time and from time to time before maturity at the redemption price
set forth in the global note representing the outstanding series of senior notes.
In February 2004, the Company issued senior notes with an aggregate principal amount of $475.0 million at a 0.61%
discount to the public, which bear interest at 6.75% per year and matures in February 2034. Interest is payable semi-annually.
These senior notes are not redeemable prior to maturity. In December 2016 and August 2019, the Company completed a cash
tender offers of $100.0 million each in aggregate principal amount of such senior notes. A loss on extinguishment of debt of
$31.4 million was reported for the year ended December 31, 2019 and the outstanding aggregate principal amount of the senior
notes was $275.0 million as of December 31, 2019.
Credit Facility and Commercial Paper Program
The Company has a five-year senior unsecured $450.0 million revolving credit agreement (the “Credit Facility”) with a
syndicate of banks arranged by JPMorgan Chase Bank, N.A. and Wells Fargo Bank, National Association. The Credit Facility
provides for revolving loans and the issuance of multi-bank, syndicated letters of credit and letters of credit from a sole issuing
bank in an aggregate amount of $450.0 million, which may be increased up to $575.0 million. The Credit Facility is available
until December 2022, provided the Company is in compliance with all covenants. The Credit Facility has a sublimit for letters
of credit issued thereunder of $50.0 million. The proceeds of these loans may be used for the Company’s commercial paper
program or for general corporate purposes.
The Company’s commercial paper program requires the Company to maintain liquidity facilities either in an available
amount equal to any outstanding notes from the program or in an amount sufficient to maintain the ratings assigned to the notes
issued from the program. The Company’s commercial paper is rated AMB-1 by A.M. Best, P-3 by Moody’s and A-2 by S&P.
The Company’s subsidiaries do not maintain commercial paper or other borrowing facilities. This program is currently backed
up by the Credit Facility, of which $441.0 million was available at December 31, 2019, and $9.0 million letters of credit were
outstanding.
The Company did not use the commercial paper program during the years ended December 31, 2019 or 2018 and there
were no amounts relating to the commercial paper program outstanding as of December 31, 2019 or 2018. The Company made
no borrowings using the Credit Facility during the years ended December 31, 2019 or 2018 and no loans were outstanding as of
December 31, 2019 or 2018.
Term Loan and Bridge Loan Facilities
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In March 2018, the commitments under the Company’s $1.50 billion senior unsecured bridge loan facility were
terminated. In May 2018, the commitments under the Company’s senior unsecured term loan facility were terminated. During
the year ended December 31, 2018, the Company incurred $9.8 million of expense related to the amortization of costs
capitalized in connection with such facilities.
Covenants
The Credit Facility contains restrictive covenants including, but not limited to:
(i)
Maintenance of a maximum consolidated total debt to capitalization ratio on the last day of any fiscal quarter of
not greater than 0.35 to 1.0, subject to certain exceptions; and
(ii) Maintenance of a consolidated adjusted net worth in an amount not less than a “Minimum Amount” equal to the
sum of (a) the greater of 70% of the Company’s consolidated adjusted net worth on the date of the closing of the
TWG acquisition and $2.72 billion, (b) 25% of consolidated net income for each fiscal quarter (if positive)
beginning with the first fiscal quarter ending after the date of the closing of the TWG acquisition and (c) 25% of
the net cash proceeds received from any capital contribution to, or issuance of any capital stock, disqualified
capital stock and hybrid securities, received after the closing of the TWG acquisition.
In the event of a breach of certain covenants, all obligations under the Credit Facility, including unpaid principal and
accrued interest and outstanding letters of credit, may become immediately due and payable.
Interest Rate Derivatives
In March 2018, the Company exercised a series of derivative transactions it had entered into in 2017 to hedge the interest
rate risk related to expected borrowing to finance the TWG acquisition. The Company determined that the derivatives qualified
for hedge accounting as effective cash flow hedges and recognized a deferred gain of $26.7 million upon settlement that was
reported through other comprehensive income. The deferred gain is being recognized as a reduction in interest expense related
to the 2023 Senior Notes, the 2028 Senior Notes and the Subordinated Notes on an effective yield basis. The amortization of the
deferred gain for the years ended December 31, 2019 and 2018 was $3.0 million and $2.2 million, respectively. The remaining
deferred gain as of December 31, 2019 and 2018 was $21.5 million and $24.5 million, respectively. Additionally, the Company
expensed $8.6 million of the premium paid for the derivatives as a component of interest expense for the year ended December
31, 2018.
20. Equity Transactions
Common Stock
Changes in the number of shares of common stock outstanding are as follows for the periods presented:
Shares of common stock outstanding, beginning
Issuance of shares of common stock for TWG acquisition
Vested restricted stock and restricted stock units, net (1)
Issuance related to performance share units (1)
Issuance related to ESPP
Shares of common stock repurchased
Shares of common stock outstanding, ending
December 31,
2019
2018
2017
61,908,979
—
248,333
117,581
88,498
(2,417,498)
59,945,893
52,417,812
10,399,862
170,426
110,137
80,425
(1,269,683)
61,908,979
55,941,480
—
185,890
138,337
85,314
(3,933,209)
52,417,812
(1) Vested restricted stock, restricted stock units and performance share units are shown net of shares of common stock retired to cover participant income
tax liabilities.
The Company is authorized to issue 800,000,000 shares of common stock. In addition, 150,001 shares of Class B
common stock and 400,001 shares of Class C common stock are authorized but have not been issued.
Stock Repurchase
On November 5, 2018, the Company’s Board of Directors (the “Board”) authorized the Company to repurchase up to an
additional $600.0 million of its outstanding common stock.
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During the year ended December 31, 2019, the Company repurchased 2,417,498 shares of the Company’s outstanding
common stock at a cost of $274.9 million, exclusive of commissions, leaving $486.3 million remaining under the total
repurchase authorization at December 31, 2019. During the years ended December 31, 2018 and 2017, the Company
repurchased 1,269,683 and 3,933,209 shares of the Company’s outstanding common stock at a cost, exclusive of commissions,
of $132.3 million and $389.5 million, respectively.
The timing and the amount of future repurchases will depend on market conditions, the Company’s financial condition,
results of operations and liquidity and other factors.
Issuance of Mandatory Convertible Preferred Stock
In March 2018, the Company issued 2,875,000 shares of the MCPS at a public offering price of $100.00 per share. The
net proceeds from the sale of the MCPS was $276.4 million after deducting underwriting discounts and offering expenses.
Refer to Note 19 for further details on the use of proceeds from this offering.
Each outstanding share of MCPS will convert automatically on March 15, 2021 into between 0.9374 (the “minimum
conversion rate”) and 1.1248 shares of common stock, subject to customary anti-dilution adjustments. At any time prior to
March 2021, holders may elect to convert each share of MCPS into shares of common stock at the minimum conversion rate or
in the event of a fundamental change at the specified rates defined in the Certificate of Designations of the MCPS.
Dividends on the MCPS will be payable on a cumulative basis when, as and if declared, at an annual rate of 6.50% of the
liquidation preference of $100.00 per share. The Company may pay declared dividends in cash or, subject to certain limitations,
in shares of the Company’s common stock, or in any combination of cash and shares of the Company’s common stock
quarterly, commencing in June 2018 and ending in March 2021. No dividend or distribution may be declared or paid on
common stock or any other class or series of junior stock, and no common stock or any other class or series of junior stock or
parity stock may be purchased, redeemed or otherwise acquired for consideration unless all accumulated and unpaid dividends
on the MCPS for all preceding dividend periods have been declared and paid in full, subject to certain limited exceptions. The
Company paid preferred stock dividends of $18.7 million and $14.2 million for the years ended December 31, 2019 and 2018,
respectively.
21. Stock Based Compensation
In accordance with the guidance on share-based compensation, the Company recognized stock-based compensation costs
based on the grant date fair value. For the years ended December 31, 2019, 2018 and 2017, the Company recognized
compensation costs net of a 5% per year estimated forfeiture rate on a pro-rated basis over the remaining vesting period.
Long-Term Equity Incentive Plan
Under the Assurant, Inc. 2017 Long-Term Equity Incentive Plan (the “ALTEIP”), as amended in May 2019, the Company
is authorized to issue up to 1,588,797 new shares of the Company’s common stock to employees, officers and non-employee
directors. Under the ALTEIP, the Company may grant awards based on shares of its common stock, including stock options,
stock appreciation rights (“SARs”), restricted stock (including performance shares), unrestricted stock, restricted stock units
(“RSUs”), performance share units (“PSUs”) and dividend equivalents. All share-based grants are awarded under the ALTEIP.
The Compensation Committee of the Board (the “Compensation Committee”) awards RSUs and PSUs annually. RSUs
and PSUs are promises to issue actual shares of common stock at the end of a vesting period or performance period. The RSUs
granted to employees under the ALTEIP are based on salary grade and performance and generally vest one-third each year over
a three-year period. RSUs receive dividend equivalents in cash during the restricted period and do not have voting rights during
the restricted period. RSUs granted to non-employee directors also vest one-third each year over a three-year period, however,
issuance of vested shares and payment of dividend equivalents is deferred until separation from Board service. PSUs accrue
dividend equivalents during the performance period based on a target payout and will be paid in cash at the end of the
performance period based on the actual number of shares issued.
Under the ALTEIP, the Company’s CEO is authorized by the Board to grant common stock, restricted stock and RSUs to
employees other than the Company’s executive officers. The Compensation Committee recommends the annual share allotment
that can be awarded by the CEO under this program. Restricted stock and RSUs granted under this program may have different
vesting periods.
The fair value of RSUs is estimated using the fair market value of a share of the Company’s common stock at the date of
grant. The fair value of PSUs is estimated using the Monte Carlo simulation model. The number of shares of common stock a
participant will receive upon vesting of a PSU award is contingent upon the Company’s performance with respect to selected
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metrics, as identified below. The payout levels for 2019, 2018 and 2017 awards can vary between 0% and 200% (maximum) of
the target (100%) ALTEIP award amount, based on the Company’s level of performance against the selected metrics.
2019 and 2017 PSU Performance Goals. The Compensation Committee established total shareholder return and net
operating earnings per diluted share, excluding reportable catastrophes, as the two equally weighted performance measures for
PSU awards in 2019 and 2017. Total shareholder return is defined as appreciation in Company’s common stock plus dividend
yield to stockholders and will be measured by the performance of the Company relative to the S&P 500 Index over the three-
year performance period. Net operating earnings per diluted common share, excluding reportable catastrophes, is a Company-
specific profitability metric and is defined as the Company’s net operating earnings, excluding reportable catastrophes, divided
by the number of fully diluted common shares outstanding at the end of the period. This metric is an absolute metric that is
measured against a three-year cumulative target established by the Compensation Committee at the award date and is not tied
to the performance of peer companies.
2018 PSU Performance Goals. In July 2018, the Compensation Committee granted PSUs to the management committee
that reflect the remaining half of each executive’s annual target long-term incentive opportunity plus an additional opportunity
to further incentivize and retain executives with respect to the TWG acquisition. Payout for the PSUs is determined by
reference to two metrics measured over a thirty-month performance period: (i) total shareholder return relative to the S&P 500
Index (weighted at 60%) and (ii) the realization of net pre-tax synergies in connection with the TWG acquisition (weighted at
40%) provided that a net operating earnings per share (excluding reportable catastrophes) goal is met in 2020. The aggregate
grant date fair value of the additional target opportunity provided to all members of the management committee, including the
Company’s CEO and other named executive officers, was $11.1 million. The additional target opportunity granted to the
Company’s CEO had a grant date fair value of $4.0 million.
Restricted Stock Units
A summary of the Company’s outstanding RSUs is presented below:
Restricted stock units outstanding at December 31, 2018
Grants (1)
Vests (2)
Forfeitures and adjustments
Restricted stock units outstanding at December 31, 2019
Restricted stock units vested, but deferred at December 31, 2019
Restricted Stock
Units
Weighted-
Average
Grant-Date
Fair Value
864,404
$
299,487
(374,702)
(39,235)
749,954
57,602
$
$
90.26
102.86
88.83
96.41
95.69
71.19
(1) The weighted average grant date fair value for RSUs granted in 2018 and 2017 was $93.20 and $99.40, respectively.
(2) The total fair value of RSUs vested was $38.4 million, $25.3 million and $29.4 million for the years ended December 31, 2019, 2018
and 2017, respectively.
The following table shows a summary of RSU activity during the years ended December 31, 2019, 2018 and 2017:
RSU compensation expense
Income tax benefit
RSU compensation expense, net of tax
Years Ended December 31,
2019
2018
2017
$
$
29.5
(5.3)
24.2
$
$
36.0
(6.5)
29.5
$
$
23.7
(8.3)
15.4
As of December 31, 2019, there was $21.5 million of unrecognized compensation cost related to outstanding RSUs. That
cost is expected to be recognized over a weighted-average period of 1.05 years.
Performance Share Units
A summary of the Company’s outstanding PSUs is presented below:
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Performance share units outstanding, December 31, 2018
Grants (1)
Vests (2)
Performance adjustment (3)
Forfeitures and adjustments
Performance share units outstanding, December 31, 2019
Performance
Share Units
Weighted-
Average
Grant-Date
Fair Value
634,908
$
250,603
(195,490)
(51,731)
(16,280)
622,010
$
102.91
105.23
81.90
79.23
105.90
112.38
(1) The weighted average grant date fair value for PSUs granted in 2018 and 2017 was $123.51 and $112.23, respectively.
(2) The total fair value of PSUs vested was $19.7 million, $16.5 million and $22.5 million for the years ended December 31, 2019, 2018
and 2017, respectively.
(3) Represents the change in PSUs issued based upon the attainment of performance goals established by the Company.
PSU grants above represent initial target awards and do not reflect potential increases or decreases resulting from the
financial performance objectives to be determined at the end of the prospective performance period. The actual number of
PSUs to be issued at the end of each performance period will range from 0% to 200% of the initial target awards.
The following table shows a summary of PSU activity during the years ended December 31, 2019, 2018 and 2017:
PSU compensation expense
Income tax benefit
PSU compensation expense, net of tax
Years Ended December 31,
2019
2018
2017
$
$
23.2
(2.7)
20.5
$
$
19.6
(3.1)
16.5
$
$
10.5
(3.7)
6.8
Portions of the compensation expense recorded in prior periods were reversed in 2017 related to the Company’s level of
actual performance as measured against pre-established performance goals and peer group results. As of December 31, 2019,
there was $24.0 million of unrecognized compensation cost related to outstanding PSUs. That cost is expected to be recognized
over a weighted-average period of 0.92 years.
The fair value of PSUs with market conditions was estimated on the date of grant using a Monte Carlo simulation model,
which utilizes multiple variables that determine the probability of satisfying the market condition stipulated in the award.
Expected volatilities for awards granted during the years ended December 31, 2019, 2018 and 2017 were based on the
historical prices of the Company’s common stock and peer group. The expected term for grants issued during the years ended
December 31, 2019, 2018 and 2017 was assumed to equal the average of the vesting period of the PSUs. The risk-free rate was
based on the U.S. Treasury yield curve in effect at the time of grant.
Expected volatility
Expected term (years)
Risk free interest rate
Employee Stock Purchase Plan
For awards granted during the
years ended December 31,
2019
2018
2017
20.92%
2.80
2.40%
23.17%
2.46
2.64%
21.81%
2.81
1.62%
Under the Employee Stock Purchase Plan (the “ESPP”), the Company is authorized to issue up to 5,000,000 new shares
of common stock to employees who are participants in the ESPP. The ESPP allows eligible employees to contribute, through
payroll deductions, portions of their after-tax compensation in each offering period toward the purchase of shares of the
Company’s common stock. There are two offering periods during the year (January 1 through June 30 and July 1 through
December 31) and shares of common stock are purchased at the end of each offering period at 90% of the lower of the closing
price of the common stock on the first or last day of the offering period. Participants must be employed on the last trading day
of the offering period in order to purchase shares of common stock under the ESPP. The maximum number of shares of
common stock that can be purchased is 5,000 per employee. Participants’ contributions are limited to a maximum contribution
of $7.5 thousand per offering period, or $15.0 thousand per year.
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The ESPP is offered to individuals who are scheduled to work a certain number of hours per week, have been
continuously employed for at least six months by the start of the offering period, are 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 2020, the Company issued 39,645 shares of common stock at a discounted price of $98.09 for the offering
period of July 1, 2019 through December 31, 2019. In January 2019, the Company issued 42,950 shares of common stock at a
discounted price of $80.50 for the offering period of July 1, 2018 through December 31, 2018.
In July 2019, the Company issued 45,515 shares of common stock to employees at a discounted price of $81.09 for the
offering period of January 1, 2019 through June 30, 2019. In July 2018, the Company issued 40,571 shares of common stock to
employees at a discounted price of $89.31 for the offering period of January 1, 2018 through June 30, 2018.
The compensation expense recorded related to the ESPP was $1.3 million, $1.5 million and $1.3 million for the years
ended December 31, 2019, 2018 and 2017, respectively. The related income tax benefit for disqualified disposition was $0.2
million for the years ended December 31, 2018 and 2017. There was no income tax benefit for disqualified disposition for the
year ended December 31, 2019.
The fair value of each award under the ESPP was estimated at the beginning of each offering period using the Black-
Scholes option-pricing model and assumptions in the table below. Expected volatilities are based on implied volatilities from
traded options on the Company’s common stock and the historical volatility of the Company’s common stock. The risk-free
rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
The dividend yield is based on the current annualized dividend and common stock price as of the grant date.
Expected volatility
Risk free interest rates
Dividend yield
Expected term (years)
Non-Stock Based Incentive Plans
Deferred Compensation
For awards issued during the
years ended December 31,
2019
2018
2017
18.47 - 26.91%
20.90 - 27.73%
21.83 - 27.20%
2.10 - 2.56%
2.18 - 2.63%
0.5
1.61 - 2.14%
1.49 - 1.56%
0.5
0.37 - 0.65%
1.61 - 1.69%
0.5
The Company’s deferred compensation programs consist of the AIP, the ASIC and the ADC. The AIP and the ASIC
provided key employees the ability to exchange a portion of their compensation for options to purchase certain third-party
mutual funds. The AIP and the ASIC were frozen in December 2004 and no additional contributions can be made to either the
AIP or the ASIC. Effective March 1, 2005 and amended and restated on January 1, 2008, the ADC Plan was established in
order to comply with the American Jobs Creation Act of 2004 (the “Jobs Act”) and Section 409A of the Internal Revenue Code
of 1986, as amended (the “IRC”). The ADC provides key employees the ability to defer a portion of their eligible compensation
to be notionally invested in a variety of mutual funds. Deferrals and withdrawals under the ADC are intended to be fully
compliant with the Jobs Act definition of eligible compensation and distribution requirements.
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22. Accumulated Other Comprehensive Income
Certain amounts included in the consolidated statements of comprehensive income are net of reclassification adjustments.
The following tables summarize those reclassification adjustments (net of taxes) for the periods indicated:
Year Ended December 31, 2019
Foreign
currency
translation
adjustment
Net unrealized
gains on
securities
Net unrealized
gains on
derivative
transactions
OTTI
Unamortized
net (losses) on
Pension Plans
Accumulated
other
comprehensive
income (loss)
Balance at December 31, 2018
$
(375.6) $
301.0
$
18.4
$
15.1
$
(114.3) $
(155.4)
Change in accumulated other
comprehensive income before
reclassifications
Amounts reclassified from
accumulated other comprehensive
income
Net current-period other
comprehensive income (loss)
16.7
564.6
1.0
—
16.7
(9.1)
(2.3)
555.5
(1.3)
17.1
$
0.4
—
0.4
15.5
$
(4.5)
578.2
0.1
(11.3)
(4.4)
(118.7) $
566.9
411.5
Balance at December 31, 2019
$
(358.9) $
856.5
$
Year Ended December 31, 2018
Foreign
currency
translation
adjustment
Net unrealized
gains on
securities
Net unrealized
gains on
derivative
transactions
OTTI
Unamortized
net (losses) on
Pension Plans
Accumulated
other
comprehensive
income (loss)
Balance at December 31, 2017
$
(281.5) $
581.2
$
— $
17.9
$
(83.6) $
234.0
Change in accumulated other
comprehensive income before
reclassifications
Amounts reclassified from
accumulated other comprehensive
income
Net current-period other
comprehensive (loss) income
Cumulative effect of change in
accounting principles (1)
(94.2)
(367.6)
20.1
(6.7)
(15.2)
(463.6)
—
25.3
(94.2)
(342.3)
0.1
62.1
(1.7)
18.4
—
—
(6.7)
3.9
2.5
26.1
(12.7)
(437.5)
(18.0)
(114.3) $
48.1
(155.4)
Balance at December 31, 2018
$
(375.6) $
301.0
$
18.4
$
15.1
$
(1)
See Note 2 for additional information.
Balance at December 31, 2016
Change in accumulated other
comprehensive income before
reclassifications
Amounts reclassified from
accumulated other comprehensive
income
Net current-period other
comprehensive income (loss)
Balance at December 31, 2017
Year Ended December 31, 2017
Foreign
currency
translation
adjustment
Net unrealized
gains on
securities
OTTI
Unamortized net
(losses) on
Pension Plans
Accumulated
other
comprehensive
income (loss)
$
(322.1) $
459.3
$
20.6
$
(63.2) $
94.6
40.6
—
40.6
140.2
(2.7)
(22.1)
156.0
(18.3)
121.9
—
1.7
(16.6)
(2.7)
17.9
$
(20.4)
(83.6) $
139.4
234.0
$
(281.5) $
581.2
$
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The following tables summarize the reclassifications out of AOCI for the periods indicated.
Details about AOCI components
Amount reclassified from AOCI
Years Ended December 31,
2019
2018
2017
Affected line item in the statement where
net income is presented
Net unrealized (gains) losses on
securities
Unrealized gains on derivative
transactions
Amortization of pension and
postretirement unrecognized net
periodic benefit cost:
Amortization of net loss
Settlement loss
Total reclassifications for the period
$
$
$
$
$
$
$
(11.5) $
2.4
(9.1) $
(3.0) $
0.7
(2.3) $
— $
0.1
0.1
—
0.1
$
(11.3) $
32.0
(6.7)
25.3
$
$
(2.2) $
0.5
(1.7) $
2.7
0.5
3.2
(0.7)
2.5
26.1
$
$
$
Net realized gains on investments,
excluding other-than-temporary
impairment losses
(28.2)
9.9 Provision for income taxes
(18.3) Net of tax
Interest expense
—
— Provision for income taxes
— Net of tax
2.6
(1)
— (1)
2.6 Total before tax
(0.9) Provision for income taxes
1.7 Net of tax
(16.6) Net of tax
(1)
These AOCI components are included in the computation of net periodic pension cost. See Note 24 for additional information.
23. Statutory Information
The Company’s insurance subsidiaries prepare financial statements in accordance with Statutory Accounting Principles
(“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) VOBA 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, intangible assets and goodwill are different under SAP than under GAAP; and (9)
the criteria for obtaining reinsurance accounting treatment is different under SAP than under GAAP, and SAP allows net
presentation of insurance reserves and reinsurance recoverables.
The combined statutory net income, excluding intercompany dividends and surplus note interest, and capital and surplus
of the Company’s U.S. domiciled statutory insurance subsidiaries is as follows:
Property & Casualty (“P&C”) companies
Life and Health (“L&H”) companies
Total statutory net income (1)
Years Ended December 31,
2019
2018
2017
$
$
313.3
104.7
418.0
$
$
234.0
157.5
391.5
$
$
267.8
214.0
481.8
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P&C companies
L&H companies
Total statutory capital and surplus (1)
December 31,
2019
2018
$
$
1,623.2
405.7
2,028.9
$
$
1,641.2
392.7
2,033.9
(1)
Results for 2019 and 2018 included $35.9 million and $26.0 million of statutory net income for the years ended December 31, 2019 and 2018,
respectively, and $361.0 million and $393.4 million in statutory capital and surplus as of December 31, 2019 and 2018, respectively, from Virginia
Surety Company, an insurance subsidiary from the TWG acquisition. Additionally, results for 2017 included $41.5 million of statutory net income for
the year ended December 31, 2017 from Time Insurance Company, an insurance subsidiary that was sold in the fourth quarter 2018.
The Company also has non-insurance subsidiaries and foreign insurance subsidiaries that are not subject to SAP. The
statutory net income and statutory capital and surplus amounts presented above do not include foreign insurance subsidiaries in
accordance with SAP.
Insurance enterprises are required by state insurance departments to adhere to minimum 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 any of the Company’s regulated U.S domiciled insurance subsidiaries in
excess of a certain amount (i.e., extraordinary dividends) must be approved by the subsidiary’s domiciliary jurisdiction
department of insurance. Ordinary dividends, for which no regulatory approval is generally required, are limited to amounts
determined by a formula, which varies by jurisdiction. The formula for the majority of the jurisdictions in which the
Company’s subsidiaries are domiciled is based on the prior year’s statutory net income or 10% of the statutory surplus as of the
end of the prior year. Some jurisdictions limit ordinary dividends to the greater of these two amounts, others limit them to the
lesser of these two amounts and some jurisdictions exclude prior year realized capital gains from prior year net income in
determining ordinary dividend capacity. Some jurisdictions 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. Based on the dividend restrictions under applicable laws and regulations, the maximum
amount of dividends that the Company’s U.S domiciled insurance subsidiaries could pay to the Company in 2020 without
regulatory approval is $423.7 million. 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.
State regulators require insurance companies to meet minimum capitalization standards designed to ensure that they can
fulfill obligations to policyholders. Minimum capital requirements are based on the RBC Ratio, which is a ratio of a company’s
total adjusted capital (“TAC”) to its RBC. TAC is equal to statutory surplus adjusted to exclude certain statutory liabilities.
RBC is calculated by applying specified factors to various asset, premium, expense, liability, and reserve items.
Generally, if a company’s RBC Ratio is below 100% (the “Authorized Control Level”), the insurance commissioner of
the company’s jurisdiction of domicile is authorized to take control of the company, to protect the interests of policyholders. If
the RBC Ratio is greater than 100% but less than 200% (the “Company Action Level”), the company must submit a RBC plan
to the commissioner of the jurisdiction of domicile. Corrective actions may also be required if the RBC Ratio is greater than the
Company Action Level but the company fails certain trend tests.
As of December 31, 2019, the TAC of each of the Company’s insurance subsidiaries exceeded the Company Action Level
and no trend tests that would require regulatory action were violated. As of December 31, 2019, the TAC of the Company’s
L&H entities subject to RBC requirements was $447.5 million. The corresponding Authorized Control Level was $65.2
million. As of December 31, 2019, the TAC of the Company’s P&C entities subject to RBC requirements was $1.63 billion.
The corresponding Authorized Control Level was $335.7 million.
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24. Retirement and Other Employee Benefits
Defined Benefit Plans
The Company and its subsidiaries participate in a non-contributory, qualified defined benefit pension plan (“Assurant
Pension Plan”) covering substantially all employees. The Assurant Pension Plan is considered “qualified” because it meets the
requirements of IRC Section 401(a) (“IRC 401(a)”) and the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”). The Assurant Pension Plan is a pension equity plan with a grandfathered final average earnings plan for a certain
group of 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 Assurant Pension Plan sufficient to meet the
minimum funding requirements in ERISA, plus such additional amounts as the Company may determine to be appropriate from
time to time up to the maximum permitted. The funding policy considers several factors to determine such additional amounts,
including items such as the amount of service cost plus 15% of the Assurant Pension Plan deficit and the capital position of the
Company. During the year ended December 31, 2019, there were no contributions to the Assurant Pension Plan. Due to the
Assurant Pension Plan’s current funding status, no contributions to the Assurant Pension Plan are expected during the year
ending December 31, 2020. Assurant Pension Plan assets are maintained in a separate trust. Assurant Pension Plan assets and
benefit obligations are measured as of December 31, 2019.
The Company also has various non-contributory, non-qualified supplemental plans covering certain employees including
the Assurant Executive Pension Plan and the Assurant Supplement Executive Retirement Plan (the “SERP”). Since these plans
are “non-qualified” they are not subject to the requirements of IRC 401(a) and ERISA. As such, the Company is not required,
and does not, fund these plans. The qualified and nonqualified plans are referred to as “Pension Benefits” unless otherwise
noted. The Company has the right to modify or terminate these benefits; however, the Company will not be relieved of its
obligation to plan participants for their vested benefits.
In addition, the Company provides certain life and health care benefits (“Retirement Health Benefits”) for retired
employees and their dependents. On July 1, 2011, the Company terminated certain health care benefits for employees who did
not qualify for “grandfathered” status and no longer offers these benefits to new hires. The Company contribution, plan design
and other terms of the remaining benefits did not change for those grandfathered employees. The Company has the right to
modify or terminate these benefits.
Effective January 1, 2014, the Pension Benefits plans were closed to new hires. Effective January 1, 2016, the Assurant
Pension Plan was amended and split into two separate plans, the Assurant Pension Plan No. 1 (“Plan No. 1”) and the Assurant
Pension Plan No. 2 (“Plan No. 2”). Plan No. 1 generally covered all eligible employees (including the active population as of
January 1, 2016, the remainder of the terminated vested population and all Puerto Rico participants). Plan No. 2 generally
included a subset of the terminated vested population and the total population who commenced distribution of their accrued
benefit prior to January 1, 2016. Assets for Plan No. 1 and Plan No. 2 remained in the Assurant, Inc. Pension Plan Trust.
Effective December 31, 2017, Plan No. 1 and Plan No. 2 were merged back together into the Assurant Pension Plan.
Effective March 1, 2016, the Pension Benefits and Retirement Health Benefits (together, the “Plans”) were amended such
that no additional benefits will be earned after February 29, 2016.
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The following table presents information on the Plans for the periods indicated:
Change in projected benefit obligation
Projected benefit obligation at beginning of year
Interest cost
Actuarial (loss) gain, including curtailments and settlements
Benefits paid
Projected benefit obligation at end of year
Change in plan assets
Fair value of plan assets at beginning of year
Actual return (loss) on plan assets
Employer contributions
Benefits paid (including administrative expenses)
Fair value of plan assets at end of year
Funded status at end of year
Pension Benefits
Retirement Health Benefits
2019
2018
2019
2018
$
$
$
$
$
(752.2) $
(28.6)
(99.5)
55.2
(825.1) $
732.3
$
119.7
13.7
(56.7)
809.0
$
(16.1) $
(823.1) $
(26.3)
46.9
50.3
(752.2) $
$
807.1
(32.5)
9.2
(51.5)
732.3
$
(19.9) $
(94.5) $
(3.1)
7.5
4.7
(85.4) $
41.9
$
6.6
0.2
(4.7)
44.0
$
(41.4) $
(104.0)
(3.3)
7.7
5.1
(94.5)
48.8
(2.0)
0.2
(5.1)
41.9
(52.6)
In accordance with the guidance on retirement benefits, the Company aggregates the results of the qualified and non-
qualified plans as “Pension Benefits” and is required to disclose the aggregate projected benefit obligation, accumulated benefit
obligation and fair value of plan assets, if the obligations within those plans exceed plan assets.
As of December 31, 2019 and 2018, the fair value of plan assets, projected benefit obligation, funded status at end of year
and the accumulated benefit obligation of Pension Benefits were as follows:
Qualified Pension Benefits
Unfunded Nonqualified
Pension Benefits
Total Pension Benefits
2019
2018
2019
2018
2019
2018
Fair value of plan assets
Projected benefit obligation
Funded status at end of year
Accumulated benefit obligation
$
$
$
809.0
(742.6)
66.4
742.6
$
$
$
732.3
(667.2)
65.1
667.2
$
$
$
— $
(82.5)
(82.5) $
$
82.5
— $
(85.0)
(85.0) $
$
85.0
$
809.0
(825.1)
(16.1) $
$
825.1
732.3
(752.2)
(19.9)
752.2
Amounts recognized in the consolidated balance sheets consist of:
Assets
Liabilities
Pension Benefits
Retirement Health Benefits
2019
2018
2019
2018
$
$
66.4
$
(82.5) $
65.1
$
(85.0) $
— $
(41.4) $
—
(52.6)
Amounts recognized in AOCI consist of:
Net (loss) gain
Prior service (cost) credit
Pension Benefits
Retirement Health Benefits
2019
2018
2017
2019
2018
2017
$
$
(157.4) $
(0.5)
(157.9) $
(141.9) $
(0.6)
(142.5) $
(122.0) $
(0.6)
(122.6) $
8.5
—
8.5
$
$
(2.5) $
—
(2.5) $
(6.1)
—
(6.1)
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Components of net periodic benefit cost, recorded in underwriting, general and administrative expenses in the
consolidated statements of operations, and other amounts recognized in AOCI for the years ended December 31 were as
follows:
Net periodic benefit cost
Interest cost
Expected return on plan assets
Amortization of net loss (gain)
Curtailment/settlement loss (gain)
Net periodic benefit cost
Other changes in plan assets and benefit
obligations recognized in accumulated other
comprehensive income
Net loss (gain)
Amortization of net (loss) gain
Total recognized in accumulated other
comprehensive income (loss)
Total recognized in net periodic benefit cost
and other comprehensive income (loss)
$
$
$
$
$
Pension Benefits
Retirement Health Benefits
2019
2018
2017
2019
2018
2017
$
28.6
(35.5)
1.2
0.1
(5.6) $
$
26.3
(36.2)
2.7
0.5
(6.7) $
$
26.3
(50.0)
2.6
—
(21.1) $
$
3.1
(1.9)
(1.2)
—
— $
3.3
(2.2)
—
—
1.1
$
$
16.8
(1.3)
15.5
9.9
$
$
$
23.1
(3.3)
19.8
13.1
$
$
$
28.1
(2.6)
25.5
4.4
$
$
$
(12.2) $
1.2
(3.5) $
—
(11.0) $
(3.5) $
(11.0) $
(2.4) $
3.4
(3.0)
—
—
0.4
5.9
—
5.9
6.3
The Company uses a five-year averaging method to determine the market-related value of Pension Benefits plan assets,
which is used to calculate the expected return of plan assets component of the Plans’ expense. Under this methodology, asset
gains/losses that result from actual returns which differ from the Company’s expected long-term rate of return on assets
assumption are recognized in the market-related value of assets on a level basis over a five-year period. The difference between
actual as compared to expected asset returns for the Plans will be fully reflected in the market-related value of plan assets over
the next five years using the methodology described above. Other post-employment benefit assets under the Retirement Health
Benefits are valued at fair value.
The estimated net loss of Pension Benefits that will be amortized from AOCI into net periodic benefit cost over the next
fiscal year was $5.0 million. There was no estimated prior service credit of Pension Benefits that will be amortized from AOCI
into net periodic benefit cost over the next fiscal year. There was no estimated prior service credit (cost) and no estimated net
gain (loss) of Retirement Health Benefits that will be amortized from AOCI into net periodic benefit cost over the next fiscal
year.
Determination of the projected benefit obligation was based on the following weighted-average assumptions for the years
ended December 31:
Qualified Pension Benefits
2019
2018
2017 Plan
No. 1
2017 Plan
No. 2
Unfunded
Nonqualified Pension Benefits
Retirement Health Benefits
2019
2018
2017
2019
2018
2017
Discount rate
3.27%
4.36%
3.67% 3.67%
3.11%
4.21%
3.49%
3.23%
4.31%
3.63%
Determination of the net periodic benefit cost was based on the following weighted-average assumptions for the years
ended December 31:
Qualified Pension Benefits
2019
2018
2017 Plan
No. 1
2017 Plan
No. 2
Unfunded
Nonqualified Pension Benefits
Retirement Health Benefits
2019
2018
2017
2019
2018
2017
Discount rates:
Effective discount
rate for benefit
obligations
Effective rate for
interest on benefit
obligations
Expected long-term
return on plan assets
4.33%
3.68%
4.35%
4.16%
4.21%
3.49%
3.91%
4.30%
3.63%
4.17%
3.98%
3.31%
3.54%
3.48%
3.88%
3.09%
3.10%
3.99%
3.27%
3.52%
4.75%
4.75%
6.75%
6.75%
—%
—%
—%
4.75%
4.75%
6.75%
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The selection of the Company’s discount rate assumption reflects the rate at which the Plans’ obligations could be
effectively settled at December 31, 2019, 2018 and 2017. The methodology for selecting the discount rate was to match each
Plan’s cash flows to that of a yield curve that provides the equivalent yields on zero-coupon corporate bonds for each maturity.
The yield curve utilized in the cash flow analysis was comprised of 210 bonds rated AA by either Moody’s or S&P’s with
maturities between zero and 28 years. The discount rate for each Plan is the single rate that produces the same present value of
cash flows. The Company utilizes a split rate approach for purposes of determining the benefit obligations and service cost as
well as a spot rate approach for the calculation of interest on these items in the determination of the net periodic benefit cost.
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
long-term rate of return on Plan assets reflects the average rate of earnings expected on the funds invested or to be invested.
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. The Company believes the current assumption reflects the projected
return on the invested assets, given the current market conditions and the modified portfolio structure. Actual return (loss) on
Plan assets was 16.3%, (4.0)% and 11.1% for the years ended December 31, 2019, 2018 and 2017, respectively.
The assumed health care cost trend rates used in measuring the accumulated postretirement benefit obligation and net
periodic benefit cost were as follows:
Health care cost trend rate assumed for next year:
Pre-65 Non-reimbursement Plan
Post-65 Non-reimbursement Plan (Medical)
Post-65 Non-reimbursement Plan (Rx)
Pre-65 Reimbursement Plan
Post-65 Reimbursement Plan
Rate to which the cost trend rate is assumed to decline (the ultimate trend
rate)
Year that the rate reaches the ultimate trend rate
Pre-65 Non-reimbursement Plan
Post-65 Non-reimbursement Plan (Medical & Rx)
Pre-65 Reimbursement Plan
Post-65 Reimbursement Plan
Retirement Health Benefits
2019
2018
2017
8.2%
5.9%
13.5%
9.9%
9.9%
4.5%
2038
2038
2038
2038
8.0%
5.9%
13.0%
10.4%
10.4%
4.5%
2037
2037
2037
2037
11.1%
5.9%
13.5%
10.8%
10.8%
4.5%
2037
2037
2037
2037
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:
One percentage point increase in health care cost trend rate
Effect on postretirement benefit obligation
One percentage point decrease in health care cost trend rate
Effect on postretirement benefit obligation
Retirement Health Benefits
2019
2018
2017
$
$
0.7
$
0.7
$
0.7
(1.0) $
(0.9) $
(1.0)
The assets of the Plans are managed to maximize their long-term pre-tax investment return, subject to the following dual
constraints: minimization of required contributions and maintenance of solvency requirements. It is anticipated that periodic
contributions to the Plans will, for the foreseeable future, be sufficient to meet benefit payments thus allowing the balance to be
managed according to a long-term approach. The Benefit Plan Investment Committee (“BPIC”) for the Plans meets on a
quarterly basis and reviews the re-balancing of existing fund assets and the asset allocation of new fund contributions.
The goal of the Company’s asset strategy is to ensure that the growth in the value of the Plan’s assets over the long-term,
both in real and nominal terms, manages (controls) 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. Diversification by asset classes stabilizes total
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results over short-term time periods. Each asset class is externally managed by outside investment managers appointed by the
BPIC. Derivatives may be used consistent with the Plan’s investment objectives established by the BPIC. All securities must be
U.S. Dollar denominated.
The BPIC oversees the investment of the Company’s plan assets and periodically reviews the investment strategies,
strategic asset allocation, liabilities and portfolio structure of the Company’s plan assets. After a 2017 review and considering
the funded status of the Assurant Pension Plan, the BPIC transitioned plan assets to a new target asset allocation consisting of
80% fixed income, 10% real estate, 5% hedge funds and 5% equities.
The assets of the Plans are primarily invested in fixed maturity securities. Interest rate risk is hedged by aligning the
duration of the fixed maturity securities with the duration of the liabilities. Specifically, interest rate swaps can be used if
needed to synthetically extend the duration of fixed maturity securities to match the duration of the liabilities, as measured on a
projected benefit obligation basis. In addition, the Plans’ fixed income securities have exposure to credit risk. In order to
adequately diversify and limit exposure to credit risk, the BPIC established parameters which include a limit on the asset types
that managers are permitted to purchase, maximum exposure limits by sector and by individual issuer (based on asset quality)
and minimum required ratings on individual securities. As of December 31, 2019, 81% of plan assets were invested in fixed
maturity securities and 16%, 15% and 13% of those securities were concentrated in the energy and power, finance and real
estate, and communication industries, with no exposure to any single creditor in excess of 4%, 11% and 12% of those
industries, respectively. As of December 31, 2019, 3% of plan assets were invested in equity securities and 90% of the Plans’
equity securities were invested in a mutual fund that attempts to replicate the return of the S&P 500 Index by investing its
assets in large capitalization stocks that are included in the S&P 500 Index using a weighting similar to the S&P 500 Index. The
remainder of the assets are invested in real estate and other alternative assets.
The fair value hierarchy for the Company’s qualified pension plan and other postretirement benefit plan assets at
December 31, 2019 by asset category, is as follows:
Qualified Pension Benefits
Financial Assets
Cash equivalents:
December 31, 2019
Total
Level 1
Level 2
Short-term investment funds
$
9.7
$
— $
Equity securities:
Preferred stock
Mutual funds- U.S. listed large cap
Fixed maturity securities:
U.S. & foreign government and government agencies and authorities
Corporate- U.S. & foreign investment grade
Corporate- U.S. & foreign high yield
Other investments measured at net asset value (1)
Total financial assets
2.6
22.1
133.0
477.4
48.8
109.7
803.3 (2) $
$
2.6
22.1
—
—
—
—
24.7
$
9.7
—
—
133.0
477.4
48.8
—
668.9
(1)
(2)
In accordance with fair value measurements and disclosures guidance, certain investments that are measured at fair value using the net asset value
practical expedient have not been classified in the fair value hierarchy. The net asset values of $39.3 million, $8.4 million and $62.0 million as of
December 31, 2019 are used as a practical expedient to fair value of the multi-strategy hedge fund, private equity fund and real estate fund, respectively.
The difference between the fair value of Plan assets above and the amount used in determining the funded status is due to interest receivable, which is
not required to be included in the fair value hierarchy.
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F-81
Retirement Health Benefits
Financial Assets
Cash equivalents:
December 31, 2019
Total
Level 1
Level 2
Short-term investment funds
$
0.5
$
— $
Equity securities:
Preferred stock
Mutual funds- U.S. listed large cap
Fixed maturity securities:
U.S. & foreign government and government agencies and authorities
Corporate- U.S. & foreign investment grade
Corporate- U.S. & foreign high yield
Other investments measured at net asset value (1)
Total financial assets
0.1
1.2
7.2
26.0
2.7
$
6.0
43.7 (2) $
0.1
1.2
—
—
—
—
1.3
$
0.5
—
—
7.2
26.0
2.7
—
36.4
(1)
(2)
In accordance with fair value measurements and disclosures guidance, certain investments that are measured at fair value using the net asset value
practical expedient have not been classified in the fair value hierarchy. The net asset values of $2.1 million, $0.5 million and $3.4 million as of
December 31, 2019 are used as a practical expedient to fair value of the multi-strategy hedge fund, private equity fund and real estate fund, respectively.
The difference between the fair value of Plan assets above and the amount used in determining the funded status is due to interest receivable, which is
not required to be included in the fair value hierarchy.
The fair value hierarchy for the Company’s qualified pension plan and other postretirement benefit plan assets at
December 31, 2018 by asset category, is as follows:
Qualified Pension Benefits
Financial Assets
Cash and cash equivalents:
Short-term investment funds
Equity securities:
Preferred stock
Mutual funds- U.S. listed large cap
Fixed maturity securities:
U.S. & foreign government and government agencies and authorities
Corporate- U.S. & foreign investment grade
Corporate- U.S. & foreign high yield
Other investments measured at net asset value (1)
Total financial assets
December 31, 2018
Total
Level 1
Level 2
$
11.8
$
— $
11.8
3.5
40.9
179.4
311.1
72.6
108.6
727.9 (2) $
$
3.5
40.9
—
—
—
—
44.4
$
—
—
179.4
311.1
72.6
—
574.9
(1)
(2)
In accordance with fair value measurements and disclosures guidance, certain investments that are measured at fair value using the net asset value
practical expedient have not been classified in the fair value hierarchy. The net asset values of $38.9 million, $9.3 million and $60.4 million as of
December 31, 2018 are used as a practical expedient to fair value of the multi-strategy hedge fund, private equity fund and real estate fund, respectively.
The difference between the fair value of Plan assets above and the amount used in determining the funded status is due to interest receivable, which is
not required to be included in the fair value hierarchy.
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F-82
Retirement Health Benefits
Financial Assets
Cash and cash equivalents:
Short-term investment funds
Equity securities:
Preferred stock
Mutual funds- U.S. listed large cap
Fixed maturity securities:
U.S. & foreign government and government agencies and authorities
Corporate- U.S. & foreign investment grade
Corporate- U.S. & foreign high yield
Other investments measured at net asset value (1)
Total financial assets
December 31, 2018
Total
Level 1
Level 2
$
0.7
$
— $
0.2
2.3
10.3
17.8
4.2
$
6.2
41.7 (2) $
0.2
2.3
—
—
—
—
2.5
$
0.7
—
—
10.3
17.8
4.2
—
33.0
(1)
(2)
In accordance with fair value measurements and disclosures guidance, certain investments that are measured at fair value using the net asset value
practical expedient have not been classified in the fair value hierarchy. The net asset values of $2.2 million, $0.5 million and $3.5 million as of
December 31, 2018 are used as a practical expedient to fair value of the multi-strategy hedge fund, private equity fund and real estate fund,
respectively.
The difference between the fair value of Plan assets above and the amount used in determining the funded status is due to interest receivable, which is
not required to be included in the fair value hierarchy.
Level 1 and Level 2 securities are valued using various observable market inputs obtained from a pricing service. The
pricing service prepares estimates of fair value measurements for the Company’s Level 2 securities using proprietary valuation
models based on techniques such as matrix pricing which include observable market inputs. Observable market inputs for
Level 1 and Level 2 securities are consistent with the observable market inputs described in Note 10.
The Company obtains one price for each investment. A quarterly analysis is performed to assess if the evaluated prices
represent a reasonable estimate of their fair value. This process involves quantitative and qualitative analysis and is overseen by
benefits, investment and accounting professionals. Examples of procedures performed include, but are not limited to, initial and
on-going review of pricing service methodologies, review of pricing statistics and trends, and comparison of prices for certain
securities with two different appropriate price sources for reasonableness. Following this analysis, the Company uses the best
estimate of fair value based upon all available inputs. The pricing service provides information regarding their pricing
procedures so that the Company can properly categorize the Plans’ financial assets in the fair value hierarchy.
The following pension benefits are expected to be paid over the next ten-year period:
2020
2021
2022
2023
2024
2025 - 2029
Total
Defined Contribution Plan
Pension
Benefits
Retirement
Health
Benefits
$
$
64.4
51.6
52.2
51.2
51.8
253.1
$
524.3
$
5.0
5.2
5.4
5.5
5.6
27.5
54.2
The Company and its subsidiaries participate in a defined contribution plan covering substantially all employees. The
defined contribution plan provides benefits payable to participants on retirement or disability and to beneficiaries of
participants in the event of the participant’s death. The amounts expensed by the Company related to this plan were $38.4
million, $36.9 million and $37.0 million for the years ended December 31, 2019, 2018 and 2017, respectively.
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F-83
25. Earnings per Common Share
The following table presents net income, the weighted average common shares used in calculating basic earnings per
common share (“EPS”) and those used in calculating diluted EPS for each period presented below. Diluted EPS reflects the
incremental common shares from: (1) common shares issuable upon vesting of PSUs and ESPP using the treasury stock
method; and (2) common shares issuable upon conversion of the MCPS using the if-converted method. Refer to Notes 20 and
21 for further information regarding potential common stock issuances. The outstanding RSUs have non-forfeitable rights to
dividend equivalents and are therefore included in calculating basic and diluted EPS under the two-class method.
Numerator
Net income attributable to stockholders
Less: Preferred stock dividends
Net income attributable to common stockholders
Less: Common stock dividends paid
Undistributed earnings
Denominator
Weighted average common shares outstanding used in basic
earnings per common share calculations
Incremental common shares from:
PSUs
ESPP
MCPS
Weighted average common shares used in diluted earnings per
common share calculations
Earnings per common share – Basic
Distributed earnings
Undistributed earnings
Net income attributable to common stockholders
Earnings per common share – Diluted
Distributed earnings
Undistributed earnings
Net income attributable to common stockholders
Years Ended December 31,
2019
2018
2017
382.6
(18.7)
363.9
(151.4)
212.5
$
$
251.0
(14.2)
236.8
(133.8)
103.0
$
$
519.6
—
519.6
(119.0)
400.6
61,942,969
59,239,608
54,986,654
332,873
37,626
—
260,904
45,012
—
284,835
39,543
—
62,313,468
59,545,524
55,311,032
2.44
3.43
5.87
2.43
3.41
5.84
$
$
$
$
2.26
1.74
4.00
2.25
1.73
3.98
$
$
$
$
2.16
7.29
9.45
2.15
7.24
9.39
$
$
$
$
$
$
Average PSUs totaling 20, 39,065 and 68,110 for the years ended December 31, 2019, 2018 and 2017, respectively, were
outstanding but were anti-dilutive and thus not included in the computation of diluted EPS under the treasury stock method.
Average MCPS totaling 2,695,025 and 2,357,090 for the years ended December 31, 2019 and 2018, respectively, were anti-
dilutive and thus not included in the computation of diluted EPS under the if-converted method.
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F-84
26. Quarterly Results of Operations (Unaudited)
The Company’s quarterly results of operations for the years ended December 31, 2019 and 2018 are summarized in the
tables below:
2019
Total revenues
Income (loss) before provision for income taxes
Net income (loss) attributable to common stockholders
Basic per share data:
Income (loss) before provision for income taxes
Net income (loss)
Diluted per share data (1):
Income (loss) before provision for income taxes
Net income (loss)
2018
Total revenues
Income before provision for income taxes
Net income attributable to common stockholders
Basic per share data:
Income before provision for income taxes
Net income
Diluted per share data:
Income before provision for income taxes
Net income
178.8
122.9
2.92
2.01
2.78
1.91
Three Month Periods Ended
March 31
June 30
September 30
December 31
$
2,435.6
$
2,545.5
$
217.0
161.0
183.3
139.5
2,499.3
(24.6)
(59.5)
$
2,606.4
$
$
$
$
3.47
2.57
3.30
2.52
$
$
$
$
2.95
2.24
2.81
2.21
$
$
$
$
(0.40) $
(0.96) $
(0.40) $
(0.96) $
March 31
June 30
September 30
December 31
$
1,638.6
$
1,831.7
$
2,270.3
$
2,317.0
136.5
106.0
2.57
1.99
2.52
1.96
$
$
$
$
$
$
$
$
78.3
62.2
1.37
1.09
1.37
1.09
$
$
$
$
75.8
48.3
1.19
0.76
1.19
0.76
$
$
$
$
42.9
20.3
0.68
0.32
0.68
0.32
(1)
In accordance with earnings per share guidance, diluted per common share amounts are computed in the same manner as basic per common share
amounts when a loss from operations exists.
Fourth quarter 2019 and third quarter 2019 results reflect the impact of $32.5 million and $124.8 million after-tax charges
related to the investment in Iké, respectively. Refer to Note 5 for additional information. Third quarter 2019 results also reflect
the impact of $36.3 million after-tax of reportable catastrophes, primarily related to Hurricane Dorian, and a $9.9 million after-
tax reduction to net income to adjust for the net over-capitalization of deferred acquisition costs, primarily at one of the Global
Preneed international subsidiaries, occurring over a ten-year period.
Quarterly 2018 results reflect the results of the acquired TWG operations beginning June 1, 2018 and the sale of our
Mortgage Solutions business on August 1, 2018. Refer to Notes 3 and 4, respectively, for additional information.
Fourth quarter 2018 results reflect the impact of $95.6 million after-tax of reportable catastrophes, primarily related to
Hurricane Michael and the wildfires in California. This was partially offset by an $18.4 million gain on the sale of Time
Insurance Company. Fourth quarter 2018 results included a $6.2 million after-tax reduction to fourth quarter 2018 net income
to adjust for the understated 2018 catastrophe reinsurance premium estimates recorded during the first three quarters of 2018.
Third quarter 2018 results reflect the impact of $67.7 million after-tax of reportable catastrophes, primarily related to
Hurricane Florence and an increase in reserves for claims on Hurricane Maria. This was partially offset by $18.3 million of net
losses in foreign exchange, primarily related to a re-measurement as result of Argentina’s highly inflationary economy.
The Company performed both a qualitative and quantitative assessment of the materiality of the two adjustments and
concluded that the effects were not material to the Company’s financial position, results of operations or cash flows for any
previously reported quarterly or annual financial statements or for the current period in which they were adjusted.
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F-85
27. Commitments and Contingencies
Leases
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.
As of December 31, 2019, the lease liability and right-of-use asset was $76.4 million and $69.5 million, respectively.
These balances are included in accounts payable and other liabilities and other assets, respectively, in the consolidated balance
sheets. For the year ended December 31, 2019, the operating lease cost recognized for leases with terms in excess of 12 months
was $22.1 million and related cash outflows reducing the lease liability was $21.3 million. At December 31, 2019, the weighted
average remaining lease term and discount rate was 7.0 years and 4.4%, respectively. For the year ended December 31, 2019,
the short-term lease cost recognized for leases with terms of 12 months or less was $4.2 million.
At December 31, 2019, the lease liability by maturity is as follows:
2020
2021
2022
2023
2024
Thereafter
Total future lease payments
Less imputed interest
Total lease liability
$
$
20.4
18.8
14.3
11.0
8.3
28.6
101.4
(25.0)
76.4
Rent expense was $27.4 million and $23.8 million for the years ended December 31, 2018 and 2017, respectively.
Sublease income was $0.7 million and $5.9 million for the years ended December 31, 2018 and 2017, respectively.
Future minimum payments under purchase agreements totaled $4.5 million as of December 31, 2019, with payment of
$4.5 million due in 2020.
Letters of Credit
In the normal course of business, letters of credit are issued primarily to support reinsurance arrangements in which the
Company is the reinsurer. These letters of credit are supported by commitments under which the Company is required to
indemnify the financial institution issuing the letter of credit if the letter of credit is drawn. The Company had $12.1 million
and $13.2 million of letters of credit outstanding as of December 31, 2019 and 2018, respectively.
Legal and Regulatory Matters
The Company is involved in a variety of litigation and legal and regulatory proceedings relating to its current and past
business operations and, from time to time, it may become involved in other such actions. In particular, the Company is a
defendant in class actions in a number of jurisdictions regarding its Lender-placed Insurance programs. These cases assert a
variety of claims under a number of legal theories. The plaintiffs typically seek premium refunds and other relief. The
Company continues to defend itself vigorously in these class actions. The Company has participated and may participate in
settlements on terms that the Company considers reasonable.
The Company has established an accrued liability for certain legal and regulatory proceedings. The possible loss or range
of loss resulting from such litigation and regulatory proceedings, if any, in excess of the amounts accrued is inherently
unpredictable and uncertain. Consequently, no estimate can be made of any possible loss or range of loss in excess of the
accrual. Although the Company cannot predict the outcome of any pending legal or regulatory proceeding, or the potential
losses, fines, penalties or equitable relief, if any, that may result, it is possible that such outcome could have a material adverse
effect on the Company’s consolidated results of operations or cash flows for an individual reporting period. However, on the
basis of currently available information, management does not believe that the pending matters are likely to have a material
adverse effect, individually or in the aggregate, on the Company’s financial condition.
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Schedule I – Summary of Investments Other – Than – Investments in Related Parties
Assurant, Inc.
December 31, 2019
Cost or
Amortized Cost
Fair Value
(in millions)
Amount at which
shown in balance
sheet
Fixed maturity securities:
U.S. government and government agencies and authorities
$
188.9
$
194.1
$
States, municipalities and political subdivisions
Foreign governments
Asset-backed
Commercial mortgage-backed
Residential mortgage-backed
U.S. corporate
Foreign corporate
Total fixed maturity securities
Equity securities:
Common stocks
Non-redeemable preferred stocks
Mutual funds
Total equity securities
Commercial mortgage loans on real estate
Short-term investments
Other investments
Total investments
216.1
916.9
502.4
212.7
1,235.3
5,679.8
2,112.7
11,064.8
14.5
281.0
46.0
341.5
815.0
402.5
638.9
242.5
1,010.4
503.2
222.1
1,286.3
6,496.6
2,367.2
12,322.4
23.5
319.5
45.5
388.5
843.8
402.5
638.9
194.1
242.5
1,010.4
503.2
222.1
1,286.3
6,496.6
2,367.2
12,322.4
23.5
319.5
45.5
388.5
815.0
402.5
638.9
$
13,262.7
$
14,596.1
$
14,567.3
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Assurant, Inc.
Schedule II – Condensed Balance Sheet (Parent Only)
Assets
Investments:
Equity investment in subsidiaries
$
6,915.8
$
6,461.7
December 31,
2019
2018
(in millions, except number
of shares)
Fixed maturity securities available for sale, at fair value (amortized cost – $256.6 and
$305.0 at December 31, 2019 and 2018, respectively)
Equity securities at fair value
Short-term investments
Other investments
Total investments
Cash and cash equivalents
Receivable from subsidiaries, net
Accrued investment income
Property and equipment, at cost less accumulated depreciation
Other assets
Total assets
Liabilities
Accounts payable and other liabilities
Income tax payable
Debt
Total liabilities
Commitments and Contingencies
Stockholders’ equity
6.50% Series D mandatory convertible preferred stock, par value $1.00 per share, 2,875,000
shares authorized, issued and outstanding at December 31, 2019 and 2018, respectively
Common stock, par value $0.01 per share, 800,000,000 shares authorized, 161,607,866 and
161,153,454 shares issued and 59,945,893 and 61,908,979 shares outstanding at
December 31, 2019 and 2018, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income
Treasury stock, at cost; 101,661,973 and 99,244,475 shares at December 31, 2019 and 2018,
respectively
Total stockholders’ equity
$
$
$
$
269.5
6.4
2.7
112.7
7,307.1
256.7
74.8
2.3
174.8
77.4
7,893.1
222.1
11.3
2,006.9
2,240.3
2.9
1.6
4,537.7
5,966.4
411.5
(5,267.3)
5,652.8
299.6
6.0
2.7
103.7
6,873.7
196.0
48.2
1.6
139.3
43.1
7,301.9
160.5
23.4
2,006.0
2,189.9
2.9
1.6
4,495.6
5,759.7
(155.4)
(4,992.4)
5,112.0
Total liabilities and stockholders’ equity
$
7,893.1
$
7,301.9
See the accompanying Notes to the Parent Only Condensed Financial Statements
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Assurant, Inc.
Schedule II – Condensed Income Statement (Parent Only)
Years Ended December 31,
2019
2018
(in millions)
2017
Revenues
Net investment income
Net realized gains (losses) on investments
Fees and other income
Gain on pension plan curtailment
Equity in net income of subsidiaries
Total revenues
Expenses
General and administrative expenses
Interest expense
Loss on extinguishment of debt
Total expenses
Income before benefit for income taxes
Benefit for income taxes
Net income
$
10.8
$
1.1
205.2
—
593.6
810.7
333.9
142.0
—
475.9
334.8
52.0
386.8
(4.2)
382.6
$
14.7
(0.1)
106.0
—
453.9
574.5
269.9
100.3
—
370.2
204.3
48.3
252.6
(1.6)
251.0
$
$
11.0
(1.0)
138.8
—
619.8
768.6
246.0
49.5
—
295.5
473.1
46.5
519.6
—
519.6
Less: Net income attributable to non-controlling interest
Net income attributable to stockholders
$
See the accompanying Notes to the Parent Only Condensed Financial Statements
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Schedule II – Condensed Statements of Comprehensive Income (Parent Only)
Assurant, Inc.
Net income
Other comprehensive income (loss):
Years Ended December 31,
2019
2018
(in millions)
2017
$
386.8
$
252.6
$
519.6
Change in unrealized gains on securities, net of taxes of $(4.3), $3.0
and $(4.3) for the years ended December 31, 2019, 2018 and 2017,
respectively
Change in unrealized gains on derivative transactions, net of taxes of
$0.4 and $(4.9) for the years ended December 31, 2019 and 2018,
respectively
Change in foreign currency translation, net of taxes of $0.0, $0.0 and
$0.1 for the years ended December 31, 2019, 2018 and 2017,
respectively
Amortization of pension and postretirement unrecognized net periodic
benefit cost and change in funded status, net of taxes of $1.1, $3.4 and
$11.0 for the years ended December 31, 2019, 2018 and 2017,
respectively
Change in subsidiary other comprehensive income
Total other comprehensive income (loss)
Total comprehensive income (loss)
Less: Net income attributable to non-controlling interest
Total comprehensive income (loss) attributable to stockholders
$
16.3
(11.3)
(1.3)
18.4
2.5
—
—
—
(0.1)
(4.2)
556.1
566.9
953.7
(4.2)
949.5
$
(12.7)
(431.9)
(437.5)
(184.9)
(1.6)
(186.5) $
(20.4)
157.4
139.4
659.0
—
659.0
See the accompanying Notes to the Parent Only Condensed Financial Statements
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Assurant, Inc.
Schedule II – Condensed Cash Flows (Parent Only)
Operating Activities
Net cash provided by operating activities
Investing Activities
Sales of:
Fixed maturity securities available for sale
Equity securities available for sale
Other invested assets
Property, buildings and equipment
Subsidiary, net of cash transferred (1)
Maturities, calls, prepayments, and scheduled redemption of:
Fixed maturity securities available for sale
Purchases of:
Fixed maturity securities available for sale
Equity securities available for sale
Other invested assets
Property and equipment and other
Subsidiary, net of cash transferred (2)
Capital contributed to subsidiaries
Return of capital contributions from subsidiaries
Change in short-term investments
Net cash (used in) provided by investing activities
Financing Activities
Years Ended December 31,
2019
2018
(in millions)
2017
$
550.2
$
548.8
$
177.1
363.3
5.9
15.8
3.3
—
16.2
(328.8)
(5.7)
(15.2)
(59.7)
—
(74.8)
24.9
—
(54.8)
413.1
12.6
74.1
0.1
31.5
26.2
(372.8)
(2.8)
(38.8)
(31.9)
(1,490.9)
(61.0)
14.0
11.5
(1,415.1)
589.8
9.7
3.6
26.2
—
47.4
(538.2)
(3.9)
(24.1)
(23.5)
—
(186.6)
41.9
248.8
191.1
Issuance of debt
Repayment of debt, including extinguishment
Issuance of mandatory convertible preferred stock, net of issuance costs
Acquisition of common stock
Preferred stock dividends paid
Common stock dividends paid
Withholding on stock based compensation
Proceeds from transfer of rights to ACA recoverables (Note 4 to the
Consolidated Financial Statements)
Other
Net cash (used in) provided by financing activities
Change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
(1) Amounts for the year ended December 31, 2018 relate to cash received from the sale of Time Insurance Company ($23.9 million). For additional
1,285.7
(350.0)
276.4
(139.3)
(14.2)
(133.8)
1.4
346.7
(379.6)
—
(271.8)
(18.7)
(151.3)
13.3
26.7
—
(434.7)
60.7
196.0
256.7
—
0.1
926.3
60.0
136.0
196.0
$
$
$
—
—
—
(388.9)
—
(118.9)
10.8
—
—
(497.0)
(128.8)
264.8
136.0
information, refer to Note 4 to the Consolidated Financial Statements.
(2) Amounts for the year ended December 31, 2018 primarily consist of $1.49 billion of cash used to fund a portion of the total purchase of the TWG
acquisition, inclusive of the $595.9 million repayment of pre-existing TWG debt at the acquisition date. Refer to Note 3 to the Consolidated Financial
Statements for further information.
See the accompanying Notes to the Parent Only Condensed Financial Statements
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Assurant, Inc.
Notes to the Parent Only Condensed Financial Statements
Assurant, Inc.’s (the “Registrant”) investments in consolidated subsidiaries are stated at cost plus equity in income of
consolidated subsidiaries. The accompanying Parent Only Condensed Financial Statements of the Registrant should be read in
conjunction with the Consolidated Financial Statements and Notes thereto of the registrant and its subsidiaries included in the
Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the Securities and Exchange
Commission on February 19, 2020.
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Assurant, Inc.
Schedule III – Supplementary Insurance Information
Segment
Deferred
acquisition
costs
Future
policy
benefits
and
expenses
Unearned
premiums
Claims
and
benefits
payable
Net
investment
income
Premium
revenue
(in millions)
Year Ended December 31, 2019
Benefits
claims,
losses
and
settlement
expenses
Amortization
of deferred
acquisition
costs
Other
operating
expenses
(1)
Property
and
Casualty
premiums
written
Global
Lifestyle
Global
Housing
Global
Preneed
Corporate
and Other
Total segments
$
5,985.6
$
97.5
$ 15,115.8
$
729.5
$
6,073.7
$
250.8
$
1,516.2
$
1,882.4
$ 3,410.9
$ 1,083.9
136.1
—
1,436.0
651.6
1,885.1
95.2
869.5
221.5
711.6
1,833.7
1,180.2
6,327.6
500.9
29.9
(633.9)
3,382.2
(449.1)
1,276.7
61.2
—
285.3
43.7
269.0
—
78.4
—
73.8
357.0
—
—
$
6,668.0
$
9,807.3
$ 16,603.6
$ 2,687.7
$
8,020.0
$
675.0
$
2,654.7
$
2,182.3
$ 4,553.3
$ 2,917.6
Year Ended December 31, 2018
Global
Lifestyle
Global
Housing
Global
Preneed
Corporate
and Other
$
4,075.1
$
112.2
$ 13,819.9
$
709.8
$
4,291.8
$
189.4
$
1,145.6
$
1,207.1
$ 2,631.3
$
716.8
128.6
—
1,472.5
651.3
1,806.2
80.8
938.4
204.5
837.1
1,852.7
1,051.9
5,943.7
437.3
27.6
(152.6)
3,185.0
(81.7)
1,425.0
58.4
0.5
278.0
263.3
63.9
66.7
50.2
(4.7)
—
270.6
—
—
Total segments
$
5,103.0
$
9,240.9
$ 15,648.0
$ 2,813.7
$
6,156.9
$
598.4
$
2,342.6
$
1,475.5
$ 3,805.7
$ 2,569.5
Year Ended December 31, 2017
Global
Lifestyle
Global
Housing
Global
Preneed
Corporate
and Other
$
2,843.7
$
124.9
$
5,518.8
$
280.1
$
2,576.5
$
114.6
$
700.4
$
1,082.3
$ 1,481.8
$
596.2
114.4
—
1,434.9
1,258.8
1,761.4
75.6
958.4
194.9
953.0
1,760.8
949.9
5,779.2
380.6
27.8
(423.5)
4,493.3
(295.7)
2,215.5
59.5
6.7
262.0
259.1
54.9
70.0
41.6
(47.3)
—
213.5
—
—
Total segments
$
3,484.5
$ 10,397.4
$
7,038.6
$ 3,782.2
$
4,404.1
$
493.8
$
1,870.6
$
1,332.1
$ 2,718.3
$ 2,357.0
(1)
Includes amortization of value of business acquired and underwriting, general and administration expenses.
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Assurant, Inc.
Schedule IV – Reinsurance
Direct amount
Ceded to
other
Companies
Assumed
from other
Companies
(in millions)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
28,750.3
381.3
796.5
13,259.5
14,437.3
555.8
590.5
5,249.3
6,395.6
53,831.6
526.8
1,234.2
9,942.8
11,703.8
599.9
1,114.4
4,588.6
6,302.9
77,852.8
602.8
1,424.4
7,503.6
9,530.8
666.1
775.0
4,998.4
$
$
$
$
$
$
$
$
$
$
$
$
$
$
18,724.6
275.6
620.5
5,738.0
6,634.1
281.9
566.3
3,119.2
3,967.4
50,110.5
402.5
1,067.8
4,229.9
5,700.2
330.7
1,095.8
2,642.6
4,069.1
74,851.8
465.8
1,272.4
3,542.4
5,280.6
404.2
802.0
3,590.8
$
$
$
$
$
$
$
$
$
$
$
$
$
$
516.2
2.9
1.6
212.3
216.8
12.5
0.2
213.8
226.5
554.1
3.8
2.4
147.1
153.3
12.8
0.4
95.6
108.8
614.8
6.1
4.8
143.0
153.9
14.4
0.2
213.5
6,439.5
$
4,797.0
$
228.1
$
Percentage
of amount
assumed
to net
Net amount
10,541.9
4.9 %
108.6
177.6
7,733.8
8,020.0
286.4
24.4
2,343.9
2,654.7
2.7 %
0.9 %
2.7 %
2.7 %
4.4 %
0.8 %
9.1 %
8.5 %
4,275.2
13.0 %
128.1
168.8
5,860.0
6,156.9
282.0
19.0
2,041.6
2,342.6
3.0 %
1.4 %
2.5 %
2.5 %
4.5 %
2.1 %
4.7 %
4.6 %
3,615.8
17.0 %
143.1
156.8
4,104.2
4,404.1
276.3
(26.8)
1,621.1
1,870.6
4.3 %
3.1 %
3.5 %
3.5 %
5.2 %
(0.7)%
13.2 %
12.2 %
Year Ended December 31, 2019
Life Insurance in Force
Premiums:
Life insurance
Accident and health insurance
Property and liability insurance
Total earned premiums
Benefits:
Life insurance
Accident and health insurance
Property and liability insurance
Total policyholder benefits
Year Ended December 31, 2018
Life Insurance in Force
Premiums:
Life insurance
Accident and health insurance
Property and liability insurance
Total earned premiums
Benefits:
Life insurance
Accident and health insurance
Property and liability insurance
Total policyholder benefits
Year Ended December 31, 2017
Life Insurance in Force
Premiums:
Life insurance
Accident and health insurance
Property and liability insurance
Total earned premiums
Benefits:
Life insurance
Accident and health insurance
Property and liability insurance
Total policyholder benefits
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Assurant, Inc.
Schedule V – Valuation and Qualifying Accounts
For the Year Ended December 31, 2019
Valuation allowance for foreign deferred tax
assets
Valuation allowance for mortgage loans on real
estate
Valuation allowance for uncollectible agents
balances
Valuation allowance for uncollectible accounts
Valuation allowance for reinsurance
recoverables
Total
For the Year Ended December 31, 2018
Valuation allowance for foreign deferred tax
assets
Valuation allowance for mortgage loans on real
estate
Valuation allowance for uncollectible agents
balances
Valuation allowance for uncollectible accounts
Valuation allowance for reinsurance
recoverables
Total
For the Year Ended December 31, 2017
Valuation allowance for foreign deferred tax
assets
Valuation allowance for mortgage loans on real
estate
Valuation allowance for uncollectible agents
balances
Valuation allowance for uncollectible accounts
Valuation allowance for reinsurance
recoverables
Total
Additions
Balance at
Beginning of
Year
Charged to
Costs and
Expenses
Charged
to Other
Accounts
(in millions)
Deductions
Balance at
End of
Year
$
26.4
$
50.2
$
— $
— $
76.6
0.4
9.5
8.2
0.2
2.4
(0.8)
—
—
—
0.3
44.8
$
2.5
54.5
$
—
— $
—
2.3
—
—
2.3
$
0.6
9.6
7.4
2.8
97.0
9.2
$
(0.5) $
17.8
$
0.1
$
26.4
1.0
2.3
10.2
0.3
23.0
(0.6)
0.1
0.2
—
8.9
(0.9)
—
(0.8) $
—
25.8
$
$
—
1.8
1.3
—
3.2
$
12.5
$
(3.3) $
— $
— $
2.3
13.8
15.8
0.3
44.7
(1.3)
(3.8)
(4.7)
—
(13.1) $
$
—
0.1
0.1
—
0.2
$
—
7.8
1.0
—
8.8
$
0.4
9.5
8.2
0.3
44.8
9.2
1.0
2.3
10.2
0.3
23.0
$
$
$
$
$
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ABOUT ASSURANT
Assurant, Inc. (NYSE: AIZ) is a leading global provider of lifestyle and housing
solutions that support, protect and connect major consumer purchases.
Anticipating the evolving needs of consumers, Assurant partners with the world’s
leading brands to develop innovative products and services and to deliver an
enhanced customer experience. A Fortune 500 company with a presence in
21 countries, Assurant offers mobile device solutions; extended service contracts;
vehicle protection services; pre-funded funeral insurance; renters insurance;
lender-placed homeowners insurance; and other specialty products.
2019 SUMMARY
$9.3 billion(1)
Total Revenue
$44.3 billion
Assets
$534
million(2)
Holding Company
Liquidity
~50%(3)
Total Shareholder Return,
Net Including
Investor Dividends
63%(4)
Shares Repurchased
Since IPO in 2004
This Annual Report contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.
Please see “Forward-Looking Statements” on page 2 of the Form 10-K included in this Annual Report.
(1) References to total revenue refer to net earned premiums, fees and other income.
(2) Holding company liquidity represents the portion of cash and other liquid marketable securities held at Assurant, Inc., which we
were not otherwise holding for a specific purpose as of the balance sheet date.
(3) Total shareholder return is the appreciation in the Company’s common stock plus dividend yield to stockholders.
(4) Shares repurchased since IPO in 2004 represents total shares repurchased divided by total shares issued since IPO in 2004.
Visit our reports online:
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Learn more about Assurant’s social
responsibility efforts with our latest
Social Responsibility report at
https://ir.assurant.com/our-story/
corporate-responsibility/default.aspx.
OTHER INFORMATION
INVESTOR INFORMATION
Suzanne Shepherd
Senior Vice President, Investor Relations
Assurant, Inc.
28 Liberty Street, 41st Floor
New York, NY 10005
212-859-7062
suzanne.shepherd@assurant.com
Sean Moshier
Director, Investor Relations
Assurant, Inc.
28 Liberty Street, 41st Floor
New York, NY 10005
212-859-5831
sean.moshier@assurant.com
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017
Telephone: 646-471-3000
Fax: 813-286-6000
www.pwc.com/us
SHAREHOLDER INQUIRIES
COMPUTERSHARE
462 South 4th Street
Suite 1600
Louisville, KY 40202
computershare.com
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A
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W
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R
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S
M
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T
Assurant, Inc.
28 Liberty Street
41st Floor
New York, NY 10005
T: 212-859-7000
assurant.com
We’re
Where You
Need Us Most
2019 ANNUAL REPORT
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