Assurant Reports Fourth Quarter and Full-Year 2017 Financial Results

February 8, 2018 4:15 PM

4Q 2017 Net Income of $312.9 million, $5.76 per diluted share

Full-Year 2017 Net Income of $519.6 million, $9.39 per diluted share

4Q 2017 Net Operating Income of $99.9 million, $1.84 per diluted share

Full-Year 2017 Net Operating Income of $220.0 million, $3.98 per diluted share

NEW YORK--(BUSINESS WIRE)-- Assurant, Inc. (NYSE: AIZ), a global provider of risk management solutions, today reported results for the fourth quarter and full-year ended Dec. 31, 2017.

• Key Financial Highlights Full-Year 2017

― $412.5 million of net operating income, up 9 percent, excluding reportable catastrophes*; $7.46 per diluted share, up 22 percent1,2

― 12.4 percent GAAP ROE

― 10.4 percent operating ROE, excluding AOCI and reportable catastrophes3

― Approximately $510 million returned to shareholders in share repurchases and dividends, bringing total returned to $1.5 billion since 2016

― Approximately $540 million of corporate capital available at year-end 2017

* Reportable catastrophes of $192.5 million after-tax include catastrophe losses, net of reinsurance and client profit sharing adjustments, as well as reinstatement and other premiums.

“In 2017, we surpassed our initial expectations for the year and delivered strong growth in net operating income and earnings per share, on a year-over-year basis, excluding catastrophes losses. Consistent with our capital management commitment, we also completed the return of $1.5 billion of capital to shareholders since 2016,” said Assurant President and Chief Executive Officer Alan Colberg.

“We expect to build on this solid foundation in 2018, as we close our acquisition of The Warranty Group and leverage our expanded scale and expertise in key Housing and Lifestyle markets to sustain long-term, profitable growth at Assurant,” Colberg added.

Reconciliation of Net Operating Income to GAAP Net Income

(UNAUDITED) 4Q 4Q 12 Months 12 Months
(in millions, net of tax) 2017 2016 2017 2016
Global Housing $ 89.6 $ 10.8 $ 97.4 $ 188.6
Global Lifestyle 42.8 34.6 178.0 154.4
Global Preneed 4.6 10.9 39.6 42.3
Corporate and other (29.1 ) (20.3 ) (62.8 ) (71.0 )
Interest expense (8.0 ) (9.0 ) (32.2 ) (37.4 )
Net operating income 99.9 27.0 220.0 276.9
Adjustments:
Assurant Health runoff operations (0.9 ) (6.7 ) 10.6 (41.0 )
Assurant Employee Benefits (2.0 ) 8.5
Net realized gains (losses) on investments 3.3 (20.7 ) 19.6 105.4
Amortization of deferred gains and gains on disposal of businesses 13.2 55.4 67.5 256.4
Impact of TCJA at enactment 177.0 177.0
Expenses related to The Warranty Group acquisition (5.7 ) (8.1 )
Change in tax liabilities 27.1 27.1
Loss on extinguishment of debt (15.0 ) (15.0 )
Other adjustments (1.0 ) (6.7 ) 5.9 (25.8 )
GAAP net income $ 312.9 $ 31.3 $ 519.6 $ 565.4

Additional financial information, including a schedule of disclosed items that affected Assurant’s results by business for the last eight quarters, appears on page 21 of the company’s Financial Supplement and is located on Assurant’s Investor Relations website http://ir.assurant.com/investor/default.aspx

Fourth Quarter 2017 Consolidated Results

Full-Year 2017 Consolidated Results

Reportable Segments

Global Housing

(in millions) 4Q17 4Q16 % Change 12M17 12M16 % Change
Net operating income $ 89.6 $ 10.8 730 % $ 97.4 $ 188.6 (48)%
Net earned premiums, fees and other $ 562.8 $ 571.3 (1)% $ 2,175.0 $ 2,288.8 (5)%

Global Lifestyle

(in millions) 4Q17 4Q16 % Change 12M17 12M16 % Change
Net operating income $ 42.8 $ 34.6 24 % $ 178.0 $ 154.4 15 %
Net earned premiums, fees and other $ 913.6 $ 929.1 (2)% $ 3,396.2 $ 3,706.1 (8)%

Global Preneed

(in millions) 4Q17 4Q16 % Change 12M17 12M16 % Change
Net operating income $ 4.6 $ 10.9 (58)% $ 39.6 $ 42.3 (6)%
Net earned premiums, fees and other $ 45.9 $ 42.1 9 % $ 181.0 $ 171.3 6 %

Corporate & Other

(in millions) 4Q17 4Q16 % Change 12M17 12M16 % Change
Net operating loss (5) $ (29.1) $ (20.3) 43 % $ (62.8) $ (71.0) (12)%

Capital Position

Company Outlook

On October 18, 2017, Assurant announced an agreement to acquire The Warranty Group from TPG Capital for $2.5 billion of enterprise value, including The Warranty Group’s existing debt. The acquisition is expected to close in the second quarter of 2018. The impact of the acquisition and the related financing plan are not included in the 2018 outlook.

Based on current market conditions, for full-year 2018 the company expects:

Earnings Conference Call

The fourth quarter 2017 earnings conference call and webcast will be held Friday, Feb. 9, 2018 at 8:30 a.m. ET. The live and archived webcast, along with supplemental information, will be available on Assurant’s Investor Relations website http://ir.assurant.com/investor/default.aspx

About Assurant

Assurant, Inc. (NYSE: AIZ) is a global provider of risk management solutions, protecting where consumers live and the goods they buy. A Fortune 500 company, Assurant focuses on the housing and lifestyle markets, and is among the market leaders in mobile device protection and related services; extended service contracts; vehicle protection; pre-funded funeral insurance; renters insurance; lender-placed homeowners insurance; and mortgage valuation and field services. With approximately $32 billion in assets as of December 31, 2017 and $6 billion in 2017 revenue, Assurant operates in 16 countries, while its Assurant Foundation works to support and improve communities. Learn more at Assurant.com or on Twitter @AssurantNews.

Safe Harbor Statement

Some of the statements included in this news release and its exhibits, particularly those anticipating future financial performance, business prospects, growth and operating strategies and similar matters including with respect to the pending transaction with The Warranty Group and the benefits and synergies of the transaction, 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 “outlook,” “will,” “may,” “can,” “anticipates,” “expects,” “estimates,” “projects,” “intends,” “plans,” “believes,” “targets,” “forecasts,” “potential,” “approximately,” or the negative version of those words and other words and terms with a similar meaning. Any forward-looking statements contained in this news release or its exhibits are based upon our historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Our actual results might differ materially from those projected in the forward-looking statements. The company undertakes no obligation to update or review any forward-looking statements in this news release or the exhibits, whether as a result of new information, future events or other developments. The following risk factors could cause our actual results to differ materially from those currently estimated by management, including those projected in the company outlook:

(i) the successful completion of the pending transaction with The Warranty Group and the effective integration of its operations;
(ii) the loss of significant client relationships or business, distribution sources and contracts;
(iii) the impact of general economic, financial market and political conditions;
(iv) the adequacy of reserves established for future claims;
(v) the impact of catastrophic losses, including human-made catastrophic losses;
(vi) a decline in our credit or financial strength ratings;
(vii) risks related to our international operations, including fluctuations in exchange rates;
(viii) an impairment of the Company’s goodwill or other intangible assets resulting from a sustained significant decline in the Company’s stock price, a decline in actual or expected future cash flows or income, a significant adverse change in the business climate or slower growth rate, among other circumstances;
(ix) a failure to effectively maintain and modernize our information technology systems;
(x) the Company’s vulnerability to system security threats, data protection breaches, cyber-attacks and data breaches compromising client information and privacy;
(xi) significant competitive pressures in our businesses or changes in customer preferences;
(xii) the failure to find and integrate suitable acquisitions and new ventures;
(xiii) a decline in the sales of our products and services resulting from an inability to develop and maintain distribution sources or attract and retain sales representatives;
(xiv) a decrease in the value of our investment portfolio;
(xv) the impact of recently enacted tax reform legislation in the U.S.;
(xvi) the impact of unfavorable outcomes in potential litigation and/or potential regulatory investigations;
(xvii) the extensive regulations we are subject to could increase our costs; restrict the conduct of our business and limit our growth;
(xviii) the failure to successfully manage outsourcing activities, such as functions in our mortgage solution business and call center services;
(xix) a decline in the value of mobile devices in our inventory or those that are subject to guaranteed buyback provisions;
(xx) the unavailability or inadequacy of reinsurance coverage;
(xxi) the insolvency of third parties to whom we have sold or may sell businesses through reinsurance or modified co-insurance;
(xxii) the credit risk of some of our agents that we are exposed to due to the structure of our commission program;
(xxiii) the inability of our subsidiaries to pay sufficient dividends to the holding company; and
(xxiv) the failure to attract and retain key personnel and to provide for succession of senior management and key executives.

For a detailed discussion of the risk factors that could affect our actual results, please refer to the risk factors identified in our SEC reports, including, but not limited to our Annual Report on Form 10-K, as filed with the SEC.

Non-GAAP Financial Measures

(1) Assurant uses net operating income (as defined below), excluding reportable catastrophes, as an important measure of the company’s operating performance. 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 the effect of reportable catastrophes, which can be volatile. The comparable GAAP measure is net income.
(UNAUDITED) 4Q 4Q 12 Months 12 Months
(in millions) 2017 2016 2017 2016
Global Housing, excluding reportable catastrophes $ 92.7 $ 54.7 $ 287.9 $ 291.0
Global Lifestyle* 39.8 34.6 180.0 154.4
Global Preneed 4.6 10.9 39.6 42.3
Corporate and other (29.1 ) (20.3 ) (62.8 ) (71.0 )
Interest expense (8.0 ) (9.0 ) (32.2 ) (37.4 )
Net operating income 100.0 70.9 412.5 379.3
Adjustments, pre-tax:
Assurant Health runoff operations (1.9 ) (5.3 ) 16.0 (47.3 )
Assurant Employee Benefits (3.0 ) 13.8
Net realized gains (losses) on investments 5.0 (31.8 ) 30.1 162.2
Reportable catastrophes (0.1 ) (67.5 ) (295.7 ) (157.4 )
Amortization of deferred gains and gains on disposal of businesses 20.4 85.3 103.9 394.5
Impact of TCJA at enactment 177.0 177.0
Expenses related to The Warranty Group acquisition (8.8 ) (12.5 )
Change in tax liabilities 27.1 27.1
Loss on extinguishment of debt (23.0 ) (23.0 )
Other adjustments (1.8 ) (10.5 ) 9.1 (40.1 )
(Provision) benefit for income taxes (4.0 ) 16.2 52.1 (116.6 )
GAAP net income $ 312.9 $ 31.3 $ 519.6 $ 565.4

*Due to significant flooding from Hurricane Harvey in 3Q 2017, full-year 2017 excludes $2.0 million loss after-tax ($3.1 million pre-tax) related to reportable catastrophes primarily related to vehicle protection products. 4Q 2017 excludes a $3.0 million benefit after-tax ($4.6 million pre-tax) due to favorable development related to 3Q 2017 reportable catastrophes.

(2) Assurant uses net operating income (as defined below) per diluted share, excluding reportable catastrophes, as an important measure of the company's stockholder value. The company believes this metric provides investors a valuable measure of stockholder value because it excludes the effect of reportable catastrophes, which can be volatile. The comparable GAAP measure is net income per diluted share, defined as net income divided by weighted average diluted shares outstanding.
(UNAUDITED) 4Q 4Q 12 Months 12 Months
2017 2016 2017 2016
Net operating income, excluding reportable catastrophes, per diluted share $ 1.84 $ 1.22 $ 7.46 $ 6.12
Adjustments, pre-tax:
Assurant Health runoff operations (0.03 ) (0.08 ) 0.29 (0.77 )
Assurant Employee Benefits (0.05 ) 0.22
Net realized gains (losses) on investments 0.09 (0.55 ) 0.54 2.62
Reportable catastrophes (1.16 ) (5.35 ) (2.54 )
Amortization of deferred gains and gains on disposal of businesses 0.37 1.47 1.87 6.37
Impact of TCJA at enactment 3.26 3.20
Expenses related to The Warranty Group acquisition (0.16 ) (0.23 )
Change in tax liabilities 0.50 0.49
Loss on extinguishment of debt (0.40 ) (0.37 )
Other adjustments (0.04 ) (0.18 ) 0.17 (0.64 )
(Provision) benefit for income taxes (0.07 ) 0.27 0.95 (1.88 )
Net income per diluted share $ 5.76 $ 0.54 $ 9.39 $ 9.13
(3) Assurant uses operating return on equity ("Operating ROE"), excluding accumulated other comprehensive income ("AOCI") and reportable catastrophes, as an important measure of the company’s operating performance. Operating ROE, excluding AOCI and reportable catastrophe losses, equals net operating income (as defined below) for the periods presented divided by average stockholders’ equity, excluding AOCI and reportable catastrophes, for the year-to-date period. The company believes Operating ROE excluding AOCI and reportable catastrophe losses provides investors a valuable measure of the performance of the company’s ongoing business, because it excludes the effect of Assurant Health runoff operations, the divested Assurant Employee Benefits business, which was sold on March 1, 2016, and reportable catastrophes, which can be volatile. The calculation also excludes net realized gains (losses) on investments, amortization of deferred gains and gains on disposal of businesses and those events that are highly variable and do not represent the ongoing operations of the company. The comparable GAAP measure is GAAP return on equity (“GAAP ROE”), defined as net income, for the period presented, divided by average stockholders’ equity for the year.
(UNAUDITED) 4Q 4Q 12 Months 12 Months
2017 2016 2017 2016
Annual operating return on average equity, excluding AOCI and reportable catastrophes 10.2 % 7.2 % 10.4 % 10.5 %
Assurant Health runoff operations (0.1)% (0.7)% 0.3 % (1.1)%
Assurant Employee Benefits —% (0.2)% —% 0.2 %
Net realized gains (losses) on investments 0.3 % (2.1)% 0.5 % 2.9 %
Reportable catastrophes (0.1)% (4.5)% (4.9)% (2.8)%
Amortization of deferred gains and gains on disposal of businesses 1.3 % 5.6 % 1.7 % 7.1 %
Impact of TCJA at enactment 18.0 % —% 4.5 % —%
Expenses related to The Warranty Group acquisition (0.6)% —% (0.2)% —%
Change in tax liabilities 2.8 % —% 0.7 % —%
Loss on extinguishment of debt —% (1.5)% —% (0.4)%
Other adjustments (0.1)% (0.7)% 0.1 % (0.7)%
Change due to effect of including AOCI (1.9)% (0.2)% (0.7)% (2.6)%
Annual GAAP return on average equity 29.8 % 2.9 % 12.4 % 13.1 %
(4) Assurant uses net operating income as an important measure of the company’s operating performance. Net operating income equals net income excluding Assurant Health runoff operations, Assurant Employee Benefits, net realized gains (losses) on investments, amortization of deferred gains and gains on disposal of businesses and other highly variable items. The company believes net operating income provides a valuable measure of the performance of the company’s ongoing business because it excludes the effect of Assurant Health runoff operations and the divested Assurant Employee Benefits business, which the company sold on March 1, 2016. The calculation also excludes net realized gains (losses) on investments, amortization of deferred gains and gains on disposal of businesses and those events that are highly variable and do not represent the ongoing operations of the company. The comparable GAAP measure is net income.
(UNAUDITED) 4Q 4Q 12 Months 12 Months
(in millions) 2017 2016 2017 2016
Net operating income $ 99.9 $ 27.0 $ 220.0 $ 276.9
Adjustments (pre-tax):
Assurant Health runoff operations (1.9 ) (5.3 ) 16.0 (47.3 )
Assurant Employee Benefits (3.0 ) 13.8
Net realized gains (losses) on investments 5.0 (31.8 ) 30.1 162.2
Amortization of deferred gains and gains on disposal of businesses 20.4 85.3 103.9 394.5
Impact of TCJA at enactment 177.0 177.0
Expenses related to The Warranty Group acquisition (8.8 ) (12.5 )
Change in tax liabilities 27.1 27.1
Loss on extinguishment of debt (23.0 ) (23.0 )
Other adjustments (1.8 ) (10.5 ) 9.1 (40.1 )
Provision for income taxes (4.0 ) (7.4 ) (51.1 ) (171.6 )
GAAP net income $ 312.9 $ 31.3 $ 519.6 $ 565.4
(5) Assurant uses Corporate & Other net operating loss as an important measure of the corporate segment’s operating performance. Corporate & Other net operating loss equals Total Corporate & Other segment net income, excluding Assurant Health runoff operations net income (loss), amortization of deferred gains and gains on disposal of businesses, net realized gains (losses) on investments, interest expense and other highly variable items. The company believes Corporate & Other net operating loss provides a valuable measure of the performance of the company’s corporate segment because it excludes the effect of amortization of deferred gains and gains on disposal of businesses, net realized gains (losses) on investments, interest expense and those events that are highly variable and do not represent the ongoing operations of the company’s corporate segment. The comparable GAAP measure is Total Corporate & Other segment net income.
(UNAUDITED) 4Q 4Q 12 Months 12 Months
(in millions) 2017 2016 2017 2016
GAAP Total Corporate & Other segment net income (loss) $ 175.9 $ (23.0 ) $ 204.6 $ 171.6
Excluding: Health runoff operations net (loss) income (0.9 ) (6.7 ) 10.6 (41.0 )
GAAP Corporate & Other segment net income (loss) 176.8 (16.3 ) 194.0 212.6
Adjustments, pre-tax:
Amortization of deferred gains and gains on disposal of businesses (20.4 ) (85.3 ) (103.9 ) (394.5 )
Impact of TCJA at enactment (177.0 ) (177.0 )
Expenses related to The Warranty Group acquisition 8.8 12.5
Change in tax liabilities (27.1 ) (27.1 )
Interest expense 12.3 13.9 49.5 57.6
Net realized (gains) losses on investments (5.0 ) 31.8 (30.1 ) (162.2 )
Loss on extinguishment of debt 23.0 23.0
Other adjustments 1.8 10.5 (9.1 ) 40.1
Provision for income taxes 0.7 2.1 28.4 152.4
Corporate & other net operating loss $ (29.1 ) $ (20.3 ) $ (62.8 ) $ (71.0 )
(6) The company outlook for Corporate & Other full-year net operating loss constitutes forward-looking information and the company believes that it cannot reconcile such forward-looking information to the most comparable GAAP measure without unreasonable efforts. A reconciliation would require the company to quantify amortization of deferred gains and gains on disposal of businesses, interest expense, net realized gains on investments, and change in derivative investment. The last two components cannot be reliably quantified due to the combination of variability and volatility of such components and may, depending on the size of the components, have a significant impact on the reconciliation. The company is able to reasonably quantify a range for the first component for the forecast period, based on certain assumptions relating to future reinsured premium on disposed business during the forecast period. In addition, the company is assuming it does not incur additional debt or extinguish debt in the forecast period. Amortization of deferred gains and gains on disposal of businesses is expected to be approximately $42-50 million after-tax while interest expense is expected to be approximately $42-44 million after-tax. This reflects the lower effective tax rate. In addition, the company is assuming it will refinance $350M of debt maturing in March 2018 but will not incur additional debt in the forecast period.

A summary of net operating income disclosed items is included on page 21 of the company’s Financial Supplement, which is available on Assurant’s Investor Relations website http://ir.assurant.com/investor/default.aspx

Assurant, Inc.Consolidated Statement of Operations (unaudited)Three Months and Twelve Months Ended Dec. 31, 2017 and 2016

4Q 12 Months
2017 2016 2017 2016

(in millions except number of shares and per share amounts)

Revenues
Net earned premiums $ 1,165.4 $ 1,174.7 $ 4,404.1 $ 5,007.3
Fees and other income 366.9 388.8 1,383.1 1,422.5
Net investment income 118.9 135.4 493.8 515.7
Net realized gains (losses) on investments 5.0 (31.8 ) 30.1 162.2
Gain on pension plan curtailment 29.6
Amortization of deferred gains and gains on disposal of businesses 20.4 85.3 103.9 394.5
Total revenues 1,676.6 1,752.4 6,415.0 7,531.8
Benefits, losses and expenses
Policyholder benefits 414.0 428.7 1,870.6 1,808.5
Selling, underwriting, general and administrative expenses 1,092.0 1,232.2 4,050.4 4,794.1
Interest expense 12.3 13.9 49.5 57.6
Loss on extinguishment of debt 23.0 23.0
Total benefits, losses and expenses 1,518.3 1,697.8 5,970.5 6,683.2
Income before (benefit) provision for income taxes 158.3 54.6 444.5 848.6
(Benefit) provision for income taxes (154.6 ) 23.3 (75.1 ) 283.2
Net income $ 312.9 $ 31.3 $ 519.6 $ 565.4
Net income per share:
Basic $ 5.79 $ 0.54 $ 9.45 $ 9.23
Diluted $ 5.76 $ 0.54 $ 9.39 $ 9.13
Dividends per share $ 0.56 $ 0.53 $ 2.15 $ 2.03
Share data:
Basic weighted average shares outstanding 54,019,089 57,503,640 54,986,654 61,261,288
Diluted weighted average shares outstanding 54,334,415 58,162,397 55,311,032 61,934,774

Assurant, Inc.Consolidated Condensed Balance Sheets (unaudited)At Dec. 31, 2017 and Dec. 31, 2016

December 31, December 31,
2017 2016
(in millions)
Assets
Investments and cash and cash equivalents $ 12,550.3 $ 12,511.0
Reinsurance recoverables 9,790.2 9,083.2
Deferred acquisition costs 3,484.5 3,267.4
Goodwill 917.7 830.9
Assets held in separate accounts 1,837.1 1,692.3
Other assets 2,516.7 2,324.3
Assets of consolidated investment entities 746.5
Total assets $ 31,843.0 $ 29,709.1
Liabilities
Policyholder benefits and claims payable $ 14,179.6 $ 13,414.1
Unearned premiums 7,038.6 6,626.5
Debt 1,068.2 1,067.0
Liabilities related to separate accounts 1,837.1 1,692.3
Deferred gain on disposal of businesses 128.1 232.2
Accounts payable and other liabilities 2,736.5 2,578.9
Liabilities of consolidated investment entities 573.4
Total liabilities 27,561.5 25,611.0
Stockholders' equity
Equity, excluding accumulated other comprehensive income 4,036.6 4,003.5
Accumulated other comprehensive income 234.0 94.6
Total Assurant, Inc. stockholders' equity 4,270.6 4,098.1
Non-controlling interest 10.9
Total equity 4,281.5 4,098.1
Total liabilities and equity $ 31,843.0 $ 29,709.1

Assurant, Inc.

Media:

Linda Recupero, 212.859.7005

Senior Vice President, Global Communication

linda.recupero@assurant.com

or

Investor Relations:

Suzanne Shepherd, 212.859.7062

Vice President, Investor Relations

suzanne.shepherd@assurant.com

or

Sean Moshier, 212-859-5831

Manager, Investor Relations

sean.moshier@assurant.com

Source: Assurant, Inc.

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