Business Context and Reporting Period
On October 17, 2017, Assurant, Inc. (the "Company") entered into an Agreement and Plan of Merger with TWG Holdings Limited ("Parent"), TWG Re, Ltd., and Arbor Merger Sub, Inc. The transaction involves a reverse merger where Assurant will become a wholly-owned subsidiary of Parent, which will subsequently change its name to Assurant Ltd. and trade under the ticker symbol "AIZ" on the New York Stock Exchange. Under applicable accounting principles, Assurant is regarded as the acquiring entity.
Key Financial Metrics
This filing primarily details the terms of the merger and financing arrangements rather than Assurant's standalone financial results. However, it includes unaudited summary financial data for the Parent (TWG Holdings) to provide context for the combined entity.
Parent (TWG Holdings) Summary Financial Data (in millions)
| Item | Six Months Ended June 30, 2017 | Year Ended Dec 31, 2016 |
|---|---|---|
| Premium earned and contract fees | $521.2 | $956.3 |
| Total revenue | $572.7 | $1,040.7 |
| Income before income tax | $46.4 | $74.2 |
| Net income | $38.3 | $51.7 |
| Balance Sheet Item | As of June 30, 2017 | As of Dec 31, 2016 |
|---|---|---|
| Total assets | $6,221.0 | $5,931.8 |
| Total reserves | $4,015.2 | $3,803.5 |
| Debt | $591.3 | $592.7 |
| Total liabilities | $5,253.3 | $5,034.9 |
| Total stockholders' equity | $967.7 | $896.9 |
Financing Commitments: To fund the transaction, Assurant secured a $1.0 billion senior unsecured bridge loan facility and a $350 million senior unsecured term loan facility commitment from Morgan Stanley.
Material Changes and Transaction Terms
- Ownership Structure: Post-merger, current Assurant stockholders will own approximately 77% of the combined company, while current Parent equityholders will own approximately 23%.
- Consideration: Each share of Assurant common stock converts into one Parent ordinary share. Parent equityholders will receive approximately $372 million in cash and retain approximately 16 million Parent ordinary shares.
- Stock Price Adjustments: The cash consideration is subject to adjustment based on Assurant's stock price relative to $95.4762. Adjustments apply if the price varies by up to 10% (automatic adjustment) or more than 20% (right to adjust or terminate).
- Accounting Differences: The filing notes that Parent's accounting policies differ from Assurant's, specifically regarding the gross vs. net presentation of revenues and costs. The combined company will adopt Assurant's policies.
Termination Fees
- Change in Recommendation: If Assurant's board changes its recommendation, Assurant must pay a $65 million termination fee to Parent.
- Stockholder Rejection: If Assurant stockholders do not approve the merger, Assurant must pay Parent's out-of-pocket expenses up to $5 million.
Guidance, Outlook, and Risks
The filing contains forward-looking statements regarding the benefits, synergies, and future results of the combined company, which are subject to significant uncertainties. The transaction is contingent upon Assurant stockholder approval, regulatory approvals, and the expiration of antitrust waiting periods. The "Walk-Away Date" is set for October 17, 2018, after which either party may terminate the agreement if the merger has not been consummated.
Risks and Contingencies:
- Failure to obtain necessary regulatory or governmental approvals.
- Failure to secure stockholder approval.
- Material differences in accounting policies between the two entities that may impact future financial reporting.
- Market volatility affecting the stock price adjustment mechanisms.
Key Facts for Investor Verification
- Transaction Status: Verify the outcome of the Assurant stockholder vote and the receipt of all required regulatory approvals.
- Financing Execution: Confirm the final syndication of the $350 million term loan facility beyond Morgan Stanley's initial $70 million commitment.
- Accounting Impact: Review the upcoming Form S-4 for detailed pro forma financial information and the specific impact of aligning Parent's accounting policies with Assurant's.
- Stock Price Sensitivity: Monitor Assurant's stock price relative to the $95.4762 threshold to assess potential adjustments to the cash consideration or termination rights.
- Termination Fees: Note the $65 million fee obligation if the Assurant board changes its recommendation regarding the merger.