Assurant, Inc. — Second Quarter 2021 Form 10-Q
Business context and reporting period. Assurant provides lifestyle and housing protection products and services through Global Lifestyle and Global Housing. This unaudited report covers the quarter and six months ended June 30, 2021, compared with the same 2020 periods. Global Preneed and certain related businesses are presented as discontinued operations and held for sale.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $2,542.3 million | $2,352.0 million | $4,974.9 million | $4,800.7 million |
| Net income from continuing operations | $184.7 million | $164.7 million | $333.2 million | $313.3 million |
| Net income attributable to common stockholders | $203.4 million | $173.5 million | $361.7 million | $323.5 million |
| Diluted EPS, continuing operations | $3.01 | $2.59 | $5.41 | $4.90 |
| Diluted EPS, total | $3.32 | $2.81 | $5.95 | $5.24 |
| Net investment income | $82.9 million | $65.4 million | $159.2 million | $149.0 million |
- Q2 revenue grew 8%; continuing-operations net income grew 12%. For the six months, revenue rose 4% and continuing-operations net income rose 6%.
- Q2 Global Lifestyle net income was $123.8 million, up 2%; Global Housing net income was $93.7 million, up 10%. Corporate and Other reported a $32.8 million loss, improved from $42.5 million.
- Q2 total revenue included $10.3 million of net realized investment gains, versus $28.9 million a year earlier. Six-month realized gains were $11.1 million, versus losses of $55.1 million in 2020.
- Six-month reportable catastrophe losses were $34.9 million, primarily from Texas winter storms, versus $22.9 million in 2020. Q2 catastrophe losses were $0.4 million, versus $10.0 million.
- Six-month claims development was favorable by $34.5 million overall; Global Lifestyle contributed $35.0 million favorable development, partly offset by $4.6 million unfavorable development in Global Housing.
- Continuing-operations operating cash flow was $409.9 million for the six months, versus $170.4 million. Continuing-operations investing cash flow provided $148.1 million; financing activities used $20.8 million. Consolidated operating cash flow, including discontinued operations, was $529.0 million.
- Cash and cash equivalents in continuing operations were $2.746 billion at June 30, 2021, versus $2.208 billion at December 31, 2020. Total investments were $7.894 billion, down from $8.223 billion.
- Debt carrying value was $2.551 billion, up from $2.253 billion at year-end. The company issued $350 million of 2.65% senior notes due 2032 in June; no revolving-credit borrowings were outstanding and $445.5 million was available at quarter-end.
- Total assets were $45.995 billion and total equity was $5.908 billion. Balance-sheet totals include substantial assets and liabilities held for sale: $13.648 billion and $12.485 billion, respectively.
Material changes, outlook, and risks
- Management attributed Q2 continuing-earnings growth mainly to lower COVID-related and corporate expenses, partly offset by lower investment gains. Business growth and investment income were balanced by a return toward more normal claims activity compared with pandemic-affected 2020.
- Global Lifestyle growth reflected Global Automotive sales and mobile trade-in activity, including recent acquisitions; Connected Living results faced weaker international extended-service and mobile performance. Global Housing benefited from Multifamily Housing growth and higher lender-placed rates and insured values, while lower real-estate-owned volumes and higher non-catastrophe claims were offsets.
- In August 2021, after quarter-end, Assurant completed the sale of Global Preneed and related businesses to CUNA for $1.35 billion at closing. Estimated net proceeds were $1.31 billion; the filing estimated an after-tax gain of $726.8 million based on June 30 carrying values, including $614.3 million reclassified from accumulated other comprehensive income. The purchase price is subject to a post-closing true-up. Assurant said it intended to return 75% of net proceeds to shareholders through repurchases within one year of closing.
- In July 2021, Assurant redeemed $350 million of 4.00% notes due 2023 using proceeds from the 2032 notes and cash on hand. It expects to record a $20.7 million extinguishment loss in Q3 2021.
- The 2021 U.S. catastrophe reinsurance program provides $965 million of coverage above an $80 million first-event retention, with lower retention for certain later events. Estimated program premiums were approximately $149 million, compared with $139 million for 2020.
- Management said liquidity was sufficient for the next 12 months, including debt interest and common dividends. It reported $353.3 million of holding-company liquidity at quarter-end, excluding cash and liquid securities reserved for the July debt redemption.
- Key risks include catastrophe and other claims, reserve estimation, investment-market and interest-rate changes, reinsurer and counterparty credit, reliance on major clients and distribution partners, competition, cyber and technology risks, regulation, litigation, and COVID-19 effects. Management said pending legal matters were not believed likely to materially affect financial condition, although outcomes could affect results or cash flows in an individual period.
Important facts for investors to verify
- Track continuing-operations earnings and segment trends separately from discontinued Global Preneed results and the sale gain.
- Confirm the final sale proceeds, post-closing purchase-price adjustment, recognized gain, and timing and execution of the planned shareholder returns.
- Assess catastrophe losses, reinsurance costs and recoverability, and the development of small-commercial run-off reserves.
- Reconcile the debt balance after the July redemption, including the $20.7 million extinguishment charge, and monitor available holding-company liquidity and subsidiary dividend constraints.
- Consider the quality and repeatability of earnings contributions from investment gains, real-estate transactions, favorable reserve development, and lower pandemic-related expenses.