Assurant, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Assurant is a global provider of connected-device, automotive, homeowners, renters and related protection products and services. Results are unaudited and prepared under U.S. GAAP.
Financial results
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue | $2,774.1m | $2,547.8m | $8,148.5m | $7,540.2m |
| Net income | $190.1m | $7.3m | $460.0m | $208.5m |
| Diluted EPS | $3.54 | $0.14 | $8.55 | $3.78 |
| Net cash from operating activities | Not presented for quarter | Not presented for quarter | $775.5m | $319.8m |
Q3 net income margin was approximately 6.9% of revenue, versus 0.3% a year earlier; nine-month margin was approximately 5.6%, versus 2.8%. These are calculated from reported figures. Net investment income was $125.5m in Q3, up from $83.5m, and $343.6m for nine months, up from $261.8m. Net realized investment losses and equity-security fair-value changes were $19.1m in Q3 and $49.7m for nine months, compared with $27.4m and $166.2m, respectively, in 2022.
Segments: Global Lifestyle Adjusted EBITDA was $191.8m in Q3 (up 7%) and $587.7m for nine months (down 6%). Global Housing Adjusted EBITDA was $165.1m in Q3 versus a $38.5m loss, and $388.1m for nine months versus $126.9m. Corporate and Other Adjusted EBITDA was a loss of $26.2m in Q3 and $79.1m for nine months. Adjusted EBITDA is a company-defined non-GAAP measure.
Balance sheet, cash flow and capital
- At September 30, 2023, total assets were $33.21bn, total liabilities $28.72bn and stockholders’ equity $4.49bn. Cash and cash equivalents were $1.43bn; total investments were $7.92bn.
- Debt was $2.08bn, down from $2.13bn at year-end 2022. The company issued $175m of 6.10% senior notes due 2026 and used the proceeds and cash to redeem $175m of 4.20% notes due 2023; the remaining $50m of those notes matured in September. No revolving-credit-facility or commercial-paper borrowings were outstanding; $500m was available under the credit facility.
- Nine-month operating cash flow was $775.5m, investing cash use $640.8m and financing cash use $241.9m. Cash declined $111.4m from year-end to $1.43bn. Management said the operating cash-flow increase mainly reflected timing of mobile-business collections and lower vendor payments for devices.
- Holding-company liquidity was $490.8m, $265.8m above its $225m target minimum. Management believes liquidity is sufficient for the next 12 months, including debt interest and common dividends. U.S. regulated insurance subsidiaries could pay approximately $344.7m in dividends without prior regulatory approval in 2023, subject to applicable requirements.
- Nine-month common dividends were $113.8m; share repurchases were $70.0m, excluding commissions. The Q3 dividend was $0.70 per share. $204.5m remained under the repurchase authorization at September 30.
Changes, outlook and notable items
- Q3 net income rose sharply, principally from lower catastrophe losses and stronger Global Housing results, along with higher investment income and stronger mobile results. Q3 Global Housing catastrophe impact was $26.2m versus $123.8m in Q3 2022. Nine-month improvement also reflected higher lender-placed premiums and lower catastrophe losses; Global Lifestyle earnings declined amid elevated Global Automotive claims costs.
- Global Housing growth reflected higher lender-placed policies in force, insured values and premium rates. Global Lifestyle revenue growth was partly offset by mobile-program changes and runoff programs; its automotive business faced elevated parts and labor costs.
- Net unrealized losses on fixed-maturity securities increased $94.9m during the first nine months, to $732.0m, primarily due to higher Treasury yields. The filing says management considered the losses non-credit-related and did not intend or expect to be required to sell the securities before anticipated recovery. Accumulated other comprehensive loss was $1.05bn.
- The company recorded $18.3m of restructuring costs in the first nine months, including $13.2m in Q3; estimated total costs for the expanded plan are $92.2m, with $21.0m estimated to remain. The plan includes organizational changes and real-estate consolidation, with completion expected by mid-2024. Substantially all charges are expected to be cash.
- A potential sale of the Miami office remained conditional at quarter-end. If completed, Assurant expected a gain in 2024 above the $46m carrying value; there is no assurance a definitive agreement or sale will occur.
- No formal earnings or revenue guidance is provided in the supplied filing text. Management cautions that interim results are not necessarily indicative of full-year results. Key risks include catastrophe and inflation-related claims, reserve-estimation uncertainty, investment and interest-rate risks, reinsurer credit or availability, client concentration/retention, competition, cyber and regulatory matters.
- Legal and regulatory proceedings are ongoing. The company has accrued amounts for certain matters but says any additional possible loss cannot be estimated; management does not believe pending matters are likely to materially affect financial condition, though an individual reporting period could be affected.
Important facts for investors to verify
- Whether Global Housing’s earnings improvement persists as catastrophe experience and reserve development change; Q3 included a $14.6m reserve reduction, compared with $24.3m of prior-year reserve strengthening.
- Whether Global Automotive claims-cost inflation and mobile-program changes continue to weigh on Global Lifestyle results.
- Changes in fixed-income portfolio unrealized losses, credit quality and liquidity needs; fixed maturities had $748.1m of gross unrealized losses at September 30.
- Progress and cash costs of the restructuring plan, and whether the proposed Miami property sale is finalized.
- Insurance-subsidiary dividend capacity, holding-company liquidity and planned dividends or repurchases, considering regulatory and credit-facility constraints.
- Reserve development in non-core sharing-economy and small-commercial lines, where the filing reported $32.0m of unfavorable development for the first nine months of 2023.