Assurant, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. The filing also reports unaudited fourth-quarter results. Assurant is a global provider of insurance, protection, and related services, operating through Global Lifestyle and Global Housing, with Corporate and Other expenses.
Financial performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total revenue | $10.193 billion | $10.188 billion |
| Net income from continuing operations | $276.6 million | $602.9 million |
| Diluted EPS from continuing operations | $5.05 | $10.03 |
| Net cash from continuing operating activities | $596.9 million | $630.5 million |
| Cash and cash equivalents at year-end | $1.537 billion | $2.041 billion |
| Total debt at year-end | $2.130 billion | $2.203 billion |
Fourth-quarter 2022 revenue was $2.653 billion and continuing net income was $68.1 million, compared with $2.575 billion and $124.0 million, respectively, in fourth-quarter 2021. The filing reports debt to total capital of 33.5%. Holding-company liquidity was $446.1 million, and $499.8 million was available under the $500 million revolving credit facility; there were no revolver borrowings or commercial paper outstanding at year-end.
Segments
- Global Lifestyle: Net earned premiums, fees, and other income were $7.936 billion, up 3%. Adjusted EBITDA rose 7% to $753.4 million, supported by North American Connected Living and Global Automotive; results included $24.1 million of real-estate income and an $11.2 million one-time client-contract benefit.
- Global Housing: Net earned premiums, fees, and other income were $2.010 billion, up 4%. Adjusted EBITDA fell 15% to $302.0 million, reflecting higher non-catastrophe claims, inflation-related severity, catastrophe losses and reinsurance costs. Reportable catastrophe impact was $172.7 million, versus $155.1 million in 2021.
- Corporate and Other: Adjusted EBITDA loss widened to $99.2 million from $93.3 million, mainly due to lower investment income and higher employee and technology expenses.
Changes, unusual items, and management outlook
- Continuing net income declined 54%. The main drivers were a swing in equity-security fair-value results, realized losses on fixed-maturity sales, weaker non-core results, restructuring charges, and lower Global Housing earnings. Net realized investment losses and equity-security fair-value changes were $179.7 million, compared with gains of $128.2 million in 2021.
- Net income from continuing operations excludes the large Global Preneed disposal gain recorded in 2021. Total 2021 net income was $1.362 billion, including $758.9 million from discontinued operations; 2022 had no discontinued-operations income.
- Assurant revised prior-period financial statements after identifying an error involving reinsurance of Connected Living claims and benefits payable, dating from late 2018 through first-quarter 2022. The company said the error understated policyholder benefits and overstated net income; 2021 continuing net income was reduced by $10.6 million in the revision. The filing also notes other immaterial corrections.
- The company recorded $52.9 million of 2022 restructuring and impairment charges and estimated total costs of $64.6 million. It expects approximately $55 million in gross annualized run-rate savings by year-end 2024, with more than half expected in 2023. The actions were expected to be completed in 2023.
- Management cited continued growth opportunities in Connected Living, Renters, and Global Automotive, while noting inflation, labor costs, supply-chain constraints, foreign exchange, changing consumer demand, and catastrophe exposure as headwinds. The filing provides no specific earnings or revenue guidance.
- Effective January 1, 2023, segment composition was realigned: certain leased and financed products moved from Global Housing to Global Lifestyle. The change does not affect consolidated results.
Risks and contingencies
- Claims and reserve uncertainty is significant. FY2022 included $77.4 million of unfavorable prior-year loss development in non-core sharing-economy and small-commercial operations, which Assurant expects to exit; Global Housing also had $26.7 million of unfavorable development.
- Inflation and supply-chain disruption can increase claim severity and operating costs. Climate-related and other catastrophes may exceed modeled assumptions or available reinsurance; 2023 catastrophe reinsurance pricing was expected to remain elevated.
- Both operating segments depend on a limited number of significant clients and distribution partners. Client loss, unfavorable renewals, or partner financial or regulatory problems could reduce revenue and cash flow.
- Reinsurance recoverables were $7.006 billion at year-end. Assurant remains liable to policyholders if reinsurers fail to pay; $436.5 million was recoverable from John Hancock for reinsured long-term-care business.
- The company disclosed litigation and regulatory proceedings but said their outcomes and any losses beyond accrued amounts were not estimable. Management did not believe pending matters were likely to materially affect financial condition, while noting individual-period results or cash flows could be materially affected.
- Investment risk increased with higher interest rates: fixed-maturity securities had a $637.1 million net unrealized loss at year-end, versus a $311.4 million net unrealized gain in 2021. Goodwill was $2.603 billion; the company reported no impairment for its core reporting units, but wrote off $7.8 million of goodwill for non-core businesses.
Investor verification priorities
- Review the reinsurance accounting correction, revised comparative results, and related controls and disclosures.
- Track runoff reserves and further adverse development in sharing-economy and small-commercial claims, including recovery of high-deductible receivables.
- Assess Global Housing claim severity, catastrophe experience, and the cost and availability of reinsurance.
- Evaluate whether the planned restructuring savings are achieved and whether the exit of non-core operations limits future losses as intended.
- Monitor cash generation, subsidiary dividend capacity, the September 2023 senior-note maturity, and capital returns relative to liquidity and leverage.