Business Context and Reporting Period
Company: Assurant, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: June 7, 2015
Event: Conclusion of strategic review for the Assurant Health business segment. The Company is exiting the health insurance market to focus on housing and lifestyle specialty protection products.
Key Financial Metrics and Exit Costs
The filing details estimated costs associated with the exit of the health insurance market rather than standard operating financials for the period.
- Total Estimated Pre-Tax Exit Costs: $175 million to $250 million.
- Cost Breakdown:
- Premium deficiency reserves: $60 million to $110 million.
- Severance and retention: $85 million to $95 million.
- Long-lived asset impairments and contract/lease terminations: $25 million to $35 million.
- Other transaction costs: $5 million to $10 million.
- Estimated Future Incremental Cash Expenditures: $95 million to $110 million.
- Q2 2015 Impact: Approximately $100 million to $165 million of exit-related charges expected in consolidated pre-tax results.
- H2 2015 Impact: Approximately $25 million to $35 million expected to be recorded.
Material Changes and Strategic Actions
Assurant has initiated a wind-down of its major medical operations, with substantial completion of the exit expected by the end of 2016. The Company has reached an agreement in principle to sell its supplemental and small-group self-funded lines of business and certain other assets to National General Holdings Corp., subject to final documentation and regulatory approval. The filing notes that future premiums and current policyholder reserves are inadequate to cover future claim payments and direct expenses during the wind-down, necessitating the recording of premium deficiency reserves.
Guidance, Risks, and Contingencies
Forward-Looking Statements: The Company cautions that actual charges and timing may differ materially from projections due to factors including the ability to implement the exit as planned, effective tax rates, and unanticipated charges.
Uncertainty: The Company states it is not able to determine the timing or estimated amount of any additional charges or future cash expenditures beyond the current estimates. An amendment to this report will be filed upon determination of such amounts.
Risk Factors: Investors are directed to the 2014 Annual Report on Form 10-K and First Quarter 2015 Form 10-Q for a detailed discussion of risk factors.
Investor Verification Checklist
- Verify the final terms and regulatory approval status of the asset sale to National General Holdings Corp.
- Monitor the actual realization of the $175 million to $250 million pre-tax cost range against Q2 and H2 2015 earnings reports.
- Assess the adequacy of the premium deficiency reserves given the uncertainty of future claims experience on major medical policies.
- Track the timeline for the wind-down of major medical operations to ensure completion by the end of 2016.
- Review subsequent filings for any amendments regarding additional charges or cash expenditures not currently quantified.