Assurant, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Assurant provides consumer protection and insurance products through Global Lifestyle and Global Housing, with Corporate and Other reported separately. Amounts below are in millions unless noted.
Financial results
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Total revenue | $2,482.7 | $2,432.6 |
| Net income from continuing operations | $145.5 | $148.5 |
| Net income attributable to common stockholders | $145.5 | $158.3 |
| Diluted EPS from continuing operations | $2.59 | $2.41 |
| Net investment income | $86.3 | $76.3 |
| Net realized investment losses and equity-security fair-value changes | $(62.4) | $0.8 gain |
| Operating cash flow, continuing operations | $(501.1) | $(468.3) |
Revenue rose modestly, led by higher fees and other income and net investment income. Net income from continuing operations declined 2%; Q1 2021 common-stockholder income also included $14.3 of discontinued-operations income and $4.7 of preferred dividends. The filing does not provide a single consolidated operating-margin measure.
Segment Adjusted EBITDA: Global Lifestyle was $217.4, up 13%; Global Housing was $103.8, up 11%; and Corporate and Other was $(22.2), compared with $(27.9). Global Housing’s increase reflected much lower catastrophe losses: its catastrophe impact was $3.1 versus $43.6. Excluding catastrophes, Global Housing Adjusted EBITDA fell $30.2, or 22%, amid higher non-catastrophe losses.
Financial position, liquidity and capital
- At March 31, total assets were $33,022.6, total liabilities $28,001.5, and stockholders’ equity $5,021.1. Equity declined from $5,489.7 at year-end, principally alongside a $335.3 quarterly other comprehensive loss.
- Cash and cash equivalents were $1,250.9, down from $2,040.8 at December 31, 2021. Total investments were $8,219.1, down from $8,671.6.
- Debt was $2,203.0. No borrowings were outstanding under the $500.0 revolving credit facility or commercial paper program; $495.5 of facility capacity was available. The next stated debt maturity is $300.0 of senior notes due September 2023.
- Management reported $737.6 of holding-company liquidity, $512.6 above its $225.0 target minimum, and said it expects sufficient liquidity for the next 12 months. Insurance-subsidiary dividends are regulated; the stated 2022 maximum without prior regulatory approval was approximately $475.3.
- Q1 financing cash use was $277.5, including $230.0 of share repurchases and $37.4 of common dividends. The company repurchased 1.48 million shares for $242.4 excluding commissions; $599.7 remained under the $900.0 authorization.
Material changes and notable items
- Fixed-maturity securities’ net unrealized position moved from a $311.4 gain at December 31 to a $108.1 loss at March 31, a $419.5 decrease, primarily due to rising Treasury yields. The filing says these losses were non-credit-related and that Assurant neither intended nor was required to sell the affected securities before anticipated recovery.
- Q1 investment losses included $55.0 of net unrealized losses from equity-security fair-value changes, including losses associated with four equity positions that went public through SPAC mergers and preferred stocks affected by higher interest rates.
- Reportable catastrophe losses were $2.4 after tax in Q1 2022 versus $34.5 in Q1 2021. Favorable prior-year loss development contributed $30.1 overall; Global Housing had $7.6 of net unfavorable development, while Global Lifestyle had $33.1 favorable development.
- Assurant completed the sale of John Alden Life Insurance Company on April 1, 2022. At March 31, its assets and liabilities were classified as held for sale; most of its $875.4 reinsurance recoverables balance was uncollateralized and reinsured with Employers Reassurance Corporation. The filing says the transaction subsequently eliminated those ERAC recoverables.
- Global Preneed was sold in August 2021 for $1.34 billion cash; the 2021 comparative quarter included discontinued-operations income from that business. Assurant said it had completed approximately 85% of its planned $900.0 return of Global Preneed proceeds through repurchases by March 31, 2022.
- Beginning in 2022, Assurant changed its segment performance measure to Adjusted EBITDA following the CEO transition and revised prior-period segment amounts for comparability.
Outlook, risks and contingencies
The filing gives no quantified earnings or revenue guidance. Management’s liquidity assessment covers the next 12 months. It expects to deploy capital toward business growth, investments, mergers and acquisitions, dividends, and repurchases, subject to Board approval and market conditions.
Management highlighted risks from inflation, interest rates and financial-market conditions, the Ukraine conflict, COVID-19, catastrophe and non-catastrophe claims, reserve estimation, investment values, reinsurance credit and availability, client and distributor relationships, competition, mobile-device trade-in volumes, housing-market conditions, and technology and cybersecurity. Legal and regulatory proceedings are ongoing; the company said excess losses cannot be estimated, though management did not believe pending matters were likely to materially affect financial condition. It reported no material off-balance-sheet arrangements and $7.2 of letters of credit outstanding.
Important facts for investors to verify
- Whether Global Housing’s elevated non-catastrophe claims, especially sharing-economy and lender-placed losses, persist or improve.
- How interest rates and market movements affect the investment portfolio, unrealized losses, equity-security marks, and reported earnings.
- The resolution and collateral status of JALIC-related reinsurance recoverables following the April 1 sale.
- Whether operating cash use tied to mobile-device claims, trade-ins, service and repair, and vendor payments is temporary or continues to pressure cash flows.
- How capital returns, subsidiary dividend limits, and the September 2023 debt maturity affect holding-company liquidity and financial flexibility.