Assurant, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The filing is an annual report, not a standalone Q4 filing; quarterly figures are included below. Amounts are in U.S. dollars and generally in millions unless stated otherwise.
Business context
Assurant is a global provider of lifestyle and housing protection and related services. Its continuing operations are reported through Global Lifestyle, Global Housing, and Corporate and Other. In August 2021, Assurant sold its Global Preneed business to CUNA Mutual Group; that business is presented as discontinued operations.
Financial results and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Total revenue | $10,187.6 | $9,595.5 |
| Net income from continuing operations | $613.5 | $520.4 |
| Net income from discontinued operations | $758.9 | $(77.7) |
| Net income attributable to common stockholders | $1,367.7 | $423.1 |
| Net cash from continuing operating activities | $630.5 | $1,114.3 |
- Revenue increased 6%; continuing-operations net income increased 18%. Continuing-operations net margin was approximately 6.0%, versus 5.4% in 2020, calculated from reported revenue and income.
- FY2021 common-stockholder earnings included a $720.1 after-tax gain on the Global Preneed sale. Continuing-operations earnings benefited from investment gains, including unrealized gains on equity positions that went public; the comparison was partly offset by the absence of an $84.4 tax benefit recorded in 2020 under the CARES Act.
- Global Lifestyle segment net income rose 11% to $484.7; segment premiums, fees and other income rose 6% to $7,747.7. Growth reflected Global Automotive and mobile trade-in activity, including Hyla, with service-and-repair investment and a disclosed program contract change weighing on results.
- Global Housing segment net income rose 5% to $244.6. Reportable catastrophe losses were $113.9, compared with $137.2 in 2020. Excluding catastrophes, segment net income declined $12.5, reflecting higher non-catastrophe losses and reserve strengthening, partly offset by rate and insured-value increases.
- Continuing operating cash flow fell to $630.5, primarily due to payment timing, higher tax payments and the absence of a 2020 CARES Act tax refund. Continuing investing activities provided $302.8; financing activities used $1,089.8, mainly reflecting share repurchases and debt repayment.
- At year-end, total assets were $33.91 billion, cash and cash equivalents $2.04 billion, and debt $2.20 billion. Debt to total capital was 28.6%. Assurant reported $1.05 billion of holding-company liquidity, above its $225 million target minimum. The $500 million revolving credit facility had $495.5 million available; no loans were outstanding.
- Fixed-maturity securities were $7.22 billion, with 5.9% rated below investment grade. Net unrealized gains on fixed maturities declined $259.5 during 2021, primarily as Treasury yields rose; AOCI moved from $709.8 income to a $150.0 loss.
Q4 and material changes
For the quarter ended December 31, 2021, revenue was $2,574.9, net income from continuing operations was $126.7, and net income attributable to common stockholders was $123.6. In Q4 2020, the comparable amounts were $2,418.1, $119.1, and $134.5, respectively. The annual report does not provide a separate full Q4 segment-results discussion.
- The Global Preneed sale generated $1.31 billion in net proceeds and a $720.1 after-tax gain, including $606.0 of after-tax AOCI gains recognized on disposal. As a result, total FY2021 net income is not directly comparable with continuing-operations income.
- Assurant issued $350 million of 2.65% senior notes due 2032 and redeemed $350 million of 4.00% notes due 2023, recording a $20.7 loss on extinguishment. It also repaid $50 million of floating-rate notes.
- Share repurchases and common dividends totaled approximately $1.00 billion in 2021. The company repurchased 5.34 million shares for $844.4 million, and had $842.1 million remaining under its May 2021 authorization at year-end. The mandatory convertible preferred stock converted into common stock in March 2021.
- Keith Demmings became CEO effective January 1, 2022, succeeding the prior CEO. Assurant also changed its segment profitability measure to Adjusted EBITDA effective that date; future segment reporting will use the new measure and revise comparative periods as required.
Outlook, risks and contingencies
- Management said it expects sufficient liquidity to meet needs over the following 12 months, including debt interest and common dividends. The filing provides no quantified earnings or revenue guidance.
- Management emphasized profitable growth through client partnerships, digital capabilities, customer experience, acquisitions and capital deployment. It identified opportunities in mobile services, automotive protection and multifamily housing, while noting mobile trade-in variability and housing-market exposure.
- Key risks include reliance on a limited number of significant clients; competition and technology disruption; inflation and labor costs; COVID-19-related operational and workforce effects; cyber and privacy incidents; reserve estimation; catastrophe and climate-related losses; and investment-market, interest-rate and foreign-exchange risk.
- Catastrophe protection for 2021 included $965 million of U.S. per-occurrence coverage above an $80 million retention for a first event, with lower retentions for certain later events. Coverage may not fully protect against severe or multiple events, and reinsurance recovery depends on reinsurer performance.
- Reinsurance credit exposure merits attention. The filing reports $881.6 million of reinsurance recoverables associated with JALIC, primarily through ERAC, without collateral backing those reserves; the JALIC sale was pending regulatory and customary approvals at year-end. A separate $410.2 million long-term-care recoverable from John Hancock was backed by trusts.
- Assurant disclosed ongoing legal and regulatory matters, including lender-placed insurance scrutiny and rate regulation. Management said pending matters were not believed likely to materially affect financial condition, but possible excess losses could not be estimated clearly.
- The auditor issued unqualified opinions on the financial statements and internal control over financial reporting. The audit identified valuation of short-duration claims reserves as a critical audit matter because of significant actuarial judgment.
Important facts for investors to verify
- Separate recurring operating performance from the Global Preneed disposal gain and from investment fair-value gains when assessing earnings quality.
- Review continuing-operations cash generation and working-capital timing, given the year-over-year decline in operating cash flow.
- Track catastrophe and non-catastrophe loss development, especially Global Housing’s 2021 unfavorable reserve development and small-commercial runoff claims.
- Assess the quality, collateral and collectability of reinsurance recoverables, particularly the ERAC/JALIC exposure and the completion of the JALIC sale.
- Confirm execution of the announced $900 million return of Global Preneed sale proceeds through repurchases, alongside future dividends, capital needs and regulatory limits on subsidiary dividends.
- Monitor the 2023 debt maturity, credit-facility covenant headroom, investment portfolio sensitivity to rates and credit, and the transition to Adjusted EBITDA segment reporting.