Business Context and Reporting Period
Company: Assurant, Inc.
Filing Type: Form 8-K (Current Report)
Date: October 20, 2015
Subject: Update on Assurant Health runoff operations for the third quarter of 2015.
Key Financial Metrics
The filing provides preliminary results specifically for the Assurant Health runoff operations, not the consolidated company.
- Q3 2015 Pre-tax Loss: $215 million to $230 million.
- Q3 2015 After-tax Loss: $140 million to $150 million.
- GAAP Equity (Assurant Health): Approximately $350 million as of quarter end.
- Planned Capital Contribution: Approximately $200 million expected in Q4 2015 to maintain capital levels.
Material Changes and Drivers
The reported loss is driven by the following factors:
- Claims Experience: Higher than expected claims on 2015 individual major medical policies.
- Reserve Strengthening: Recognition of losses for 2015 adverse claims development and increased premium deficiency reserves established in Q2 2015 to cover estimated future losses and direct expenses through 2017.
- Exit Costs: $25 million to $35 million pre-tax in severance and other exit-related costs included in Q3 results.
Breakdown of Q3 2015 Pre-tax Loss (in millions):
| Component | Amount |
|---|---|
| Additional losses (reserve strengthening & expenses) | $190 - $195 |
| Severance and retention | $20 - $25 |
| Other exit charges | $5 - $10 |
| Total Pre-tax Loss | ($215) - ($230) |
Outlook, Risks, and Management Commentary
- Future Charges: The Company expects an additional $60 million to $70 million of pre-tax exit-related charges (mainly severance) through the wind-down period.
- Reporting Status: Information is preliminary and subject to completion of quarter-end financial reporting processes. Final results are scheduled for release on October 27, 2015.
- Accounting Treatment: Beginning in Q2 2015, Assurant Health results are removed from net operating income and reflected in net income as runoff operations.
- Risks: Actual charges and timing may differ materially due to future claims, claims development, inability to implement the exit as planned, and unanticipated charges.
Investor Verification Checklist
- Verify the final Q3 2015 financial results when reported on October 27, 2015.
- Monitor the execution of the $200 million capital contribution in Q4 2015.
- Track the actual claims development on 2015 individual major medical policies against current estimates.
- Review the final wind-down timeline and total exit costs compared to the projected $60-$70 million remaining.