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ASSURANT, INC. – 10-K – Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and accompanying notes included elsewhere in this Report. It contains forward-looking statements that involve risks and uncertainties. Our actual results might differ materially from those projected in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Report, particularly under the headings "Item 1A - Risk Factors" and "Forward-Looking Statements."
General
Reportable Segments
We report our results through three segments: Global Lifestyle,Global Housing and Corporate and Other. Corporate and Other includes corporate employee-related expenses and activities of the holding company. In conjunction with the transition of our CEO and chief operating decision maker onJanuary 1, 2022 , we changed our segment measure of profitability for our reportable segments to an Adjusted EBITDA metric, as the primary measure used for purposes of making decisions about allocating resources to the segments and assessing performance, from segment net income from continuing operations, effective as of that date. Prior period amounts have been revised to reflect the new segment measure of profitability. See Note 6 to the Consolidated Financial Statements included elsewhere in this Report for more information. We define Adjusted EBITDA as net income from continuing operations, excluding net realized gains (losses) on investments and fair value changes to equity securities, COVID-19 direct and incremental expenses, loss on extinguishment of debt, non-core operations (defined below), net income (loss) attributable to non-controlling interests, interest expense, provision (benefit) for income taxes, depreciation expense, amortization of purchased intangible assets, restructuring costs related to strategic exit activities (outside of normal periodic restructuring and cost management activities), as well as other highly variable or unusual items.
Revision of Prior Period Financial Statements
Beginning with second quarter 2022, we changed the calculation of our segment measure of profitability, Adjusted EBITDA, to exclude certain businesses which we expect to fully exit, including the long-tail commercial liability businesses inGlobal Housing (sharing economy and small commercial businesses), as well as certain legacy long-duration insurance policies within Global Lifestyle (collectively referred to as "non-core operations"). All prior period amounts have been revised, which impacts segment Adjusted EBITDA but does not impact consolidated net income. See Note 6 to the Consolidated Financial Statements included elsewhere in this Report for more information. We have also revised our prior period financial statements to reflect the correction of an error identified in second quarter 2022 related to reinsurance of claims and benefits payable within the Connected Living business unit in our Global Lifestyle segment, as well as other immaterial errors which were previously recorded in the periods in which we identified them. See Notes 2 and 17 to the Consolidated Financial Statements included elsewhere in this Report for more information. Additionally, prior period disclosures have been revised to include Hurricane Eta, which should have been classified as a reportable catastrophe. 43 --------------------------------------------------------------------------------
Discontinued Operations
InAugust 2021 , we completed the sale of the legal entities which comprise the businesses previously reported as the Global Preneed segment and certain businesses previously disposed of through reinsurance, which were previously reported in the Corporate and Other segment (collectively, the "disposed Global Preneed business") to subsidiaries ofCUNA Mutual Group for an aggregate purchase price at closing of$1.34 billion . For additional information, refer to "-Results of Operations - Discontinued Operations" below and Note 4 to the Consolidated Financial Statements included elsewhere in this Report. The following discussion covers the year endedDecember 31, 2022 ("Twelve Months 2022"), the year endedDecember 31, 2021 ("Twelve Months 2021") and the year endedDecember 31, 2020 ("Twelve Months 2020"). Please see the discussion that follows, for each of these segments, for a more detailed comparative analysis. Executive Summary Overview InDecember 2022 , we finalized our plan to realize greater efficiencies by continuing to simplify our business portfolio and leverage our global footprint to reduce costs. This included realigning our organizational structure, including inGlobal Housing , and talent to support our business strategy. We also accelerated our ongoing real estate consolidation to support work-from-home arrangements given our increasingly hybrid workforce. We expect to complete these actions in 2023. See "Item 1 - Business."
Summary of Financial Results
Consolidated net income from continuing operations decreased$326.3 million , or 54%, to$276.6 million for Twelve Months 2022 from$602.9 million for Twelve Months 2021. The decline was primarily driven by a net decrease in unrealized gains to unrealized losses fromAssurant Ventures (our corporate venture capital team), net realized losses from sales of fixed maturity securities in 2022, and a decrease from non-core operations. Global Lifestyle Adjusted EBITDA increased$51.3 million , or 7%, to$753.4 million for Twelve Months 2022 from$702.1 million for Twelve Months 2021. The increase was driven by growth acrossU.S. Connected Living andGlobal Automotive , partially offset by weaker performance inEurope andAsia Pacific , including the unfavorable impact of foreign exchange. Growth in Connected Living reflected increased mobile subscribers inNorth America and more favorable mobile loss experience.Global Automotive increased primarily from higher investment income and favorable loss experience in select ancillary products. For the year, segment results included$24.1 million of income from real estate and a$11.2 million one-time client contract benefit. Global Lifestyle net earned premiums, fees and other income increased$196.0 million , or 3%, to$7.94 billion for the Twelve Months 2022 from$7.74 billion for Twelve Months 2021, driven by strong prior period sales inGlobal Automotive . Connected Living decreased mainly from runoff mobile programs, partially offset by mobile subscriber growth inNorth America . In-store mobile service and repair contributed$148.4 million of fee income, and as previously announced, is not expected to continue in 2023. Global Housing Adjusted EBITDA decreased$55.1 million , or 15%, to$302.0 million for Twelve Months 2022 from$357.1 million for Twelve Months 2021. Pre-tax reportable catastrophes (defined as individual catastrophic events that generate losses in excess of$5.0 million pre-tax, net of reinsurance and client profit sharing adjustments, and including reinstatement and other premiums) increased$17.6 million . Excluding reportable catastrophes, Adjusted EBITDA decreased$37.5 million , or 7%, primarily due to declines inMultifamily Housing and Specialty and Other, mainly from higher non-catastrophe loss experience.Lender-placed Insurance increased modestly, as strong revenue growth and improved profitability in fourth quarter 2022 more than offset higher non-catastrophe loss experience throughout the year.Global Housing results were also impacted by increased catastrophe reinsurance costs.Global Housing net earned premiums, fees and other income increased$69.0 million , or 4%, to$2.01 billion for Twelve Months 2022 from$1.94 billion for Twelve Months 2021, largely fromLender-placed Insurance . This was driven by higher average insured values, premium rates and policies in-force, including contributions from a new client onboarded in fourth quarter 2022. Corporate and Other Adjusted EBITDA was$(99.2) million for Twelve Months 2022 compared to$(93.3) million for Twelve Months 2021, primarily driven by lower investment income and higher employee-related and third-party expenses. 44 --------------------------------------------------------------------------------
Critical Factors Affecting Results
Our results depend on, among other things, the appropriateness of our product pricing, underwriting, the accuracy of our reserving methodology for future policyholder benefits and claims, the frequency and severity of reportable and non-reportable catastrophes, returns on and values of invested assets, our investment income, and our ability to realize greater operational efficiencies and manage our expenses. Our results also depend on our ability to profitably grow all of our businesses, including our Connected Living, Renters andGlobal Automotive businesses, and maintain our position in our Homeowners business. Factors affecting these items, including conditions in the financial markets, the global economy, political conditions and the markets in which we operate, fluctuations in exchange rates, interest rates and inflation, including the current period of inflationary pressures, may have a material adverse effect on our results of operations or financial condition. For more information on these and other factors that could affect our results, see "Item 1A - Risk Factors." Our results may also be impacted by our ability to continue to grow in the markets in which we operate, including in our Connected Living, Renters andGlobal Automotive businesses, which will be impacted by our ability to provide a superior digital-first customer experience, including from our investments in technology and digital initiatives, and capitalize on the smart home opportunity. Our mobile business is subject to volatility in mobile device trade-in volumes and margins based on the actual and anticipated timing of the release of new devices and carrier promotional programs, as well as to changes in customer preferences. Our Homeowners revenues will be impacted by changes in the housing market. In addition, across many of our businesses, we must respond to the threat of disruption and the competition for talent, which has increased due to labor shortages and wage inflation. See "Item 1A - Risk Factors - Business, Strategic and Operational Risks - Significant competitive pressures, changes in customer preferences and disruption could adversely affect our results of operations," " - Our mobile business is subject to the risk of declines in the value and availability of mobile devices in our inventory, and to export compliance and other risks" and " - The success of our business depends on the execution of our strategy, including through the continuing service of key executives, senior leaders, highly-skilled personnel and a high-performing workforce." For Twelve Months 2022, net cash provided by operating activities from continuing operations was$596.9 million ; net cash used in investing activities from continuing operations was$262.1 million ; and net cash used in financing activities from continuing operations was$818.4 million . We had$1.54 billion in cash and cash equivalents as ofDecember 31, 2022 . Please see " - Liquidity and Capital Resources" below for further details.
Revenues
We generate revenues primarily from the sale of our insurance policies, service contracts and related products and services, and from income earned on our investments. Sales of insurance policies are recognized in revenue as earned premiums while sales of administrative services are recognized as fee income. Our premium and fee income is supplemented by income earned from our investment portfolio. We recognize revenue from interest payments, dividends, change in market value of equity securities and sales of investments. Currently, our investment portfolio is primarily invested in fixed maturity securities. Both investment income and changes in market value on these investments can be significantly affected by changes in interest rates. Interest rate volatility can increase or reduce unrealized gains or losses in our investment portfolios. Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions, inflation and other factors beyond our control. Fluctuations in interest rates affect our returns on, and the market value of, fixed maturity and short-term investments. The fair market value of the fixed maturity securities in our investment portfolio and the investment income from these securities fluctuate depending on general economic and market conditions. The fair market value generally increases or decreases in an inverse relationship with fluctuations in interest rates, while net investment income realized by us from future investments in fixed maturity securities generally increases or decreases with fluctuations in interest rates. We also have investments that are subject to pre-payment risk, such as mortgage-backed and asset-backed securities. Interest rate fluctuations may cause actual net investment income and/or timing of cash flows from such investments to differ from estimates made at the time of investment. In periods of declining interest rates, mortgage prepayments generally increase and mortgage-backed securities, commercial mortgage obligations and bonds are more likely to be prepaid or redeemed as borrowers seek to borrow at lower interest rates. Therefore, in these circumstances we may be required to reinvest those funds in lower interest-earning investments.
Please see "Item 7A - Quantitative and Qualitative Disclosures About Market
Risk" below for further details.
Expenses
Our expenses are primarily policyholder benefits, underwriting, selling, general
and administrative expenses and interest expense.
45 -------------------------------------------------------------------------------- Policyholder benefits are affected by our claims management programs, reinsurance coverage, contractual terms and conditions, regulatory requirements, economic conditions, and numerous other factors. Benefits paid or reserves required for future benefits could substantially exceed our expectations, causing a material adverse effect on our business, results of operations and financial condition. Underwriting, selling, general and administrative expenses consist primarily of commissions, premium taxes, licenses, fees, amortization of deferred costs, general operating expenses and income taxes. In addition to the restructuring plan announced inDecember 2022 , we continue to undertake various expense savings initiatives while also making investments in talent, capabilities and technology, among other things, which will impact our expenses.
We also incur interest expense related to our debt.
Critical Accounting Policies and Estimates
Certain items in our Consolidated Financial Statements are based on estimates
and judgment. Differences between actual results and these estimates and
judgments could in some cases have material impacts on our Consolidated
Financial Statements. The following critical accounting policies require
significant estimates and judgment:
•Reserves, Net of Reinsurance
•Valuation of Investments
•Valuation and Recoverability of
Reserves, Net of Reinsurance
Reserves are established using generally accepted actuarial methods and reflect
significant judgment and estimates about expected future claim payments. Factors
used in their calculation include experience derived from historical claim
payments and actuarial assumptions. Calculations incorporate assumptions about
the incidence of incurred claims, the extent to which all claims have been
reported, reporting lags, expenses, inflation rates, future investment earnings,
internal claims processing costs and other relevant factors. While the methods
of making such estimates and establishing the related liabilities are
periodically reviewed and updated, the estimation of reserves includes an
element of uncertainty given that management is using historical information and
methods to project future events and reserve outcomes.
The recorded reserves represent our best estimate at a point in time of the
ultimate costs of settlement and administration of a claim or group of claims,
based upon actuarial assumptions and projections using facts and circumstances
known at the time of calculation. The adequacy of reserves may be impacted by
future trends in claims severity, frequency, judicial theories of liability and
other factors. These variables are affected by both external and internal
events, including: changes in the economic cycle, inflation, changes in repair
costs, natural or human-made catastrophes, judicial trends, legislative changes
and claims handling procedures.
Many of these items are not directly quantifiable and not all future events can
be anticipated when reserves are established. Reserve estimates are refined as
experience develops. Adjustments to reserves, both positive and negative, are
reflected in the consolidated statement of operations in the period in which
such estimates are updated.
Because establishment of reserves is an inherently complex process involving
significant judgment and estimates, there can be no certainty that future
settlement amounts for claims incurred through the financial reporting date will
not vary from reported claims reserves. Future loss development could require
reserves to be increased or decreased, which could have a material effect on our
earnings in the periods in which such increases or decreases are made. However,
based on information currently available, we believe our reserve estimates are
adequate. See "Item 1A - Risk Factors - Financial Risks - Our actual claims
losses may exceed our reserves for claims, requiring us to establish additional
reserves or to incur additional expense for settling unreserved liabilities,
which could have a material adverse effect on our results of operations,
profitability and capital" and " - Financial Risks - Actual results may differ
materially from the analytical models we use to assist in our decision-making in
key areas such as pricing, catastrophe risks, reserving and capital management"
for more detail on this risk.
Reinsurance Recoverables
We utilize reinsurance for loss protection and capital management, business
dispositions and client risk and profit sharing. Reinsurance premiums paid are
amortized as reductions to premium over the terms of the underlying reinsured
policies. Amounts recoverable from reinsurers are estimated in a manner
consistent with claim and claim adjustment expense reserves or future policy
benefits reserves. Reinsurance recoverables include amounts we are owed by
reinsurers for claims paid as well as those included in reserve estimates that
are subject to the reinsurance.
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We use a probability of default and loss given default methodology in estimating
an expected credit loss allowance, whereby the credit ratings of reinsurers are
used in determining the probability of default. The allowance is established for
reinsurance recoverables on paid and unpaid future policy benefits and claims
and benefits. Prior to applying default factors, the net exposure to credit risk
is reduced for any collateral for which the right of offset exists, such as
funds withheld, assets held in trust and letters of credit, which are part of
the reinsurance arrangements, with adjustments to include consideration of
credit exposure on the collateral. Our methodology incorporates historical
default factors for each reinsurer based on their credit rating using comparably
rated bonds as published by a major ratings service. The allowance is based upon
our ongoing review of amounts outstanding, length of collection periods, changes
in reinsurer credit standing and other relevant factors.
In the ordinary course of business, we are involved in both the assumption and
cession of reinsurance with non-affiliated companies. The following table
provides details of the reinsurance recoverables balance as of December 31, 2022
and 2021:
2022 2021
Ceded future policyholder benefits and expense
Ceded unearned premium
5,158.1 4,950.0 Ceded claims and benefits payable 1,312.7 824.0 Ceded paid losses 174.5 68.8 Total$ 7,005.9 $ 6,181.2
For additional information regarding our reserves and reinsurance recoverables,
see Notes 2, 5, 17 and 18 to the Consolidated Financial Statements included
elsewhere in this Report.
Short Duration Contracts
Claims and benefits payable reserves for short duration contracts include (1) case reserves for known claims which are unpaid as of the balance sheet date; (2) IBNR reserves for claims where the insured event has occurred but has not been reported to us as of the balance sheet date; and (3) loss adjustment expense reserves for the expected handling costs of settling the claims. Periodically, we review emerging experience and make adjustments to our reserves and assumptions where necessary. Ultimate loss and loss adjustment expenses are estimated utilizing generally accepted actuarial loss reserving methods. Both paid claims development as well as case incurred development are typically analyzed at the product or product grouping level, considering product size and data credibility. The reserving methods widely employed by us include the Chain Ladder, Munich Chain Ladder and Bornhuetter-Ferguson methods. ForGlobal Housing , reportable catastrophes are analyzed and reserved for separately using a frequency and severity approach. The methods all involve aggregating paid and case-incurred loss data by accident quarter (or accident year) and accident age for each product grouping. As the data ages, development factors are calculated that measure emerging claim development patterns between reporting periods. By selecting loss development factors indicative of remaining development, known losses are projected to an ultimate incurred basis for each accident period. The underlying premise of the Chain Ladder method is that future claims development is best estimated using past claims development, whereas the Bornhuetter-Ferguson method employs a combination of past claims development and prior estimates of ultimate losses based on an expected loss ratio. The Munich Chain Ladder method incorporates the correlations between paid and incurred development in projecting future development factors, and is typically more applicable to products experiencing variability in incurred to paid ratios. Each of these methods applied to the data groupings produces an estimate of the loss reserves for the product grouping. The best estimate is generally selected from a blend of the different methods. The IBNR associated with the best estimate is then allocated to accident year based on a weighting of the underlying actuarial methods. The determination of the best estimate is based on many factors, including:
•the nature and extent of the underlying assumptions;
•the quality and applicability of historical data - whether internal or industry
data;
•current and expected future economic and market conditions;
•regulatory, legislative, and judicial considerations;
•the extent of data segmentation - data should be homogeneous yet credible
enough for loss development methods to apply;
•trends in loss frequency and severity for various causes of loss;
•consideration of the distribution of loss reserves, management's selection of
the best estimate that may exceed an estimate based on median values, suggesting
that favorable development may be more likely than unfavorable development; and
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•hindsight testing of prior loss estimates - the loss estimates on some product
lines will vary from actual loss experience more than others.
When employing the reserving methods, consideration is given to contractual requirements, historical utilization trends and payment patterns, coverage changes, seasonality, product mix, the legislative and regulatory environment, economic factors, natural catastrophes and other relevant factors. We consistently apply reserving principles and methodologies from year to year, while also giving due consideration to the potential variability of these factors. While management has used judgment in establishing its best estimate of required reserves, different assumptions and variables could lead to significantly different reserve estimates. Two key measures of loss activity are loss frequency, which is a measure of the number of claims per unit of insured exposure, and loss severity, which is a measure of the average size of claims. Factors affecting loss frequency include the effectiveness of loss controls, changes in economic activity and weather patterns. Factors affecting loss severity include changes in policy limits, retentions, rate of inflation and judicial interpretations. If the actual level of loss frequency and severity are higher or lower than expected, the ultimate reserves required will be different than management's estimate. The effect of higher and lower levels of loss frequency and severity on our ultimate costs for claims occurring in 2022 would be as follows: Change in both loss frequency and severity Ultimate cost of claims Change in cost of claims for all Global Lifestyle and Global Housing occurring in 2022 occurring in 2022 3% higher $ 1,914.0 $ 110.2 2% higher $ 1,877.0 $ 73.2 1% higher $ 1,840.0 $ 36.2 Base scenario (1) $ 1,803.8 $ - 1% lower $ 1,768.0 $ (35.8) 2% lower $ 1,731.0 $ (72.8) 3% lower $ 1,694.0 $ (109.8)
(1)Represents the sum of the case reserves and incurred but not reported
reserves as of
Non-Core Operations
Short duration contracts in non-core operations consist of the sharing economy and small commercial products previously reported withinGlobal Housing . While the contracts are classified as short duration, the coverages were predominantly commercial liability and have a long reporting and settlement tail compared to property coverages which make up most of our core operations. The reserving methodology described for other short duration contacts is applicable for non-core operations. Given the nature of commercial liability coverages and its relatively long claim runoff duration, additional emphasis is placed on elevated loss activity from increasing attorney involvement and analysis of individual case reserve adequacy on known claims. This is done through use of average cost per claim methods that include an allowance for future inflation impacts, detailed open claim inventory analysis, and leveraging industry development patterns to supplement our own historical claims experience.
Long Duration Contracts, including Disposed and Runoff Long Duration Lines
Reserves for future policy benefits represent the present value of future
benefits to policyholders and related expenses less the present value of future
net premiums. Reserve assumptions reflect best estimates for expected investment
yield, inflation, mortality, morbidity, expenses and withdrawal rates. These
assumptions are based on our experience to the extent it is credible, modified
where appropriate to reflect current trends, industry experience and provisions
for possible unfavorable deviation. We also record an unearned revenue reserve
which represents premiums received which have not yet been recognized in our
consolidated statements of operations.
Risks related to the reserves recorded for certain discontinued individual life,
annuity and long-term care insurance policies have been fully ceded via
reinsurance. While we have not been released from our contractual obligation to
the policyholders, changes in and deviations from economic, mortality,
morbidity, and withdrawal assumptions used in the calculation of these reserves
will not directly affect our results of operations unless there is a default by
the assuming reinsurer.
Valuation of Investments
In determining the estimated fair value of our investments, fair values are
primarily based on unadjusted quoted prices for identical investments in active
markets that are readily and regularly obtainable. When such unadjusted quoted
prices are not available, estimated fair values are based on quoted prices for
identical or similar investments in markets that are not active, or other
observable inputs. If these observable inputs are not available, or observable
inputs are not determinable, unobservable
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inputs or adjustments to observable inputs requiring management judgment are
used to determine the estimated fair value of investments. The methodologies,
assumptions and inputs utilized are described in Note 10 to the Consolidated
Financial Statements.
Financial markets are susceptible to severe events evidenced by rapid
depreciation in asset values accompanied by a reduction in asset liquidity. Our
ability to sell investments and the price ultimately realized for investments
depends upon the demand and liquidity in the market.
See also Notes 2, 8 and 10 to the Consolidated Financial Statements included
elsewhere in this Report, "Item 1A - Risk Factors - Financial Risks - Our
investment portfolio is subject to credit, liquidity and other risks that may
adversely affect our results of operations and financial condition" and " -
Investments" contained in this Item 7.
Valuation and Recoverability of
Our goodwill related to acquisitions of businesses was$2.60 billion and$2.57 billion as ofDecember 31, 2022 and 2021, respectively. We review our goodwill annually in the fourth quarter for impairment, or more frequently if indicators of impairment exist. Such indicators include: a significant adverse change in legal factors, an adverse action or assessment by a regulator, unanticipated competition, loss of key personnel or a significant decline in our expected future cash flows due to changes in company-specific factors or the broader business climate. The evaluation of such factors requires considerable management judgment. Any adverse change in these factors could have a significant impact on the recoverability of goodwill and could have a material impact on our Consolidated Financial Statements.Goodwill is tested for impairment at the reporting unit level, which is either at the operating segment or one level below, if that component is a business for which discrete financial information is available and segment management regularly reviews such information. Components within an operating segment can be aggregated into one reporting unit if they have similar economic characteristics. A goodwill impairment loss is measured as the excess of the carrying value, including goodwill, of the reporting unit over its fair value. An impairment loss is limited to the amount of goodwill allocated to the reporting unit. Our Global Lifestyle operating segment is disaggregated into the following three reporting units: Connected Living,Global Automotive andGlobal Financial Services . Our reporting unit for goodwill testing was at the same level as the operating segment forGlobal Housing . In second quarter of 2022, we exited the sharing economy and small commercial businesses (which are now included within non-core operations) and reclassified$7.8 million of goodwill fromGlobal Housing to Corporate and Other. The entire$7.8 million of goodwill reported in Corporate and Other was impaired and written off in the fourth quarter of 2022.
The following table illustrates the amount of goodwill carried by operating
segment as of the dates indicated:
December 31,
2022 2021
Global Lifestyle (1) $ 2,193.9 $ 2,192.1
Global Housing (2) 409.1 379.5
Total $ 2,603.0 $ 2,571.6
(1)As of December 31, 2022 , $689.1 million , $1,432.9 million and $71.9 million
of goodwill was assigned to the Connected Living, Global Automotive and Global
Financial Services reporting unit, respectively. As of December 31, 2021 , $698.7
million , $1,420.5 million , and $72.9 million of goodwill was assigned to the
Connected Living, Global Automotive and Global Financial Services reporting
unit, respectively.
(2)Goodwill of $7.8 million associated with the sharing economy and small
commercial businesses was included in Global Housing as of December 31, 2021 and
subsequently reclassified to Corporate and Other, impaired and written off in
2022.
Quantitative Impairment Testing
In the fourth quarter of 2022, we performed a quantitative assessment for the Global Lifestyle andGlobal Housing reporting units given the uncertainty in macro-economic conditions, inflation concerns, and lingering COVID-19 impacts on industry performance. Based on this quantitative assessment, the Company determined that it was more likely than not that the reporting units' fair values were more than their carrying amounts and that there was no impairment for the Global Lifestyle andGlobal Housing reporting units as ofOctober 1, 2022 . The determination of fair value of the reporting units requires many estimates and assumptions. These estimates and assumptions include earnings and required capital projections discussed above, discount rates, terminal growth rates, operating income and dividend forecasts for each reporting unit and the weighting assigned to the results of each valuation method included in the fair value calculation. Changes in certain assumptions could have a significant impact on the goodwill impairment assessment. 49 -------------------------------------------------------------------------------- Should the operating results of these reporting units decline substantially compared to projected results, or should further interest rate declines increase the net unrealized investment portfolio gain position, we could determine that we need to perform an updated impairment test due to the potential impairment indicators, which may require the recognition of a goodwill impairment loss in any of the reporting units. For the fourth quarter of 2022 quantitative assessment, had the net book value for of the reporting units exceeded its estimated fair value, the Company would have recognized a goodwill impairment loss for the difference up to the amount of goodwill allocated to the reporting unit.
Refer to Note 15 to the Consolidated Financial Statements included elsewhere in
this Report for further detail.
Recent Accounting Pronouncements
Please see Note 2 to the Consolidated Financial Statements included elsewhere in
this Report.
Results of Operations Assurant Consolidated
The table below presents information regarding our consolidated results of
operations:
For
the Years Ended
2022 2021 2020 Revenues: Net earned premiums$ 8,765.3 $ 8,572.1 $ 8,277.9 Fees and other income 1,243.3 1,172.9 1,042.3 Net investment income 364.1 314.4 285.6
Net realized (losses) gains on investments and fair value
changes to equity securities
(179.7) 128.2 (8.2) Total revenues 10,193.0 10,187.6 9,597.6 Benefits, losses and expenses: Policyholder benefits 2,359.8 2,201.9 2,275.2 Underwriting, selling, general and administrative expenses 7,366.3 7,081.9 6,639.8 Goodwill impairment 7.8 - - Interest expense 108.3 111.8 104.5 Loss on extinguishment of debt 0.9 20.7 - Total benefits, losses and expenses 9,843.1 9,416.3 9,019.5 Income before provision for income taxes 349.9 771.3 578.1 Provision for income taxes 73.3 168.4 58.7 Net income from continuing operations 276.6 602.9 519.4 Net income (loss) from discontinued operations - 758.9 (77.7) Net income 276.6 1,361.8 441.7 Less: Net income attributable to non-controlling interest - - (0.9) Net income attributable to stockholders 276.6 1,361.8 440.8 Less: Preferred stock dividends - (4.7) (18.7) Net income attributable to common stockholders$ 276.6
Year Ended
Net Income from Continuing Operations
Consolidated net income from continuing operations decreased$326.3 million , or 54%, to$276.6 million for Twelve Months 2022 from$602.9 million for Twelve Months 2021, primarily due to a net decrease in unrealized gains from changes in fair value of equity securities mostly driven by the four equity positions that went public in 2021 through SPAC mergers. The changes in fair value of these investments resulted in$84.1 million of after-tax unrealized losses in 2022 compared to$67.5 million of after-tax unrealized gains in 2021. The decrease was also due to$50.3 million of net realized losses from sales of fixed maturity securities in 2022 compared to$13.6 million of net realized gains from sales in 2021, and a$52.8 million after- 50 -------------------------------------------------------------------------------- tax decrease in earnings from our non-core operations mostly related to adverse prior year reserve development from the sharing economy business. Also contributing to the decrease was$41.8 million of after-tax restructuring costs related to realigning our organizational structure and the acceleration of real estate consolidation strategy announced inDecember 2022 , and lower earnings contributions fromGlobal Housing , mainly due to higher non-catastrophe loss experience, partially offset by higher earnings contributions from Global Lifestyle driven by favorable results from both Connected Living andGlobal Automotive .
Year Ended
Net Income from Continuing Operations
Consolidated net income from continuing operations increased$83.5 million , or 16%, to$602.9 million for Twelve Months 2021 from$519.4 million for Twelve Months 2020, primarily due to higher net realized gains on investments and fair value changes to equity securities compared to net losses in the prior period, including$67.5 million of after-tax unrealized gains from four equity positions that went public during Twelve Months 2021, the absence of$25.5 million of after-tax net unrealized losses on collateralized loan obligations in Twelve Months 2020 and$19.2 million of after-tax unrealized gains from equity securities accounted for under the measurement alternative. The increase was also due to favorable earnings contributions from Global Lifestyle, mainly due to continued organic growth and favorable loss experience inGlobal Automotive . These increases were partially offset by the absence of an$84.4 million tax benefit that was recorded in Twelve Months 2020 related to the utilization of net operating losses in connection with the 2020 Coronavirus Aid, Relief, and Economic Security Act. 51 --------------------------------------------------------------------------------
Global Lifestyle
The table below presents information regarding the Global Lifestyle segment's
results of operations for the periods indicated:
For
the Years Ended
2022 2021 2020 Revenues: Net earned premiums$ 6,829.9 $ 6,712.7 $ 6,436.2 Fees and other income 1,106.2 1,027.4 895.4 Net investment income 249.4 198.8 191.5 Total revenues 8,185.5 7,938.9 7,523.1 Benefits, losses and expenses: Policyholder benefits 1,325.5 1,333.1 1,411.8 Underwriting, selling, general and administrative expenses 6,106.6 5,903.7 5,475.3 Total benefits, losses and expenses 7,432.1 7,236.8 6,887.1 Global Lifestyle Adjusted EBITDA$ 753.4
Net earned premiums, fees and other income: Connected Living$ 4,233.4 $ 4,303.2 $ 4,216.5 Global Automotive 3,702.7 3,436.9 3,115.1 Total$ 7,936.1 $ 7,740.1 $ 7,331.6 Net earned premiums, fees and other income: Domestic$ 6,156.3 $ 5,871.5 $ 5,402.3 International 1,779.8 1,868.6 1,929.3 Total$ 7,936.1 $ 7,740.1 $ 7,331.6
Year Ended
Adjusted EBITDA increased$51.3 million , or 7%, to$753.4 million for Twelve Months 2022 from$702.1 million for Twelve Months 2021, driven by growth acrossU.S. Connected Living andGlobal Automotive , partially offset by weaker performance inEurope andAsia Pacific , including the unfavorable impact of foreign exchange. Growth in Connected Living reflected increased mobile subscribers inNorth America and more favorable mobile loss experience.Global Automotive increased primarily from higher net investment income, after client profit sharing, favorable loss experience in select domestic ancillary products and expansion across distribution channels. Segment results included$24.1 million of income from real estate and a$11.2 million one-time client contract benefit. Total revenues increased$246.6 million , or 3%, to$8.19 billion for Twelve Months 2022 from$7.94 billion for Twelve Months 2021. Net earned premiums increased$117.2 million , or 2%, primarily driven by continued organic growth from strong prior periodU.S. sales in ourGlobal Automotive business across all distribution channels and domestic mobile subscriber growth within our cable operator distribution channel. The increase in net earned premiums was partially offset by the run-off of certain global mobile programs and unfavorable foreign exchange. Fees and other income increased$78.8 million , or 8%, mainly driven by an increase in global mobile devices serviced, which included$148.4 million from in-store mobile service and repair program, which, as previously announced, is not expected to continue in 2023. Net investment income increased$50.6 million , or 25%, primarily due to income from higher fixed maturity yields and asset levels and higher real estate related income. Total benefits, losses and expenses increased$195.3 million , or 3%, to$7.43 billion for Twelve Months 2022 from$7.24 billion for Twelve Months 2021. Underwriting, selling, general and administrative expenses increased$202.9 million , or 3%, mainly due to higher commission expenses, primarily from growth across ourGlobal Automotive business and domestic mobile subscriber growth within our cable operator distribution channel, as well as higher cost of sales in Connected Living due to an increase in global mobile devices serviced, which included expenses from the in-store mobile service and repair program, and higher operating costs to support growth. This was partially offset by lower commission expenses related to the run-off of certain global mobile programs. The increase in total benefits losses and expenses was partially offset by a decrease in policyholder benefits of$7.6 million , or 1%, due to the run-off of certain global mobile programs and favorable loss experience 52 --------------------------------------------------------------------------------
from select domestic ancillary products in
device protection products, partially offset by growth across our
Automotive
Year Ended
Adjusted EBITDA increased$66.1 million , or 10%, to$702.1 million for Twelve Months 2021 from$636.0 million for Twelve Months 2020, primarily due toGlobal Automotive from underlying growth from prior period sales driven by expanded and new client relationships globally, favorable loss experience in select ancillary products and$10.4 million of one-time benefits in Twelve Months 2021 that are not expected to repeat. Connected Living also contributed to the increase, led by mobile, mainly from higher mobile trade-in volumes, including our acquisition ofHyla Mobile, Inc. ("Hyla"), better performance inAsia Pacific and additional domestic mobile subscribers across carrier and cable operator clients, as well as financial services and other products, mainly due to claims and sales recoveries as Twelve Months 2020 included unfavorable impacts related to COVID-19. This increase was partially offset by investments to build out service and repair capabilities in mobile and an$11.1 million benefit for an extended service contract client recoverable in Twelve Months 2020. Total revenues increased$415.8 million , or 6%, to$7.94 billion for Twelve Months 2021 from$7.52 billion for Twelve Months 2020. Net earned premiums increased$276.5 million , or 4%, primarily driven by continued growth from strongU.S. sales in ourGlobal Automotive business across all distribution channels. The increase in net earned premiums was partially offset by modest declines in Connected Living, as the run-off of certain global mobile programs was offset by growth in extended service contract programs and domestic mobile subscribers within our cable operator distribution channel. Fees and other income increased$132.0 million , or 15%, primarily driven by Connected Living from higher mobile repair and logistics volumes mainly from Hyla contributions and mobile carrier promotions, partially offset by the$176 million reduction from the previously disclosed program contract change. Net investment income increased$7.3 million , or 4%, primarily due to higher income from real estate related investments. Total benefits, losses and expenses increased$349.7 million , or 5%, to$7.24 billion for Twelve Months 2021 from$6.89 billion for Twelve Months 2020. Underwriting, selling, general and administrative expenses increased$428.4 million , or 8%, primarily due to growth across the businesses, including higher mobile repair and logistics volumes, with contributions from Hyla, and investments to build out service and repair capabilities, partially offset by the impact of the previously disclosed program contract change. The increase in total benefits, losses and expenses was partially offset by a$78.7 million , or 6%, decrease in policyholder benefits, primarily due to the run-off of certain global mobile programs in our Connected Living business and lower loss experience in select ancillary products inGlobal Automotive , partially offset by growth across ourGlobal Automotive and Connected Living businesses. 53 --------------------------------------------------------------------------------
The table below presents information regarding the
results of operations for the periods indicated:
For
the Years Ended
2022 2021 2020 Revenues: Net earned premiums$ 1,874.0 $ 1,796.6 $ 1,758.3 Fees and other income 136.4 144.8 143.7 Net investment income 80.0 78.0 68.5 Total revenues 2,090.4 2,019.4 1,970.5 Benefits, losses and expenses: Policyholder benefits 915.2 798.8 794.3 Underwriting, selling, general and administrative expenses 873.2 863.5 858.2 Total benefits, losses and expenses 1,788.4 1,662.3 1,652.5 Global Housing Adjusted EBITDA$ 302.0
Impact of reportable catastrophes$ 172.7
Net earned premiums, fees and other income: Lender-placed Insurance$ 1,124.0 $ 1,065.9 $ 1,052.5 Multifamily Housing 482.4 482.3 451.6 Specialty and Other 404.0 393.2 397.9 Total$ 2,010.4 $ 1,941.4 $ 1,902.0
Year Ended
Adjusted EBITDA decreased$55.1 million , or 15%, to$302.0 million for Twelve Months 2022 from$357.1 million for Twelve Months 2021. Pre-tax reportable catastrophes for Twelve Months 2022 increased$17.6 million to$172.7 million , compared to$155.1 million for Twelve Months 2021, primarily due to Hurricane Ian. Excluding reportable catastrophes, Adjusted EBITDA decreased$37.5 million , or 7%, mainly driven by higher non-catastrophe loss experience across all major products, due to higher claims severity from inflation, particularly from elevated fire losses, as well as higher catastrophe reinsurance costs. The decrease was partially offset by premium from higher average insured values, premium rates and policies in force inLender-placed Insurance . Total revenues increased$71.0 million , or 4%, to$2.09 billion for Twelve Months 2022 from$2.02 billion for Twelve Months 2021. Net earned premiums increased$77.4 million , or 4%, primarily due to higher average insured values, policies in force and premium rates in ourLender-placed Insurance business, including contributions from a new client onboarded during fourth quarter 2022, partially offset by higher catastrophe reinsurance costs including higher reinstatement premiums. The increase was partially offset by a decrease in fees and other income of$8.4 million , or 6%, primarily due to a decline in fees from ourMultifamily Housing andLender-placed Insurance businesses. Total benefits, losses and expenses increased$126.1 million , or 8%, to$1.79 billion for Twelve Months 2022 from$1.66 billion for Twelve Months 2021. Policyholder benefits increased$116.4 million , or 15%, due to higher non-catastrophe loss experience as described above. Underwriting, selling, general and administrative expenses increased$9.7 million , or 1%, mainly due to higher operating costs to support growth, with general and administrative expenses remaining relatively flat through operational savings initiatives. 54 --------------------------------------------------------------------------------
Year Ended
Adjusted EBITDA increased$39.1 million , or 12%, to$357.1 million for Twelve Months 2021 compared to$318.0 million for Twelve Months 2020. Adjusted EBITDA for Twelve Months 2021 included$155.1 million of pre-tax reportable catastrophes, primarily related to Hurricane Ida and theTexas winter storms, compared to$178.5 million for Twelve Months 2020. Excluding reportable catastrophes, Adjusted EBITDA increased$15.7 million , or 3%, driven by premium rate and average insured value increases in ourLender-placed Insurance business. These increases were partially offset by decreases from higher non-catastrophe loss experience from an anticipated increase to more normalized levels than experienced in Twelve Months 2020 as well as lower REO volumes related to COVID-19 foreclosure moratoriums inLender-placed Insurance . Total revenues increased$48.9 million , or 2%, to$2.02 billion for Twelve Months 2021 from$1.97 billion for Twelve Months 2020. Net earned premiums increased$38.3 million , or 2%, primarily due to average insured value and premium rate increases in ourLender-placed Insurance business and continued growth from renters insurance in ourMultifamily Housing business. These increases were partially offset by lower REO volumes, higher estimated catastrophe premium, higher reinsurance reinstatement premium primarily related to Hurricane Ida, and a decline in Specialty and Other from client run-offs. Net investment income increased$9.5 million , or 14%, primarily due to higher income from real estate related investments. Total benefits, losses and expenses increased$9.8 million , or 1%, to$1.66 billion for Twelve Months 2021 from$1.65 billion for Twelve Months 2020. Policyholder benefits increased$4.5 million , or 1%, primarily from higher non-catastrophe losses across all lines of business from an anticipated increase to more normalized levels than experienced in Twelve Months 2020, partially offset by a decrease in reportable catastrophe losses. Underwriting, selling, general and administrative expenses increased$5.3 million , or 1%, primarily due to an increase in expenses consistent with net earned premium growth and continued investments inMultifamily Housing , partially offset by a decrease in commission expense in our Specialty and Other business. 55 --------------------------------------------------------------------------------
Corporate and Other
The table below presents information regarding the Corporate and Other segment's
results of operations for the periods indicated:
For the Years Ended December 31,
2022 2021 2020
Revenues:
Net earned premiums $ - $ - $ -
Fees and other income 0.5 0.3 0.5
Net investment income 26.9 31.9 17.6
Total revenues 27.4 32.2 18.1
Benefits, losses and expenses
Policyholder benefits 0.5 -
-
General and administrative expenses 126.1 125.5
142.5
Total benefits, losses and expenses 126.6 125.5
142.5
Corporate and Other Adjusted EBITDA$ (99.2) $ (93.3)
Year Ended
Adjusted EBITDA was$(99.2) million for Twelve Months 2022 compared to$(93.3) million for Twelve Months 2021. The increase in the loss was primarily due to lower investment income and higher employee-related and technology expenses. Total revenues decreased$4.8 million , or 15%, to$27.4 million for Twelve Months 2022 from$32.2 million for Twelve Months 2021 primarily driven by a decrease in net investment income of$5.0 million , or 16%, mostly due to a reduction in income from limited partnerships, partially offset by increased income from higher invested assets balances, primarily reflecting the remaining proceeds from the sale of Global Preneed. Total benefits, losses and expenses increased$1.1 million , or 1%, to$126.6 million for Twelve Months 2022 from$125.5 million for Twelve Months 2021. General and administrative expenses increased modestly, primarily due to higher employee-related and technology expenses.
Year Ended
Adjusted EBITDA was
million
expenses and an increase in net investment income.
Total Revenue increased$14.1 million , or 78%, to$32.2 million for Twelve Months 2021 from$18.1 million for Twelve Months 2020, primarily driven by a$14.3 million increase in net investment income, mostly driven by gains from the sale of real estate joint venture properties and higher income from limited partnerships.
Total Benefits, Losses and Expenses decreased
million
primarily due to lower operating expenses, including employee-related and
third-party expenses.
56 --------------------------------------------------------------------------------
Discontinued Operations
The table below presents information regarding the results of the discontinued
operations for the periods indicated:
For the Years Ended December 31,
2021 2020
Revenues:
Net earned premiums $ 42.6 $ 66.9
Fees and other income 91.0 151.1
Net investment income 168.4 289.3
Net realized gains (losses) on investments and fair value
changes to equity securities
4.2 (8.0) Gain on disposal of businesses 916.2 - Total revenues 1,222.4 499.3 Benefits, losses and expenses: Policyholder benefits 172.7 284.4 Underwriting, selling, general and administrative expenses 85.2 142.6 Goodwill impairment - 137.8 Total benefits, losses and expenses 257.9 564.8 Income (loss) before provision for income taxes 964.5 (65.5) Provision for income taxes 205.6 12.2 Net income (loss) from discontinued operations $
758.9
Year Ended
Net income from discontinued operations was$758.9 million for Twelve Months 2021 compared to a net loss from discontinued operations of$77.7 million for Twelve Months 2020. The change was primarily due to a$720.1 million after-tax gain on the sale of the disposed Global Preneed business in Twelve Months 2021. The gain included$606.0 million in after-tax AOCI, primarily net unrealized gains on investments, that was recognized in earnings upon the sale. The increase was also due to the absence of a$137.8 million after-tax goodwill impairment on the disposed Global Preneed business from Twelve Months 2020. These items were partially offset by lower operating results for the disposed Global Preneed business as Twelve Months 2021 included only seven months of results since the sale closed onAugust 2, 2021 . Total revenues increased$723.1 million to$1.22 billion for Twelve Months 2021 from$499.3 million for Twelve Months 2020, primarily due to the gain on the sale of the disposed Global Preneed business. The gain included$774.2 million of pre-tax AOCI, primarily net unrealized gains on investments, that was recognized in earnings upon sale. The increase in total revenues was partially offset by a$120.9 million , or 42%, decrease in net investment income, a$60.1 million , or 40%, decrease in fees and other income and a$24.3 million , or 36%, decrease in net earned premiums, primarily because Twelve Months 2021 included only seven months of results. Total benefits, losses and expenses decreased$306.9 million , or 54%, to$257.9 million for Twelve Months 2021 from$564.8 million for Twelve Months 2020, primarily due to the absence of a$137.8 million goodwill impairment on the disposed Global Preneed business from Twelve Months 2020. The decrease in total benefits, losses and expenses was also due to a$111.7 million , or 39%, decrease in policyholder benefits and a$57.4 million , or 40%, decrease in underwriting, selling, general and administrative expenses, primarily because Twelve Months 2021 included only seven months of results. 57 --------------------------------------------------------------------------------
Investments
We had total investments of$7.52 billion and$8.67 billion as ofDecember 31, 2022 and 2021, respectively. Net unrealized gains/losses on our fixed maturity securities portfolio decreased$948.5 million during Twelve Months 2022, from a$311.4 million unrealized gain atDecember 31, 2021 to a$637.1 million unrealized loss atDecember 31, 2022 , primarily due to an increase inTreasury yields.
The following table shows the credit quality of our fixed maturity securities
portfolio as of the dates indicated:
Fair Value as of
Fixed Maturity Securities by Credit Quality December 31, 2022 December 31, 2021
Aaa / Aa / A $ 3,615.2 57.5 % $ 4,066.5 56.4 %
Baa 2,295.4 36.5 % 2,719.0 37.7 %
Ba 305.2 4.9 % 333.7 4.6 %
B and lower 67.9 1.1 % 96.1 1.3 %
Total $ 6,283.7 100.0 % $ 7,215.3 100.0 %
The following table shows the major categories of net investment income for the
periods indicated:
Years Ended December 31,
2022 2021 2020
Fixed maturity securities $ 270.0 $ 232.8 $ 228.4
Equity securities 15.0 14.9 14.5
Commercial mortgage loans on real estate 14.9 8.9 8.2
Short-term investments 4.7 2.1 5.7
Other investments 48.6 61.0 16.6
Cash and cash equivalents 25.7 8.5 13.3
Revenue from consolidated investment entities (1) - - 56.3
Total investment income 378.9 328.2 343.0
Investment expenses (14.8) (13.8) (20.5)
Expenses from consolidated investment entities (1) - - (36.9)
Net investment income $ 364.1 $ 314.4 $ 285.6
(1)The following table shows the revenues net of expenses from consolidated
investment entities for the periods indicated.
Years
Ended
2022 2021 2020
Investment income from direct investments in:
Real estate funds (1) $ - $ - $ 8.3
CLO entities - - 8.0
Investment management fees - - 3.1
Net investment income from consolidated
investment entities $ - $
-
(1)The investment income from the real estate funds includes income attributable
to non-controlling interest of
2020
Net investment income increased$49.7 million , or 16%, to$364.1 million for Twelve Months 2022 from$314.4 million for Twelve Months 2021. The increase was primarily driven by higher yields on fixed maturity securities and cash and cash equivalents, and higher income from commercial mortgage loans on real estate due to higher invested assets, partially offset by lower income from other investments mostly due to a reduction in income from limited partnerships. Net investment income increased$28.8 million , or 10%, to$314.4 million for Twelve Months 2021 from$285.6 million for Twelve Months 2020. The increase was primarily driven by higher income from other investments mostly due to higher income from sales of real estate joint venture partnerships and higher valuations in our real estate joint venture and other partnerships. Fixed maturity income increased, mostly due to higher asset levels, partially offset by lower yields. Investment expenses decreased due to prior year costs associated with the disposed Global Preneed business and one-time expenses related 58 -------------------------------------------------------------------------------- to the outsourcing of our real estate asset management. These increases were offset in part by a decrease in income from short-term investments and cash and cash equivalents mainly due to continued low yields. Net realized losses on investments and fair value changes to equity securities were$179.7 million for Twelve Months 2022 compared to net realized gains and fair value changes to equity securities of$128.2 million for Twelve Months 2021. The change in Twelve Months 2022 was primarily driven by$132.7 million of net unrealized losses from changes in fair value of equity securities that included a$106.4 million decrease in net unrealized gains from four equity positions that went public in Twelve Months 2021. The change in Twelve Months 2022 was also driven by$63.7 million of net realized losses on sales of fixed maturity securities, partially offset by$18.1 million of net realized gains on sales of equity securities. The change in Twelve Months 2021 was primarily driven by$112.4 million of net unrealized gains from changes in fair value of equity securities that included$85.4 million of unrealized gains from three equity positions that went public in third quarter 2021, and$17.2 million of net realized gains from sales of fixed maturity securities.
As of
financial guarantee insurance companies. Included in this amount was
million
but would have had a rating of AA- without the guarantee.
For more information on our investments, see Notes 8 and 10 to the Consolidated
Financial Statements included elsewhere in this Report.
Liquidity and Capital Resources
The following section discusses our ability to generate cash flows from each of our subsidiaries, borrow funds at competitive rates and raise new capital to meet our operating and growth needs. Management believes that we will have sufficient liquidity to satisfy our needs over the next twelve months, including the ability to pay interest on our debt and dividends on our common stock.
Regulatory Requirements
Assurant, Inc. is a holding company and, as such, has limited direct operations of its own. Our assets consist primarily of the capital stock of our subsidiaries. Accordingly, our future cash flows depend upon the availability of dividends and other statutorily permissible payments from our subsidiaries, such as payments under our tax allocation agreement and under management agreements with our subsidiaries. Our subsidiaries' ability to pay such dividends and make such other payments is regulated by the states and territories in which our subsidiaries are domiciled. These dividend regulations vary from jurisdiction to jurisdiction and by type of insurance provided by the applicable subsidiary, but generally require our insurance subsidiaries to maintain minimum solvency requirements and limit the amount of dividends they can pay to the holding company. See "Item 1A - Risk Factors - Legal and Regulatory Risks - Changes in insurance regulation may reduce our profitability and limit our growth." Along with solvency regulations, the primary driver in determining the amount of capital used for dividends from insurance subsidiaries is the level of capital needed to maintain desired financial strength ratings fromA.M. Best . For the year endingDecember 31, 2023 , the maximum amount of dividends our regulatedU.S. domiciled insurance subsidiaries could pay us, under applicable laws and regulations without prior regulatory approval, is approximately$344.7 million . Our international and non-insurance subsidiaries provide additional sources of dividends.
Regulators or rating agencies could become more conservative in their
methodology and criteria, increasing capital requirements for our insurance
subsidiaries or the enterprise. In 2022, the following actions were taken by the
rating agencies:
A.M. Best •InAugust 2022 , upgraded the insurance financial strength ratings on our insurance operating subsidiaries,American Bankers Life Assurance Company of Florida ("ABLAC") andCaribbean American Life Assurance Company , to A from A- with a stable outlook.
Moody's
•InJune 2022 , upgraded the senior debt rating ofAssurant, Inc. to Baa2 from Baa3 with a stable outlook and upgraded the insurance financial strength ratings on our insurance operating subsidiaries,American Bankers Insurance Company of Florida ,ABLAC andAmerican Security Insurance Company , to A2 from A3 with a stable outlook. For further information on our ratings and the risks of ratings downgrades, see "Item 1 - Business - Ratings" and "Item 1A - Risk Factors - Financial Risks - A decline in the financial strength ratings of our insurance subsidiaries could adversely affect our results of operations and financial condition." 59 --------------------------------------------------------------------------------
Holding Company
As ofDecember 31, 2022 , we had approximately$446.1 million in holding company liquidity,$221.1 million above our targeted minimum level of$225.0 million . The target minimum level of holding company liquidity, which can be used for unforeseen capital needs at our subsidiaries or liquidity needs at the holding company, is calibrated based on approximately one year of corporate operating losses and interest expenses. We use the term "holding company liquidity" to represent the portion of cash and other liquid marketable securities held atAssurant, Inc. , out of a total of$532.1 million of holding company investment securities and cash, which we are not otherwise holding for a specific purpose as of the balance sheet date. We can use such assets for stock repurchases, stockholder dividends, acquisitions and other corporate purposes. Dividends or returns of capital paid by our subsidiaries, net of infusions of liquid assets and excluding amounts used for or as a result of acquisitions or received from dispositions, were$549.5 million and$728.6 million for Twelve Months 2022 and Twelve Months 2021, respectively. Twelve Months 2021 included approximately$12.0 million of dividends from subsidiaries, net of infusions, in the disposed Global Preneed business. We use these cash inflows primarily to pay holding company operating expenses, to make interest payments on indebtedness, to make dividend payments to our common stockholders, to fund investments and acquisitions, and to repurchase our common stock. From time to time, we may also seek to purchase outstanding debt in open market repurchases or privately negotiated transactions.
Dividends and Repurchases
During Twelve Months 2022 and Twelve Months 2021, we made common stock
repurchases and paid dividends to our common stockholders of
OnJanuary 19, 2023 , the Board declared a quarterly dividend of$0.70 per common share payable onMarch 20, 2023 to stockholders of record as ofFebruary 27, 2023 . We paid dividends of$0.70 per common share onDecember 19, 2022 to stockholders of record as ofNovember 28, 2022 . This represented a 3% increase to the quarterly dividend of$0.68 per common share paid onSeptember 19 ,June 20 , andMarch 21, 2022 . Any determination to pay future dividends will be at the discretion of the Board and will be dependent upon various factors, including: our subsidiaries' payments of dividends and other statutorily permissible payments to us; our results of operations and cash flows; our financial condition and capital requirements; general business conditions and growth prospects; any legal, tax, regulatory and contractual restrictions on the payment of dividends; and any other factors the Board deems relevant. The Credit Facility (as defined below) also contains limitations on our ability to pay dividends to our stockholders and repurchase capital stock if we are in default, or such dividend payments or repurchases would cause us to be in default, of our obligations thereunder. In addition, if we elect to defer the payment of interest on our 7.00% Fixed-to-Floating Rate Subordinated Notes dueMarch 2048 or our 5.25% Subordinated Notes dueJanuary 2061 (refer to "- Senior and Subordinated Notes" below), we generally may not make payments on or repurchase any shares of our capital stock. During Twelve Months 2022, we repurchased 3,347,558 shares of our outstanding common stock at a cost of$567.6 million , exclusive of commissions. InMay 2021 , the Board authorized a share repurchase program for up to$900.0 million of our outstanding common stock. As ofDecember 31, 2022 ,$274.5 million aggregate cost at purchase remained unused under the repurchase authorization. The timing and the amount of future repurchases will depend on various factors, including those listed above. As previously announced, in second quarter 2022 and within one year of closing the transaction, we completed the return of$900.0 million of net proceeds from the sale of the disposed Global Preneed business through share repurchases. For additional information, refer to Note 4 to the Consolidated Financial Statements included elsewhere in this Report.
Assurant Subsidiaries
The primary sources of funds for our subsidiaries consist of premiums and fees
collected, proceeds from the sales and maturity of investments and net
investment income. Cash is primarily used to pay insurance claims, agent
commissions, operating expenses and taxes. We generally invest our subsidiaries'
funds in order to generate investment income.
We conduct periodic asset liability studies to measure the duration of our
insurance liabilities, to develop optimal asset portfolio maturity structures
for our significant lines of business and ultimately to assess that cash flows
are sufficient to meet the timing of cash needs. These studies are conducted in
accordance with formal company-wide Asset Liability Management guidelines.
To complete a study for a particular line of business, models are developed to
project asset and liability cash flows and balance sheet items under a varied
set of plausible economic scenarios. These models consider many factors
including the current investment portfolio, the required capital for the related
assets and liabilities, our tax position and projected cash flows from both
existing and projected new business. For risks related to modeling, see "Item 1A
- Risk Factors - Financial Risks -
60
--------------------------------------------------------------------------------
Actual results may differ materially from the analytical models we use to assist
in our decision-making in key areas such as pricing, catastrophe risks,
reserving and capital management."
Alternative asset portfolio asset allocations are analyzed for significant lines of business. An investment portfolio maturity structure is then selected from these profiles given our return hurdle and risk appetite. Scenario testing of significant liability assumptions and new business projections is also performed. Our liabilities generally do not include policyholder optionality, which means that the timing of payments is generally insensitive to the interest rate environment. In addition, our investment portfolio is largely comprised of highly liquid public fixed maturity securities with a sufficient component of such securities invested that are near maturity which may be sold with minimal risk of loss to meet cash needs. Generally, our subsidiaries' premiums, fees and investment income, along with planned asset sales and maturities, provide sufficient cash to pay claims and expenses. However, there may be instances when unexpected cash needs arise in excess of that available from usual operating sources. In such instances, we have several options to raise needed funds, including selling assets from the subsidiaries' investment portfolios, using holding company cash (if available), issuing commercial paper, or drawing funds from the Credit Facility.
Senior and Subordinated Notes
The following table shows the principal amount and carrying value of our
outstanding debt, less unamortized discount and issuance costs as applicable, as
of
December 31, 2022 December 31, 2021
Principal Amount
Carrying Value Principal Amount Carrying Value
4.20% Senior Notes due
225.0 224.7 300.0 299.0 4.90% Senior Notes due March 2028 300.0 297.8 300.0 297.5 3.70% Senior Notes due February 2030 350.0 347.6 350.0 347.3 2.65% Senior Notes due January 2032 350.0 346.7 350.0 346.4 6.75% Senior Notes due February 2034 275.0 272.5 275.0 272.4 7.00% Fixed-to-Floating Rate Subordinated Notes due March 2048 400.0 396.5 400.0 395.9 5.25% Subordinated Notes due January 2061 250.0 244.1 250.0 244.0 Total Debt$ 2,129.9 $ 2,202.5 InJune 2022 , we redeemed$75.0 million of the$300.0 million then outstanding aggregate principal amount of our 2023 Senior Notes at a make-whole premium plus accrued and unpaid interest to the redemption date. In connection with the redemption, we recognized a loss on extinguishment of debt of$0.9 million . In the next five years, we have one upcoming debt maturity inSeptember 2023 when the 2023 Senior Notes will become due and payable. For additional information, see Note 19 to the Consolidated Financial Statements included elsewhere in this Report.
Credit Facility and Commercial Paper Program
We have a$500.0 million five-year senior unsecured revolving credit facility (the "Credit Facility") with a syndicate of banks arranged byJPMorgan Chase Bank, N.A . andWells Fargo Bank, National Association . The Credit Facility provides for revolving loans and the issuance of multi-bank, syndicated letters of credit and letters of credit from a sole issuing bank in an aggregate amount of$500.0 million , which may be increased up to$700.0 million . The Credit Facility is available untilDecember 2026 , provided we are in compliance with all covenants. The Credit Facility has a sublimit for letters of credit issued thereunder of$50.0 million . The proceeds from these loans may be used for our commercial paper program or for general corporate purposes.
We made no borrowings using the Credit Facility during Twelve Months 2022 and no
loans were outstanding as of
Our commercial paper program requires us to maintain liquidity facilities either in an available amount equal to any outstanding notes from the program or in an amount sufficient to maintain the ratings assigned to the notes issued from the program. Our commercial paper is rated AMB-1 byA.M. Best , P-2 by Moody's and A-2 by S&P. Our subsidiaries do not maintain commercial paper or other borrowing facilities. This program is currently backed up by the Credit Facility, of which$499.8 million out of the$500.0 million was available as ofDecember 31, 2022 , due to$0.2 million of letters of credit outstanding. 61 --------------------------------------------------------------------------------
We did not use the commercial paper program during Twelve Months 2022 and there
were no amounts relating to the commercial paper program outstanding as of
For additional information, see Note 19 to the Consolidated Financial Statements
included elsewhere in this Report.
Letters of Credit
Letters of credit are issued in the ordinary course of business. These letters of credit are supported by commitments under which we are required to indemnify the financial institution issuing the letter of credit if the letter of credit is drawn. We had$2.7 million and$7.2 million of letters of credit outstanding as ofDecember 31, 2022 and 2021, respectively.
Cash Flows
We monitor cash flows at the consolidated, holding company and subsidiary
levels. Cash flow forecasts at the consolidated and subsidiary levels are
provided on a monthly basis, and we use trend and variance analyses to project
future cash needs making adjustments to the forecasts when needed.
The table below shows our recent net cash flows for the periods indicated:
For the
Years Ended
2022 2021 2020
Net cash provided by (used in):
Operating activities - continuing operations $ 596.9 $ 630.5 $ 1,114.3
Operating activities - discontinued operations - 151.2 227.7
Operating activities 596.9 781.7 1,342.0
Investing activities - continuing operations (262.1) 302.8 (519.4)
Investing activities - discontinued operations - (145.2) (215.8)
Investing activities (262.1) 157.6 (735.2)
Financing activities - continuing operations (818.4) (1,089.8) (264.8)
Financing activities - discontinued operations - - -
Financing activities (818.4) (1,089.8) (264.8)
Effect of exchange rate changes on cash and cash
equivalents - continuing operations (34.5) (23.5) 19.4
Effect of exchange rate changes on cash and cash
equivalents - discontinued operations - 0.2 0.1
Effect of exchange rate changes on cash and cash
equivalents (34.5) (23.3) 19.5
Net change in cash $ (518.1) $ (173.8) $ 361.5
Cash Flows for the Years Ended
Operating Activities
We typically generate operating cash inflows from premiums collected from our insurance products, fees received for services and income received from our investments while outflows consist of policy acquisition costs, benefits paid and operating expenses. These net cash flows are then invested to support the obligations of our insurance products and required capital supporting these products. Our cash flows from operating activities are affected by the timing of premiums, fees, and investment income received and expenses paid. Net cash provided by operating activities from continuing operations was$596.9 million and$630.5 million for Twelve Months 2022 and Twelve Months 2021, respectively. The decrease in net cash provided by operating activities was primarily due to the timing of our mobile business operations mostly due to lower collections of premiums and fees receivable and an increase in payments to vendors for the acquisition of mobile devices used to meet insurance claims or generate profits through sales to third parties. These decreases were partially offset by an increase in cash from the receipt of a tax refund that was in excess of tax payments for Twelve Months 2022. Net cash provided by operating activities from continuing operations was$630.5 million and$1.11 billion for Twelve Months 2021 and Twelve Months 2020, respectively. The decrease in net cash provided by operating activities was primarily due to the timing of certain cash payments and business activities from our Global Lifestyle segment. The primary factors contributing to the variance included timing of cumulative payments to a vendor related to various programs for acquiring mobile devices used to meet insurance claims or generate profits through sales to third parties and higher commission payments associated with fourth quarter 2020 premiums that were paid in first quarter 2021. The decrease was also due to the absence of 62 -------------------------------------------------------------------------------- a$204.9 million tax refund, including interest, related to the ability to carry back operating losses to prior periods under the CARES Act that was collected during Twelve Months 2020 and higher tax payments, net of refunds, primarily due to the gain on sale of the disposed Global Preneed business and an increase in taxable income for Twelve Months 2021. These decreases were partially offset by an increase in premiums collected in connection with the continued growth inGlobal Automotive . Investing Activities Net cash used in investing activities from continuing operations was$262.1 million for Twelve Months 2022 compared to net cash provided by investing activities from continuing operations of$302.8 million for Twelve Months 2021. The decrease in cash provided by investing activities was primarily driven by a decrease in cash from sales of subsidiaries, partially offset by an increase in cash from sales and maturities, net of purchases, and a change in our short term investments, due to ongoing management of our investment portfolio. Twelve Months 2021 included$1.31 billion of proceeds, net of$27.3 million of cash transferred, from the sale of the disposed Global Preneed business that were mostly reinvested in short-term high quality liquid fixed income investments. Net cash provided by investing activities from continuing operations was$302.8 million for Twelve Months 2021 compared to net cash used in investing activities from continuing operations of$519.4 million for Twelve Months 2020. The increase in cash provided by investing activities was primarily driven by an increase in cash from sales and maturities, net of purchases, due to the ongoing management of our investment portfolio and a reduction in net cash used for acquisitions. Twelve Months 2021 included$1.27 billion of proceeds from the sale of the disposed Global Preneed business that were mostly reinvested within our investment portfolio. Twelve Months 2020 included$135.8 million of net cash used for the AFAS acquisition,$276.8 million of net cash used for the Hyla acquisition and$51.3 million of cash outflow, net of$22.0 million of proceeds from a foreign currency hedge, for the sale of our interests in Iké. Additionally, Twelve Months 2020 included a$34.0 million cash outflow to Iké Grupo for the Iké Loan that was repaid and reflected as a net cash inflow for Twelve Months 2021. These increases were partially offset by the absence of$197.1 million of net cash provided by consolidated investment entities and a$66.2 million increase in purchases of property and equipment mostly due to continued investments in information technology supporting our core operations.
Financing Activities
Net cash used in financing activities from continuing operations was
million
respectively. The decrease in net cash used in financing activities was
primarily due to lower cash outflow for share repurchases, mainly funded by the
net proceeds from the Global Preneed sale.
Net cash used in financing activities from continuing operations was$1.09 billion and$264.8 million for Twelve Months 2021 and Twelve Months 2020, respectively. The increase in net cash used in financing activities was mainly due to a$542.3 million increase in share repurchases, mainly funded by the net proceeds from the Global Preneed sale, the issuance of the 5.25% subordinated notes dueJanuary 2061 with an aggregate principal amount of$250.0 million , net of issuance costs, of$243.7 million in Twelve Months 2020, the$50.0 million repayment of our floating rate senior notes dueMarch 2021 in first quarter 2021 and the loss on extinguishment of debt related to the repayment of our 4.00% senior notes dueMarch 2023 . Discontinued operations Changes in cash flows from the operating and investing activities from our discontinued operations for Twelve Months 2021 as compared to Twelve Months 2020 were lower mainly due to Twelve Months 2021 including only seven months of net cash flows since the sale closed onAugust 2, 2021 . The table below shows our cash outflows for taxes, interest and dividends for the periods indicated: For the Years Ended December 31, 2022 2021 2020 Income taxes paid$ 127.7 $ 221.1 $ 98.5 Interest paid on debt 108.4 109.8 103.6 Common stock dividends 150.2 157.6 154.6 Preferred stock dividends - 4.7 18.7 Total$ 386.3 $ 493.2 $ 375.4 63
--------------------------------------------------------------------------------
Contractual Obligations and Commitments
We have contractual obligations and commitments to third parties as a result of our operations, as detailed in the table below by maturity date as ofDecember 31, 2022 : As of December 31, 2022 Less than 1 1-3 3-5 More than 5 Total Year Years Years Years Contractual obligations: Insurance liabilities (1)$ 2,116.8 $ 1,506.4
Debt and related interest
3,830.9 328.8 193.3 193.3 3,115.5 Operating leases 42.0 15.9 19.2 6.1 0.8 Pension obligations and postretirement benefits (2) 495.5 56.1 106.8 101.3 231.3
Commitments:
Investment purchases outstanding: Commercial mortgage loans on real estate 7.9 7.9 Capital contributions to non-consolidated VIEs 143.6 143.6 Liability for unrecognized tax benefits 20.4 16.9 3.5
Total obligations and commitments
(1)Insurance liabilities reflect undiscounted estimated cash payments to be made to policyholders, net of expected future premium cash receipts on in-force policies and excluding fully reinsured runoff operations. The total gross reserve for fully reinsured runoff operations that was excluded was$607.9 million which, if the reinsurers defaulted, would be payable over a 30+ year period with the majority of the payments occurring after 5 years. Additional information on the reinsurance arrangements can be found in Note 18 to the Consolidated Financial Statements included elsewhere in this Report. These liabilities also do not include recoverable amounts related to certain high deductible policies in our sharing economy business, included in our non-core operations, for which we are responsible for paying the entirety of the claim and are subsequently reimbursed by the insured for the deductible portion of the claim. As ofDecember 31, 2022 , we had exposure to$379.1 million of reserves below the deductible that we would be responsible for if the clients were to default on their contractual obligation to pay us the deductible. See Note 5 to the Consolidated Financial Statements included elsewhere in this Report for more information on our evaluation of the credit risk exposure from these recoverables. As a result, the amounts presented in this table do not agree to the future policy benefits and expenses and claims and benefits payable in the consolidated balance sheets. (2)Our pension obligations and postretirement benefits include an Assurant Pension Plan, various non-qualified pension plans (including an Executive Pension Plan) and certain life and health care benefits for retired employees and their dependents ("Retirement Health Benefits"), all of which were frozen in 2016. InFebruary 2020 , we amended the Retirement Health Benefits to terminate such plan benefits to retirees effectiveDecember 31, 2024 . Due to the Assurant Pension Plan's current overfunded status, no contributions were made during 2022 and none are expected to be made in 2023. See Note 24 to the Consolidated Financial Statements included elsewhere in this Report for more information. Liabilities for future policy benefits and expenses have been included in the commitments and contingencies table. Significant uncertainties relating to these liabilities include mortality, morbidity, expenses, persistency, investment returns, inflation, contract terms and the timing of payments.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The following is a discussion of our primary market risk exposures and management of such exposures as ofDecember 31, 2022 . There were no other significant changes in our primary market risk exposures or in how those exposures were managed for the year endedDecember 31, 2022 , compared to the year endedDecember 31, 2021 . We do not currently anticipate significant changes in our primary market risk exposures or in how those exposures are managed in future reporting periods based upon what is known or expected to be in effect in future reporting periods. Market risk is the risk of loss from changes in the fair value of our financial instruments, including due to interest rates (including impacts of changes in credit spreads), foreign currency exchange rates and credit risk from counterparties. Market risk is dependent on the volatility and liquidity in the underlying markets in which these assets are traded. Our investment portfolio consists primarily of fixed maturity securities, denominated in bothU.S. dollars and foreign currencies, which are sensitive to changes in interest rates, including impacts of changes in credit spreads, foreign currency exchange rates and credit risk from counterparties. The majority of our fixed income portfolio is classified as available for sale. The carrying value of our investment portfolio atDecember 31, 2022 and 2021 was$7.52 billion and$8.67 billion , respectively, of which 84% and 83% was invested in fixed maturity securities, respectively. 64 --------------------------------------------------------------------------------
Interest Rate Risk
Interest rate risk is the possibility that the fair value of liabilities will change more or less than the market value of investments in response to changes in interest rates, including changes in investment yields and changes in spreads due to credit risks and other factors. Our investment portfolio, including our fixed maturity portfolio, has exposure to interest rate risk. Changes in investment values attributable to interest rate changes are mitigated by corresponding and partially offsetting changes in the economic value of our liabilities. We monitor this exposure through periodic reviews of our asset and liability positions and we manage interest rate risk by selecting investments with characteristics such as duration, yield, currency and liquidity tailored to the anticipated cash outflow characteristics of our insurance and reinsurance liabilities. Portfolio duration is primarily managed through cash market transactions. For additional information, see Notes 8 and 10 to the Consolidated Financial Statements included elsewhere in this Report and "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Investments". The interest rate sensitivity relating to changes in fair value in our fixed maturity portfolio is assessed using hypothetical scenarios that assume parallel shifts of the yield curves. Our actual experience may differ from the results indicated below, particularly due to the assumptions reflected or if events occur that were not included in the methodology. For more information, see "Item 1A - Risk Factors - Financial Risks - Actual results may differ materially from the analytical models we use to assist in our decision-making in key areas such as pricing, catastrophe risks, reserving and capital management." Our sensitivity analysis model produces a loss in fair value in the fixed maturity portfolio of (i)$143.9 million and$178.6 million as ofDecember 31, 2022 and 2021, respectively, based on a hypothetical and instantaneous 50 basis point parallel increase in interest rates (including impacts of changes in credit spreads), and (ii)$283.2 million and$349.6 million as ofDecember 31, 2022 and 2021, respectively, based on a hypothetical and instantaneous 100 basis point parallel increase in interest rates (including impacts of changes in credit spreads). Our debt obligations also have exposure to interest rate risk, primarily at the time of refinancing. We monitor market interest rates and evaluate refinancing opportunities for our debt obligations as maturity dates approach. We stagger the maturity dates of our debt to mitigate the interest rate risk in any given year. For additional information, see Note 19 to the Consolidated Financial Statements included elsewhere in this Report and "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources". Our sensitivity analysis model produces a loss in fair value of our debt obligations of (i)$44.7 million and$61.1 million as ofDecember 31, 2022 and 2021, respectively, based on a hypothetical and instantaneous 50 basis point parallel increase in interest rates, and (ii)$88.4 million and$122.0 million as ofDecember 31, 2022 and 2021, respectively, based on a hypothetical and instantaneous 100 basis point parallel increase in interest rates.
Foreign Exchange Risk
We are exposed to foreign exchange risk arising from our investments in foreign subsidiaries. Foreign exchange risk is the possibility that changes in exchange rates produce an adverse effect on earnings and equity when measured in domestic currency. This risk is largest when assets backing liabilities payable in one currency are invested in financial instruments of another currency. To manage foreign exchange risk, our general principle is to invest in assets that match the currency in which we expect liabilities to be paid. Foreign exchange risk is mitigated by matching our liabilities under insurance policies that are payable in foreign currencies with investments that are denominated in such currencies. The foreign exchange risk sensitivity of the fair value of our investments in foreign subsidiaries is assessed using a hypothetical 10% immediate change in each of the foreign currency exchange rates to which we are exposed. The modeling technique we use to report our currency exposure does not take into account correlation among foreign currency exchange rates. Our actual experience may differ from the results indicated below, particularly due to the assumptions reflected or if events occur that were not included in the methodology. For more information, see "Item 1A - Risk Factors - Financial Risks - Actual results may differ materially from the analytical models we use to assist in our decision-making in key areas such as pricing, catastrophe risks, reserving and capital management" and "- Fluctuations in the exchange rate of theU.S. Dollar and other foreign currencies may materially and adversely affect our results of operations."
The following table summarizes the net assets (liabilities) denominated in
foreign currencies as of
hypothetical strengthening of the
65
--------------------------------------------------------------------------------
December 31, 2022 December 31, 2021 2022 vs. 2021
Value of net Value of net % Change in
assets assets exchange rate per
(liabilities) Exchange rate per USD (liabilities) Exchange rate per USD USD
British pound sterling (GBP) $ 306.9 1.2153 $ 351.1 1.3235 (8.2)%
Canadian dollar (CAD) 209.8 0.7393 229.4 0.7874 (6.1)%
Euro (EUR) 179.4 1.0608 192.1 1.1235 (5.6)%
Brazilian real (BRL) 68.8 0.1888 67.1 0.1755 7.6%
Australian dollar (AUD) 59.6 0.6701 61.6 0.7124 (5.9)%
Mexican peso (MXN) 63.5 0.0505 80.9 0.0480 5.2%
Japanese yen (JPY) 26.9 0.0073 37.4 0.0088 (17.0)%
Argentine peso (ARS) 27.4 0.0056 32.0 0.0097 (42.3)%
Other (various currencies) 21.8 4.5
Value of net assets denominated in
foreign currencies $ 964.1 $ 1,056.1
Net assets $ 4,228.7 $ 5,464.1
As a percentage of total net assets 22.8 % 19.3 %
Pre-tax decrease in fair value of our
investments in foreign subsidiaries
from a hypothetical 10 percent
strengthening of the USD $ (117.3) $ (128.4)
Pre-tax increase in fair value of our
investments in foreign subsidiaries
from a hypothetical 10 percent
weakening of the USD $ 117.3 $ 128.4
Credit Risk
Credit risk is the possibility that counterparties may not be able to meet
payment obligations when they become due. A counterparty is any person or entity
from which cash or other forms of consideration are expected to extinguish a
liability or obligation to us. With respect to our market risk sensitive
instruments, we have exposure to credit risk as a holder of fixed maturity
securities.
Our risk management strategy and investment policy is to invest in securities
from a diversified pool of issuers and to limit the amount of credit exposure
with respect to any one issuer. We attempt to limit our credit exposure by
imposing fixed maturity portfolio limits on individual issuers based upon credit
quality, among other strategies. For additional information, refer to "Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Investments" and Notes 5 and 8 to the Consolidated Financial
Statements included elsewhere in this Report.
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UNIVERSAL INSURANCE HOLDINGS, INC. – 10-Q/A – Management's Discussion and Analysis of Financial Condition and Results of Operations
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