Business: Legal Organization
Assurant, Inc. (“Assurant” or the “Company”) is a Delaware corporation, formed in connection with the initial public offering (“IPO”) of its common stock, which began trading on the New York Stock Exchange (“NYSE”) on February 5, 2004. Prior to the IPO, Fortis, Inc., a Nevada corporation, formed Assurant and merged into it on February 4, 2004. The merger was executed in order to redomesticate Fortis, Inc. from Nevada to Delaware and to change its name. As a result of the merger, Assurant is the successor to the business operations and obligations of Fortis, Inc.
Assurant is a provider of specialized insurance products and related services in North America and select worldwide markets. Our four operating segments—Assurant Solutions, Assurant Specialty Property, Assurant Health, and Assurant Employee Benefits—have partnered with clients who are leaders in their industries and have built leadership positions in a number of specialty insurance market segments in the United States of America (“U.S.”) and selected international markets. These segments provide debt protection administration; credit insurance; warranties and service contracts; pre-funded funeral insurance; creditor–placed homeowners insurance; manufactured housing homeowners insurance; individual health and small employer group health insurance; group dental insurance; group disability insurance; and group life insurance.
Assurant’s mission is to be the premier provider of specialized insurance products and related services in North America and selected international markets. To achieve this mission, we focus on the following areas:
• Building and maintaining a portfolio of diverse, specialty insurance businesses
• Leveraging a set of core capabilities for competitive advantage—managing risk; managing relationships with large distribution partners; and integrating complex administrative systems
• Managing targeted growth initiatives
• Identifying and adapting to evolving market needs
Building and maintaining a portfolio of diverse, specialty insurance businesses—We currently are made up of four operating segments, Assurant Solutions, Assurant Specialty Property, Assurant Health and Assurant Employee Benefits, each focused on serving specific sectors of the insurance market. We believe that the uncorrelated nature of the risks in our businesses allows us to maintain a greater level of financial stability since our businesses will generally not be affected in the same way by the same economic and operating trends.
Leveraging a set of core capabilities for competitive advantage—We pursue a strategy of building leading positions in specialized market segments for insurance products and related services in North America as well as selected international markets. These markets are generally complex, have a relatively limited number of competitors and, we believe, offer long-term growth opportunities. In these markets, we apply our core capabilities to create a competitive advantage—managing risk; managing relationships with large distribution partners; and integrating complex administrative systems. These core capabilities represent areas of expertise which are evident within each of our businesses. We seek to generate returns that are in the top quartile of the insurance industry by building on specialized market knowledge, well-established distribution relationships and economies of scale. As a result of our strategy, we are a leader in many of our chosen markets and products.
Managing targeted growth initiatives—Our approach to mergers, acquisitions and other growth opportunities reflects our prudent and disciplined approach to managing our businesses. Our acquisition process is designed to ensure that any new business will support our business model. We establish performance goals in our short-term incentive compensation plan for senior management based on growth in targeted areas.
Identifying and adapting to evolving market needs—Assurant’s businesses adapt to changing market conditions by tailoring product and service offerings to specific client and customer needs. By understanding the dynamics of our core markets, we seek to design innovative products and services that will enable us to sustain long-term profitable growth and market leading positions.
Management’s Discussion and Analysis of Financial Condition and Results of Operations: General
We report our results through five segments: Assurant Solutions, Assurant Specialty Property, Assurant Health, Assurant Employee Benefits, and Corporate and Other. The Corporate and Other segment includes activities of the holding company, financing expenses, net realized gains (losses) on investments, interest income earned from short-term investments held, interest income from excess surplus of insurance subsidiaries not allocated to other segments, run-off Asbestos business, and additional costs associated with excess of loss reinsurance and ceded to certain subsidiaries in the London market between 1995 and 1997. The Corporate and Other segment also includes the amortization of deferred gains associated with the portions of the sales of FFG and LTC, which were sold through reinsurance agreements as described below.
Although profits improved in our Assurant Solutions segment year over year, results in the United Kingdom (“UK”) have continued to deteriorate. We are taking further actions to remedy issues in the UK. We believe that the addition of several new clients effective this year may bring revenue growth. The new clients and distribution channels we are adding will partially offset business lost from client bankruptcies and a slowdown in consumer spending. Our strategy to partner with original equipment manufacturers is producing favorable results. We are benefiting from our Preneed partnership with SCI as they continue to add new funeral homes.
We expect continued changes in the mortgage marketplace affecting Assurant Specialty Property. The overall number of U.S. mortgage loans outstanding is declining and we expect this trend to continue until the residential real estate market recovers. We expect the decline to be more pronounced in the subprime sector where policy placement rates are higher. We expect that the movement of portfolios between loan servicers will continue to create quarterly variability in gross written premiums beyond the seasonality we have traditionally experienced in this business. Consolidation of mortgage portfolios by our clients will pressure margins as loans transition to terms found in the most favorable portfolio contract.
We expect that the pricing and plan changes we have implemented combined with expense reduction efforts should return the Assurant Health business to profitability by late in 2010. Results are tracking consistent with our assumptions based on our experience in the second half of 2009. We continue to work closely with the industry and with members of Congress to offer constructive suggestions for reform of the health care system in the U.S. We are hopeful that reform will focus on programs that work to reduce costs and provide affordable healthcare options to all Americans.
Our focus at Assurant Employee Benefits remains on the small employer, particularly through the sale of worksite or voluntary, employee-paid products, which we believe represents a growing segment of the industry. We have taken actions during 2009 to improve our dental results and additional changes are planned for 2010. We recently extended our shared dental network relationship with Aetna through 2012, allowing us to continue to offer small employers one of the largest dental networks in the country in conjunction with our product.
We had approximately 15,000 employees as of February 16, 2010. Assurant Solutions has employees in Argentina, Brazil, Italy, Spain and Mexico that are represented by labor unions and trade organizations.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, the Statements of Beneficial Ownership of Securities on Forms 3, 4 and 5 for our Directors and Officers and all amendments to such reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge through the SEC website at www.sec.gov. These documents are also available free of charge through our website at www.assurant.com.