Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Item 7. 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 which appear elsewhere in this Report. It contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated 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

We report our results through four segments: Global Housing, Global Lifestyle, Global Preneed and Total Corporate and Other. Total Corporate and Other includes activities of the holding company, financing and interest expenses, net realized gains (losses) on investments, interest income earned from short-term investments held and income (expenses) primarily related to the Company's frozen benefit plans. Total Corporate and Other also includes the amortization of deferred gains and gains associated with the sales of Fortis Financial Group ("FFG"), our Long Term Care ("LTC') and the Assurant Employee Benefits businesses through reinsurance agreements, integration and transaction expenses related to the pending acquisition of The Warranty Group (see below) and other unusual or infrequent items. Additionally, the Total Corporate and Other segment includes amounts related to the runoff of the Assurant Health business. As Assurant Health was a reportable segment in prior years, these amounts are disclosed for comparability. In addition, Assurant Employee Benefits was a separate segment in 2016 and primarily includes the results of operations for the periods prior to its sale on March 1, 2016. See Note 4 for more information.

The following discussion covers the year ended December 31, 2017 (“Twelve Months 2017”), year ended December 31, 2016 (“Twelve Months 2016”) and year ended December 31, 2015 (“Twelve Months 2015”). Please see the discussion that follows, for each of these segments, for a more detailed comparative analysis.

Executive Summary

On January 8, 2018, the Company entered into an Amended and Restated Agreement and Plan of Merger (the “A&R Merger Agreement”), with TWG Holdings Limited, a Bermuda limited company (“TWG Holdings,” and together with its subsidiaries, “TWG”), TWG Re, Ltd., a corporation incorporated in the Cayman Islands (“TWG Re”), Arbor Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of TWG Holdings (“TWG Merger Sub”) and Spartan Merger Sub, Ltd., a Bermuda exempted limited company and a direct wholly owned subsidiary of Assurant (“Merger Sub”). Under the terms of the A&R Merger Agreement and subject to the satisfaction or waiver of the conditions therein, Assurant will acquire TWG through a transaction in which Merger Sub will merge with and into TWG, with TWG continuing as the surviving corporation and as a wholly owned subsidiary of Assurant. TWG is a global provider of protection plans and related programs and a portfolio company of TPG Capital, a private equity company. For more information regarding the pending transaction, see Note 27 to the Consolidated Financial Statements, included elsewhere in this Report.

Consolidated net income decreased $45.8 million, or 8%, to $519.6 million for Twelve Months 2017 from $565.4 million for Twelve Months 2016. The decrease includes a $266.5 million reduction in after-tax net gains from the 2016 sale of Assurant Employee Benefits (including net realized gains on investments and amortization of deferred gains in connection with the transaction) and a $90.1 million after-tax increase in reportable catastrophes (reportable catastrophe losses, net of reinsurance and client profit sharing adjustments, and including reinstatement and other premiums), mainly due to Hurricanes Harvey, Irma and Maria. These items were partially offset by a one-time $177.0 million tax benefit from the reduction of net deferred tax liabilities following the enactment of the U.S. Tax Cuts and Jobs Act.

Global Housing net income decreased $91.2 million, or 48%, to $97.4 million for Twelve Months 2017 from $188.6 million for Twelve Months 2016, primarily due to an $88.1 million after-tax increase in reportable catastrophes mainly from Hurricanes Harvey, Irma and Maria. Excluding reportable catastrophes, the decrease in net income was due to higher non-catastrophe loss experience and a reduction from our lender placed insurance business due to the ongoing normalization of placement rates. These decreases were partially offset by a reduction of lender placed regulatory expenses and profitable growth from our multifamily housing business.

Net earned premiums and fees decreased $113.8 million to $2.18 billion for Twelve Months 2017 compared with Twelve Months 2016, primarily due to lower placement rates in lender-placed insurance as well as the impact of reinstatement and other premiums from reportable catastrophes. Reduced demand for originations and field services, along with lower client volumes, in our mortgage solutions business also contributed to the decline. The decrease was partially offset by revenue growth in our multi-family housing business.

For 2018, we anticipate Global Housing net income, excluding reportable catastrophes, to be down before taking into account recently enacted tax reform. Further declines in lender-placed insurance are expected as the housing market continues to improve. We expect declines to be partially offset by continued growth in multi-family housing and improved performance in mortgage solutions. Additional savings from ongoing expense management efforts are expected to be realized towards the end of 2018 and into 2019. Net operating income is expected to increase after reflecting a lower effective tax rate of approximately 20%, with a portion of the tax savings to be reinvested for future growth. Revenue expected to approximate 2017 levels as declines in lender-placed are offset by growth in multi-family housing and mortgage solutions.

Global Lifestyle net income increased $23.6 million, or 15%, to $178.0 million for Twelve Months 2017 from $154.4 million for Twelve Months 2016. The increase was primarily driven by our global connected living business due to higher contributions from extended service contracts from original equipment manufacturer clients and other distribution channels as well as an increase in contract recoverables and growth in our mobile business, partially offset by lower volume from our domestic repair and logistics business. The increase was also driven by growth in our domestic vehicle protection business.

Twelve Months 2017 net earned premiums, fees and other income decreased $309.9 million to $3.40 billion compared with Twelve Months 2016, primarily due to the change in program structure in fourth quarter 2016 for a large service contract client in global connected living. Excluding this program structure change, net earned premiums, fees and other income increased $193.1 million mainly due to growth in global connected living, that was mostly driven by global mobile, as well as growth from our domestic vehicle protection services and international credit businesses.

In 2018, we expect Global Lifestyle net income to increase, before taking into account recently enacted tax reform. Profitable growth is expected to be driven primarily by newly launched mobile programs and vehicle protection offerings and ongoing expense management efforts, partially offset by ongoing declines in credit insurance. Mobile trade-in activity is expected to vary based on the timing and availability of new smartphone introductions and carrier promotional activity. Results are expected to benefit from a lower effective tax rate of approximately 22%, with a portion of the tax savings to be reinvested for future growth. Revenue is expected to increase from growth in connected living and vehicle protection, globally.

Global Preneed net income decreased $2.7 million, or 6%, to $39.6 million for Twelve Months 2017 from $42.3 million for Twelve Months 2016. This decrease was primarily due to a $5.0 million impairment of software in 2017, partially offset by an increase in net investment income and fee income due to growth of the underlying preneed business.

Twelve Months 2017 net earned premiums, fees and other income increased $9.7 million to $181.0 million compared with Twelve Months 2016 primarily due to growth in preneed business and favorable foreign exchange.

In 2018, we expect Global Preneed net income and revenue to continue to increase modestly from our alignment with market leaders, before taking into account recently enacted tax reform. Results to benefit from a lower effective tax rate of roughly 22%, with a portion of the tax savings to be reinvested for future growth.

Critical Factors Affecting Results

Our results depend on the appropriateness of our product pricing, underwriting and the accuracy of our methodology for the establishment of reserves for future policyholder benefits and claims, frequency and severity of reportable catastrophes and returns on and values of invested assets, as well as our ability to manage our expenses and achieve expense savings. Our results will also depend on our ability to profitably grow our fee-based, capital-light businesses, including global connected living, multi-family housing, mortgage solutions, as well as vehicle protection services, and manage the pace of declines in placement rates in our lender-placed business. Factors affecting these items, including conditions in financial markets, the global economy and the markets in which we operate, and fluctuations in the exchange rate, may have a material adverse effect on our results of operations or financial condition. For more information on these factors, see “Item 1A – Risk Factors.”

Management believes the Company will have sufficient liquidity to satisfy its needs over the next twelve months including the ability to pay interest and principal payments on our senior notes, as well as dividends on our common stock.

For Twelve Months 2017, net cash provided by operating activities, including the effect of exchange rate changes and the reclassification of assets held for sale on cash and cash equivalents, totaled $532.7 million; net cash used in investing activities totaled $541.2 million and net cash used in financing activities totaled $26.7 million. We had $996.8 million in cash and cash equivalents as of December 31, 2017. Please see “– Liquidity and Capital Resources,” below for further details.

Revenues

We generate revenues primarily from the sale of our insurance policies and service contracts 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.

Under the universal life insurance guidance, income earned on preneed life insurance policies sold after January 1, 2009 are presented within fee income net of policyholder benefits. Under the limited pay insurance guidance, the consideration received on preneed policies sold prior to January 1, 2009 is presented separately as net earned premiums, with policyholder benefits expense shown separately.

Our premium and fee income is supplemented by income earned from our investment portfolio. We recognize revenue from interest payments, dividends and sales of investments. Currently, our investment portfolio is primarily invested in fixed maturity securities. Both investment income and realized capital gains 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 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 will generally increase or decrease with 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 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.

Our revenues may also be impacted by our ability to continue to grow in the markets in which we operate, including the mobile device insurance market, the renters insurance market and the field services and valuation markets. For example, our business is subject to volatility in mobile device trade-in volumes based on the release of new devices and carrier promotional programs, as well as to changes in the mobile device market dynamics. Our lender-placed insurance revenues will also be impacted by changes in the housing market.

Expenses

Our expenses are primarily policyholder benefits, underwriting, general and administrative expenses and interest expense.

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, general and administrative expenses consist primarily of commissions, premium taxes, licenses, fees, amortization of deferred costs, general operating expenses and income taxes. In connection with our transformation, we are undertaking various expense savings initiatives while also making investments in information technology, among other things, which will impact our expenses.

We incur interest expense related to our debt.

Critical Accounting Estimates

Certain items in our Consolidated Financial Statements are based on estimates and judgment. Differences between actual results and these estimates could in some cases have material impacts on our Consolidated Financial Statements.

The following critical accounting policies require significant estimates. The actual amounts realized in these areas could ultimately be materially different from the amounts currently provided for in our Consolidated Financial Statements.

Reserves

Reserves are established using generally accepted actuarial methods and reflect judgments about expected future claim payments. 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, 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 is subject to uncertainty given that management is using historical information and methods to help project future events and reserve outcomes.

The recorded reserves represent management's 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.

Many of the factors affecting reserve uncertainty 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 determined.

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 claim reserves. Future loss development could require reserves to be increased or decreased, which could have a material adverse or positive effect on our earnings in the periods in which such increases or decreases are made. See "Item 1A - Risk Factors - Risks related to the Company - 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 materially affect our results of operations, profitability and capital" for more detail on this risk.

The following table provides reserve information for our reporting segment lines for the years ended December 31, 2017 and 2016:

December 31, 2017December 31, 2016
Claims and Benefits PayableClaims and Benefits Payable
Future Policy Benefits and ExpensesUnearned PremiumsCase ReservesIncurred But Not Reported ReservesFuture Policy Benefits and ExpensesUnearned PremiumsCase ReservesIncurred But Not Reported Reserves
Long Duration Contracts:
Global Preneed$5,779.2$35.7$18.9$8.9$5,401.4$111.9$16.6$7.8
Disposed and runoff businesses4,493.334.91,259.3122.14,573.837.91,161.8143.8
All other124.90.21.31.3137.70.21.01.5
Short Duration Contracts:
Global Lifestyle—5,518.773.3204.4—5,041.678.2181.4
Global Housing—1,434.9669.4589.3—1,424.2220.2357.4
Disposed and runoff businesses—14.2766.667.4—10.7991.5140.1
Total$10,397.4$7,038.6$2,788.8$993.4$10,112.9$6,626.5$2,469.3$832.0

For additional information regarding our reserves, see Note 14 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. Below are further discussions on the reserving process for our major short duration products.

Global Housing and Global Lifestyle

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 within the Company include the Chain Ladder, Munich Chain Ladder and Bornhuetter-Ferguson. For Global 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 but not limited to:

•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 frequencies and severities 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
•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, legislative and regulatory environment, economic factors, natural catastrophes, and other relevant factors. The Company consistently applies 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 levels on our ultimate costs for claims occurring in 2017 would be as follows:

Change in both loss frequency and severity for all Global Housing and Global LifestyleUltimate cost of claims occurring in 2017Change in cost of claims occurring in 2017
3% higher$1,630.0$94.0
2% higher$1,598.0$62.0
1% higher$1,567.0$31.0
Base scenario (1)$1,536.0$—
1% lower$1,506.0$(30.0)
2% lower$1,474.0$(62.0)
3% lower$1,443.0$(93.0)
(1)Represents the sum of the case reserves and incurred but not reported reserves as of December 31, 2017 for Global Housing and Global Lifestyle.

Disposed and Runoff Short Duration Lines

The Company has exposure to asbestos, environmental and other general liability claims arising from our participation in various reinsurance pools from 1971 through 1985. This exposure arose from a contract that we discontinued writing many years ago. We carry case reserves, as recommended by the various pool managers, and IBNR reserves totaling $28.7 million (before reinsurance) and $24.2 million (net of reinsurance) at December 31, 2017. Estimation of these liabilities is subject to greater than normal variation and uncertainty due to the general lack of sufficiently detailed data, reporting delays and absence of a generally accepted actuarial methodology for those exposures. There are significant unresolved industry legal issues, including such items as whether coverage exists and what constitutes a claim. In addition, the determination of ultimate damages and the final allocation of losses to financially responsible parties are highly uncertain. Based on information currently available, and after consideration of the reserves reflected in the Consolidated Financial Statements, we do not believe or expect that changes in reserve estimates for these claims are likely to be material.

Reserves for the previously written Assurant Health business are established using generally accepted actuarial methods. Factors used in the reserve calculation include experience derived from historical claim payments and actuarial assumptions, such as trends, the incidence of incurred claims, the extent to which all claims have been reported, and internal claims processing changes.

Long Duration Contracts

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.

Historically, premium deficiency testing on continuing lines of business has not resulted in material adjustments to deferred acquisition costs or reserves. Such adjustments could occur, however, if economic or mortality conditions significantly deteriorated.

Global Preneed

Global Preneed includes pre-funded funeral life insurance and annuity contracts and legacy traditional life insurance (no longer offered). The reserve assumptions for future policy benefits and expenses are determined based upon pricing, which approximates actual experience.

For preneed life insurance issued after 2008 with discretionary death benefit growth, reserve assumptions are made without provision for adverse deviation. Interest and discount rates are based upon investment returns of the assets acquired to support the business. Expected mortality rates, lapse rates, and future death benefit increases are based upon pricing assumptions.

For preneed life insurance issued after 2008 with either no death benefit growth or death benefit growth linked to an inflation index, reserve assumptions are made with provision for adverse deviation. Interest and discount rates are based upon investment returns of the assets acquired to support the business. Expected mortality rates and lapse rates are based upon pricing assumptions. For contracts with minimum benefit increases associated with an inflation index, the reserves assume expected benefit increases equal to a selected discount rate less a spread.

For preneed life insurance issued prior to 2009, reserve assumptions are made with provision for adverse deviation. Interest and discount rates are based upon investment returns of the assets acquired to support the business. Expected mortality rates, lapse rates, and future death benefit increases are based upon pricing assumptions.

Annuity contracts have reserve assumptions made without provision for adverse deviation. Assumed discount rates and interest rates credited on deferred annuities vary by year of issue. Withdrawal charge assumptions are based upon contract provisions. Nearly all of the deferred annuity contracts have a minimum guaranteed interest rate.

For life insurance and annuity contracts acquired in 2000 and prior, interest and discount rates as well as mortality assumptions are based on statutory valuation requirements, which approximate the GAAP valuation requirements, with no explicit provision for lapses.

Disposed and Runoff Long Duration Lines

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 the Company has not been released from the 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.

Deferred Acquisition Costs ("DAC")

Only direct incremental costs associated with the successful acquisition of new or renewal insurance contracts are deferred to the extent that such costs are deemed recoverable from future premiums or gross profits. Acquisition costs primarily consist of commissions and premium taxes. Certain direct response advertising expenses are deferred when the primary purpose of the advertising is to elicit sales to customers who can be shown to have specifically responded to the advertising and the direct response advertising results in probable future benefits.

Premium deficiency testing is performed annually and generally reviewed quarterly. Such testing involves the use of best estimate assumptions including the anticipation of investment income to determine if anticipated future policy premiums are adequate to recover all DAC and related claims, benefits and expenses. To the extent a premium deficiency exists, it is recognized immediately by a charge to the consolidated statement of operations and a corresponding reduction in DAC. If the premium deficiency is greater than unamortized DAC, a liability is accrued for the excess deficiency.

Long Duration Contracts

Acquisition costs for pre-funded funeral ("preneed") life insurance policies issued prior to 2009 and certain life insurance policies no longer offered are deferred and amortized in proportion to anticipated premiums over the premium-paying period. These acquisition costs consist primarily of first year commissions paid to agents.

For preneed investment-type annuities, preneed life insurance policies with discretionary death benefit growth issued after January 1, 2009, universal life insurance policies and investment-type annuities no longer offered, DAC is amortized in proportion to the present value of estimated gross profits from investment, mortality, expense margins and surrender charges over the estimated life of the policy or contract. Estimated gross profits include the impact of unrealized gains or losses on investments as if these gains or losses had been realized, with corresponding credits or charges included in accumulated other comprehensive income (“AOCI”). The assumptions used for the estimates are consistent with those used in computing the policy or contract liabilities.

Short Duration Contracts

Acquisition costs relating to extended service contracts, vehicle service contracts, mobile device protection, credit insurance, lender-placed homeowners and flood, multi-family housing and manufactured housing are amortized over the term of the contracts in relation to premiums earned. These acquisition costs consist primarily of advance commissions paid to agents.

Acquisition costs relating to disposed lines of business (group term life, group disability, group dental and group vision) consist primarily of compensation to sales representatives. These acquisition costs are front-end loaded and are deferred and amortized over the estimated terms of the underlying contracts.

Investments

We regularly monitor our investment portfolio to ensure investments that may be other-than-temporarily impaired are timely identified, properly valued, and charged against earnings in the proper period. The determination that a security has incurred an other-than-temporary decline in value requires the judgment of management. Assessment factors include, but are not limited to, the length of time and the extent to which the market value has been less than cost, the financial condition and rating of the issuer, whether any collateral is held, the intent and ability of the Company to retain the investment for a period of time sufficient to allow for recovery for equity securities and the intent to sell or whether it is more likely than not that the Company will be required to sell for fixed maturity securities. Inherently, there are risks and uncertainties involved in making these judgments. Changes in circumstances and critical assumptions such as a continued weak economy, a more pronounced economic downturn or unforeseen events which affect one or more companies, industry sectors, or countries could result in additional impairments in future periods for other-than-temporary declines in value.

Any equity security whose price decline is deemed other-than-temporary is written down to its then current market value with the amount of the impairment reported as a realized loss in that period. The impairment of a fixed maturity security that the Company has the intent to sell or that it is more likely than not that the Company will be required to sell is deemed other-than-temporary and is written down to its market value at the balance sheet date with the amount of the impairment reported as a realized loss in that period. For all other-than-temporarily impaired fixed maturity securities that do not meet either of these two criteria, the Company is required to analyze its ability to recover the amortized cost of the security by calculating the net present value of projected future cash flows. For these other-than-temporarily impaired fixed maturity securities, the net amount recognized in earnings is equal to the difference between the amortized cost of the security and its net present value.

See also Notes 2 and 5 to the Consolidated Financial Statements included elsewhere in this Report and “Item 1A – Risk Factors – Risks Related to the Company – The value of our investments could decline, affecting our profitability and financial strength” and “Investments” contained later in this item.

Reinsurance

Reinsurance recoverables include amounts we are owed by reinsurers. Reinsurance costs are expensed over the terms of the underlying reinsured policies using assumptions consistent with those used to account for the policies. Amounts recoverable from reinsurers are estimated in a manner consistent with claim and claim adjustment expense reserves or future policy benefits reserves. An estimated allowance for doubtful accounts is recorded on the basis of periodic evaluations of balances due from reinsurers (net of collateral), reinsurer solvency, management’s experience and current economic conditions. The ceding of insurance does not discharge our primary liability to our insureds.

The following table sets forth our reinsurance recoverables as of the dates indicated:

December 31, 2017December 31, 2016
Reinsurance recoverables$9,790.2$9,083.2

We have used reinsurance to exit certain businesses, including Assurant Employee Benefits business and blocks of individual life, annuity, and long-term care business. The reinsurance recoverables relating to these dispositions amounted to $6.09 billion and $6.30 billion at December 31, 2017 and 2016, respectively.

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 for the years ended December 31:

20172016
Ceded future policyholder benefits and expense$4,440.9$4,523.3
Ceded unearned premium2,014.51,836.6
Ceded claims and benefits payable3,183.02,643.2
Ceded paid losses151.880.1
Total$9,790.2$9,083.2

We utilize reinsurance for loss protection and capital management, business dispositions and, in Global Lifestyle and Global Housing, client risk and profit sharing. See also “Item 1A – Risk Factors – Reinsurance may not be available or adequate to protect us against losses, and we are subject to the credit risk of reinsurers,” and “Item 7A – Quantitative and Qualitative Disclosures About Market Risk – Credit Risk.”

Retirement and Other Employee Benefits

We sponsor a qualified pension plan, (the “Assurant Pension Plan”) and various non-qualified pension plans (including an Executive Pension Plan), along with a retirement health benefits plan covering our employees who meet specified eligibility requirements. Effective March 1, 2016, benefit accruals for the Assurant Pension Plan, the various non-qualified pension plans and the retirement health benefits plan were frozen. The reported amounts associated with these plans requires an extensive use of assumptions which include, but are not limited to, the discount rate and expected return on plan assets. We determine these assumptions based upon currently available market and industry data, and historical performance of the plan and its assets. The actuarial assumptions used in the calculation of our aggregate projected benefit obligation vary and include an expectation of long-term appreciation in equity markets which is not changed by minor short-term market fluctuations, but does change when large interim deviations occur. The assumptions we use may differ materially from actual results due to changing market and economic conditions and higher or lower withdrawal rates.

Contingencies

A loss contingency is accrued if reasonably estimable and probable. We establish reserves for these contingencies at the best estimate, or, if no one estimated amount within the range of possible losses is more probable than any other, we report an estimated reserve at the low end of the estimated range. Contingencies affecting the Company primarily relate to litigation matters which are inherently difficult to evaluate and are subject to significant changes.

Deferred Taxes

Deferred income taxes are recorded for temporary differences between the financial reporting and income tax bases of assets and liabilities, based on enacted tax laws and statutory tax rates applicable to the periods in which the Company expects

the temporary differences to reverse. Changes in tax rates are required to be accounted for as of the enactment date and all impacts are required to be reflected in the income statement regardless of whether the underlying deferred taxes originated in another component of the financial statements (such as unrealized gains or losses associated with investments that originated in other comprehensive income). A valuation allowance is established for deferred tax assets if, based on the weight of all available evidence, it is more likely than not that some portion of the asset will not be realized. The valuation allowance is sufficient to reduce the asset to the amount that is more likely than not to be realized. The Company has deferred tax assets resulting from temporary differences that may reduce taxable income in future periods. The detailed components of our deferred tax assets, liabilities and valuation allowance are included in Note 9 to the Consolidated Financial Statements included elsewhere in this Report.

As of December 31, 2016, the Company had a cumulative valuation allowance of $12.5 million against deferred tax assets of international subsidiaries. During twelve months 2017, the Company recognized a cumulative income tax benefit of $3.3 million primarily related to the release of valuation allowances against foreign NOLs and other deferred tax assets. As of December 31, 2017, the Company has a cumulative valuation allowance of $9.2 million against deferred tax assets, as it is management's assessment that it is more likely than not that this amount of deferred tax assets will not be realized. The realization of deferred tax assets related to net operating loss carryforwards of international subsidiaries depends upon the existence of sufficient future taxable income of the same character in the same jurisdiction.

In determining whether the deferred tax asset is realizable, the Company weighed all available evidence, both positive and negative. We considered all sources of taxable income available to realize the asset, including the future reversal of existing temporary differences, future taxable income exclusive of reversing temporary differences, carry forwards and tax-planning strategies.

The Company believes it is more likely than not that the remainder of its deferred tax assets will be realized. Accordingly, other than as noted herein for certain international subsidiaries, a valuation allowance has not been established.

Future reversal of the valuation allowance will be recognized either when the benefit is realized or when we determine that it is more likely than not that the benefit will be realized. Depending on the nature of the taxable income that results in a reversal of the valuation allowance, and on management’s judgment, the reversal will be recognized either through other comprehensive income (loss) or through continuing operations in the consolidated statements of operations. Likewise, if the Company determines that it is not more likely than not that it would be able to realize all or part of the deferred tax asset in the future, an adjustment to the deferred tax asset valuation allowance would be recorded through a charge to continuing operations in the consolidated statements of operations in the period such determination is made.

In determining the appropriate valuation allowance, management makes judgments about recoverability of deferred tax assets, use of tax loss and tax credit carryforwards, levels of expected future taxable income and available tax planning strategies. The assumptions used in making these judgments are updated periodically by management based on current business conditions that affect the Company and overall economic conditions. These management judgments are therefore subject to change based on factors that include, but are not limited to, changes in expected capital gain income in the foreseeable future and the ability of the Company to successfully execute its tax planning strategies. Please see “Item 1A-Risk Factors- Risks Related to he Company- The value of our deferred tax assets could become impaired, which could materially and adversely affect our results of operations an financial condition” for more information.

Valuation and Recoverability of Goodwill

Our goodwill related to previous acquisitions of businesses was $917.7 million and $830.9 million as of December 31, 2017 and 2016, respectively. We review our goodwill annually in the fourth quarter for impairment, or more frequently if indicators of impairment exist. Such indicators include, but are not limited to: significant adverse change in legal factors, 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 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.

We perform goodwill testing at the reporting level (which is the same level as our operating segments). The following table illustrates the amount of goodwill carried at each reporting unit:

December 31,
20172016
Global Housing$386.7$320.9
Global Lifestyle392.8372.3
Global Preneed138.2137.7
Total$917.7$830.9

In fourth quarter 2017, the Company performed a qualitative goodwill impairment assessment for its Global Housing, Global Lifestyle and Global Preneed reporting units. Based on this assessment, the Company determined that it was more likely than not that the reporting units' fair values were more than their carrying amounts, therefore further goodwill impairment testing was not necessary.

Recent Accounting Pronouncements

Please see Note 2 of the Notes to the Consolidated Financial Statements.

Results of Operations

Assurant Consolidated

Overview

The table below presents information regarding our consolidated results of operations:

For the Years Ended December 31,
201720162015
Revenues:
Net earned premiums$4,404.1$5,007.3$8,351.0
Fees and other income1,383.11,422.51,303.5
Net investment income493.8515.7626.2
Net realized gains on investments30.1162.231.8
Amortization of deferred gains and gains on disposal of businesses103.9394.513.0
Gain on pension plan curtailment—29.6—
Total revenues6,415.07,531.810,325.5
Benefits, losses and expenses:
Policyholder benefits1,870.61,808.54,742.5
Selling, underwriting, general and administrative expenses4,050.44,794.15,326.7
Interest expense49.557.655.1
Loss on extinguishment of debt—23.0—
Total benefits, losses and expenses5,970.56,683.210,124.3
Income before (benefit) provision for income taxes444.5848.6201.2
(Benefit) provision for income taxes(75.1)283.259.6
Net income$519.6$565.4$141.6

Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016

Net income decreased $45.8 million, or 8%, to $519.6 million for Twelve Months 2017 from $565.4 million for Twelve Months 2016. The decrease was primarily related to $266.5 million of lower after-tax net gains, including a reduction in amortization of deferred gains and net realized gains on investments associated with the sale of Assurant Employee Benefits. Twelve Months 2017 also included a $90.1 million after-tax increase in reportable catastrophes primarily in Global Housing, as previously mentioned. These items were partially offset by a one-time $177.0 million tax benefit from the reduction of net deferred tax liabilities following the enactment of the U.S. Tax Cuts and Jobs Act, a $51.6 million after-tax improvement in the results of our Health run-off operations, and a $27.1 million tax benefit from the release of a reserve for uncertain tax positions.

Additionally, the decrease was offset by a $25.6 million increase from Global Lifestyle, excluding reportable catastrophes, that was driven by higher contributions from the global connected living and vehicle protection businesses, lower lender placed insurance regulatory expenses and the absence of debt extinguishment expenses incurred in 2016.

Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

Net income increased $423.8 million, or 299%, to $565.4 million for Twelve Months 2016 from $141.6 million for Twelve Months 2015. The increase was primarily related to lower losses and exit-related charges from the wind-down of the Assurant Health runoff operations, a $248.0 million after-tax increase in amortization of deferred gains and gains on disposal of businesses and an additional $84.6 million after-tax of net realized gains on investments. The increase in amortization of deferred gains and gains on disposal of businesses and net realized gains on investments both primarily relate to the 2016 sale of the Assurant Employee Benefits segment. These items were partially offset by higher reportable catastrophes and the ongoing declines of lender-placed insurance in our Global Housing segment.

Global Housing

Overview

The table below presents information regarding the Global Housing segment's results of operations:

For the Years Ended December 31,
201720162015
Revenues:
Net earned premiums$1,761.4$1,829.1$2,044.7
Fees and other income413.6459.7405.5
Net investment income75.672.792.8
Total revenues2,250.62,361.52,543.0
Benefits, losses and expenses:
Policyholder benefits958.4828.6788.5
Selling, underwriting, general and administrative expenses1,147.91,251.91,290.9
Total benefits, losses and expenses2,106.32,080.52,079.4
Segment income before provision for income taxes144.3281.0463.6
Provision for income taxes46.992.4155.9
Segment net income$97.4$188.6$307.7
Net earned premiums, fees and other:
Lender-placed insurance$1,224.9$1,317.2$1,561.4
Multi-family housing366.3320.9282.7
Mortgage solutions257.7329.3289.5
Manufactured housing and other326.1321.4316.6
Total$2,175.0$2,288.8$2,450.2
Ratios:
Combined ratio for risk-based businesses (1)99.1%91.1%83.4%
Pre-tax income margin for fee-based, capital-light businesses (2)10.1%10.8%11.6%
(1)The combined ratio for risk-based businesses is equal to total benefits, losses and expenses, divided by net earned premiums and fees and other income for lender-placed insurance including manufactured housing and other insurance businesses.
(2)The pre-tax margin for fee-based, capital-light businesses equals income before provision for income taxes divided by net earned premiums and fees and other income for multi-family housing and mortgage solutions businesses.

Regulatory Matters

Please see Note 25 to the Consolidated Financial Statements included elsewhere in this Report for a description of Settlement Agreements relating to targeted market conduct examinations regarding the Company's lender-placed insurance products.

Lender-placed insurance products accounted for 56% and 58% of net earned premiums, fees and other income for Twelve Months 2017 and Twelve Months 2016, respectively. The approximate corresponding contributions to the segment net income

in these periods were 45% and 56%, respectively. The portion of total segment net income attributable to lender-placed products may vary substantially over time depending on the frequency, severity and location of catastrophic losses, the cost of catastrophe reinsurance and reinstatement coverage, the variability of claim processing costs and client acquisition costs, and other factors. In addition, we expect placement rates for these products to decline in 2018 as the U.S. housing markets continue to improve.

Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016

Net Income

Segment net income decreased $91.2 million, or 48%, to $97.4 million for Twelve Months 2017 from $188.6 million for Twelve Months 2016, primarily due to an $88.1 million after-tax increase in reportable catastrophes, net of reinsurance and including reinstatement and other premiums. Absent the impact of these items, the decrease in net income was due to higher non-catastrophe loss experience and a reduction from our lender placed insurance business due to the ongoing normalization of placement rates. These decreases were partially offset by a reduction of lender placed regulatory expenses, fees and reimbursements from the NFIP for processing flood claims following Hurricane Harvey, and profitable growth from our multifamily housing business.

Total Revenues

Total revenues decreased $110.9 million, or 5%, to $2.25 billion for Twelve Months 2017 from $2.36 billion for Twelve Months 2016. Net earned premiums decreased $67.7 million, or 4%, mainly due to a decline in placement rates in our lender-placed insurance business and $22.4 million of reinstatement and other premiums from the increase in reportable catastrophes, partially offset by growth in multi-family housing. Fees and other income decreased $46.1 million, or 10%, mainly due to a decrease in mortgage solutions fee income driven by lower demand for originations and field services and reduced client volumes.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased to $2.11 billion for Twelve Months 2017 from $2.08 billion for Twelve Months 2016. Total policyholder benefits increased $129.8 million, or 16%, mainly due to a $118.3 million increase in net losses, excluding reinstatement and other premiums, from reportable catastrophes. Reportable catastrophe losses include only individual catastrophic events that generated losses to the Company in excess of $5.0 million, pre-tax and net of reinsurance. There was also an increase in non-catastrophe losses primarily due to the impact of lower premium rates and higher weather losses. Selling, underwriting, general and administrative expenses decreased $104.0 million, or 8%, mainly driven by the reduction in our mortgage solutions business, lower lender placed regulatory expenses and an increased focus on expense management. Also contributing to this decrease were fees and reimbursements from the NFIP for processing flood claims for Hurricane Harvey.

Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

Net Income

Segment net income decreased $119.1 million, or 39%, to $188.6 million for Twelve Months 2016 from $307.7 million for Twelve Months 2015. The decrease was primarily due to an $83.1 million after-tax increase in reportable catastrophes and the ongoing declines of our lender-placed homeowners insurance business, primarily related to reduced placement rates given stability in the U.S. economy, including a decline in real-estate owned business and the previously disclosed loss of client business. This decline was partially offset by savings realized from expense initiatives.

Total Revenues

Total revenues decreased $181.5 million, or 7%, to $2.36 billion for Twelve Months 2016 from $2.54 billion for Twelve Months 2015. Net earned premiums decreased $215.6 million, or 11%, primarily due to declines in lender-placed homeowners insurance net earned premiums due to the expected reduction in placement rates, lower premium rates and the previously disclosed loss of client business. The decrease was partially offset by an increase from the multi-family housing business due to higher volume of renters policies sold through our affinity channels and increased penetration rates across our property management network. Fees and other income increased $54.2 million, or 13%, mainly due to an increase from the mortgage solutions business, including the impact of the July 1, 2016 acquisition of American Title, Inc.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses remained flat at $2.08 billion for Twelve Months 2016 and Twelve Months 2015. Total policyholder benefits increased $40.1 million, or 5%, primarily due to $157.4 million of reportable catastrophe losses for Twelve Months 2016 compared to $29.6 million for Twelve Months 2015, partially offset by favorable non-catastrophe losses due to lower frequency in theft and vandalism claims. Selling, underwriting, general and administrative expenses decreased $39.0 million, or 3%, mainly due to savings from expense initiatives, partially offset by expenses to support growth in mortgage solutions businesses.

Global Lifestyle

Overview

The table below presents information regarding the Global Lifestyle segment's results of operations:

For the Years Ended December 31,
201720162015
Revenues:
Net earned premiums$2,576.5$2,901.4$2,955.4
Fees and other income819.7804.7678.6
Net investment income114.6113.1126.9
Total revenues3,510.83,819.23,760.9
Benefits, losses and expenses:
Policyholder benefits700.4663.8679.8
Selling, underwriting, general and administrative expenses2,564.12,947.72,869.8
Total benefits, losses and expenses3,264.53,611.53,549.6
Segment income before provision for income taxes246.3207.7211.3
Provision for income taxes68.353.358.3
Segment net income$178.0$154.4$153.0
Net earned premiums, fees and other:
Global connected living (mobile and service contracts)$2,156.0$2,570.1$2,551.0
Global vehicle protection services782.8715.8608.4
Global credit and other457.4420.2474.6
Total$3,396.2$3,706.1$3,634.0
Net earned premiums, fees and other:
Domestic$2,159.8$2,561.6$2,409.3
International1,236.41,144.51,224.7
Total$3,396.2$3,706.1$3,634.0
Ratios:
Combined ratio for risk-based businesses (1)96.2%95.9%95.5%
Pre-tax income margin for fee-based, capital-light businesses (2)5.7%3.5%3.6%
(1)The combined ratio for risk-based businesses is equal to total benefits, losses and expenses divided by net earned premiums and fees and other income for global vehicle protection services, global credit and other insurance businesses.
(2)The pre-tax income margin for fee-based, capital-light businesses equals income before provision for income taxes divided by net earned premiums and fees and other income for global connected living.

Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016

Net Income

Segment net income increased $23.6 million, or 15%, to $178.0 million for Twelve Months 2017 from $154.4 million for Twelve Months 2016. The increase was primarily driven by our global connected living business due to higher contributions from extended service contracts from original equipment manufacturer clients and other distribution channels as well as growth

in our mobile business, partially offset by lower volume from our domestic repair and logistics business. The increase was also driven by growth in our domestic vehicle protection business. Results for Twelve Months 2017 included $12.5 million in after-tax benefits for client recoverables, for both service contracts and mobile over the course of the year, and $9.6 million of nonrecurring tax benefits. Results for Twelve Months 2016 included $18.0 million in tax benefits related to a redemption of shares in our international markets.

Total Revenues

Total revenues decreased $308.4 million, or 8%, to $3.51 billion for Twelve Months 2017 from $3.82 billion for Twelve Months 2016. Net earned premiums decreased $324.9 million, or 11%, due to a change in program structure in the fourth quarter of 2016 impacting the accounting for revenues from our global connected living business for a previously disclosed large service contract client on a net instead of gross basis. This change has no impact to our earnings. Excluding the program structure change, Twelve Months 2017 net earned premiums increased 7% primarily due to growth from our global connected living business mainly driven by global mobile, as well as growth from international credit and domestic vehicle protection businesses. Fees and other income increased $15.0 million, or 2%, primarily driven by growth in our global connected living business, specifically in our global mobile programs and inclusive of the aforementioned client recoverable, partially offset by lower volume from domestic mobile repair and logistics businesses.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses decreased $347.0 million, or 10%, to $3.26 billion for Twelve Months 2017 from $3.61 billion for Twelve Months 2016. The decreases were impacted by the aforementioned change in program structure in the fourth quarter of 2016. Excluding this program structure change, Policyholder benefits increased 11%, primarily driven by growth in our global mobile protection programs, mostly in Europe, in our connected living business and in our international credit insurance business. Excluding the program structure change, selling, underwriting, general and administrative expenses increased 3%, primarily due to growth in our global connected living business, specifically from our international mobile programs, partially offset by lower volumes in our domestic repairs and logistics business. Additionally, the increase was driven by growth in our international credit insurance and domestic vehicle protection businesses.

Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

Net Income

Segment net income increased $1.4 million, or 1%, to $154.4 million for Twelve Months 2016 from $153.0 million for Twelve Months 2015. The increase was primarily due to improved mobile performance globally and $5.1 million of increased net tax benefits related to a redemption of shares in our international structure. These items were mostly offset by the loss of a domestic tablet program, declines in legacy extended service contracts from North American retail clients and the continued runoff of our credit insurance business.

Total Revenues

Total revenues increased $58.3 million, or 2%, to $3.82 billion for Twelve Months 2016 from $3.76 billion for Twelve Months 2015. Net earned premiums decreased $54.0 million, or 2%, primarily due to a large North American retail client, foreign exchange volatility, the loss of a domestic mobile tablet program and the continued runoff of our credit insurance business. Fees and other income increased $126.1 million, or 19%, primarily driven by contributions from global mobile programs and subscribers.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $61.9 million, or 2%, to $3.61 billion for Twelve Months 2016 from $3.55 billion for Twelve Months 2015. Policyholder benefits decreased $16.0 million, or 2%, primarily driven by improved loss experience in our domestic service contract business and results from a North American connected living retail client. This decrease was partially offset by higher loss experience in our global mobile protection programs due in part to expansion of our international mobile business in Asia and Europe. Selling, underwriting, general and administrative expenses increased $77.9 million, or 3%, primarily due to foreign exchange volatility, lower contributions from legacy extended service contracts from North American retailers, the continued runoff of our credit business and the loss of a domestic mobile tablet program. These items were partially offset by increased expenses from growth from our domestic vehicle protection and connected living businesses.

Global Preneed

Overview

The table below presents information regarding the Global Preneed segment's results of operations:

For the Years Ended December 31,
201720162015
Revenues:
Net earned premiums$59.5$61.7$60.4
Fees and other income121.5109.6107.1
Net investment income262.0259.8249.8
Total revenues443.0431.1417.3
Benefits, losses and expenses:
Policyholder benefits259.1250.4239.7
Selling, underwriting, general and administrative expenses124.9116.9112.5
Total benefits, losses and expenses384.0367.3352.2
Segment income before provision for income taxes59.063.865.1
Provision for income taxes19.421.520.9
Segment net income$39.6$42.3$44.2

Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016

Net Income

Segment net income decreased $2.7 million, or 6%, to $39.6 million for Twelve Months 2017 from $42.3 million for Twelve Months 2016. This decrease was primarily due to a $5.0 million after-tax impairment of software in 2017, partially offset by an increase in net investment income and fee income due to growth of the underlying preneed business.

Total Revenues

Total revenues increased $11.9 million, or 3%, to $443.0 million for Twelve Months 2017 from $431.1 million for Twelve Months 2016. This increase was primarily due to growth in preneed business, favorable foreign exchange and higher investment income.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $16.7 million, or 5%, to $384.0 million for Twelve Months 2017 from $367.3 million for Twelve Months 2016. This increase was primarily due to an increase in policyholder benefits due to growth in the preneed business. Additionally, the increase includes a $7.7 million impairment of software that was written off in 2017.

Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

Net Income

Segment net income decreased $1.9 million, or 4%, to $42.3 million for Twelve Months 2016 from $44.2 million for Twelve Months 2015. This decrease was primarily due to an adjustment related to the amortization of deferred acquisition costs and policyholder benefits for an older block of policies, partially offset by higher investment income from real estate joint venture partnerships.

Total Revenues

Total revenues increased $13.8 million, or 3%, to $431.1 million for Twelve Months 2016 from $417.3 million for Twelve Months 2015. This increase was primarily due to increased net investment income as a result of higher invested assets and investment income from real estate joint venture partnerships. Also contributing to the increase was premium from policies written in prior years.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased by $15.1 million, or 4%, to $367.3 million for Twelve Months 2016 from $352.2 million for Twelve Months 2015. This increase was primarily due to an adjustment related to the amortization of deferred acquisition costs and policyholder benefits for an older block of policies and higher expenses related to certain technology.

Assurant Employee Benefits

Overview

The table below presents information regarding the Assurant Employee Benefits segment's results of operations, through the sale date of March 1, 2016:

For the Years Ended December 31,
20162015
Revenues:
Net earned premiums$178.0$1,066.8
Fees and other income4.225.0
Net investment income17.3111.0
Total revenues199.51,202.8
Benefits, losses and expenses:
Policyholder benefits118.4730.2
Selling, underwriting, general and administrative expenses67.3398.8
Total benefits, losses and expenses185.71,129.0
Segment income before provision for income taxes13.873.8
Provision for income taxes5.326.5
Segment net income$8.5$47.3

On March 1, 2016, the Company sold its Assurant Employee Benefits segment to Sun Life Assurance Company of Canada, the wholly owned subsidiary of Sun Life Financial, Inc. For more information on the sale see Note 4 to the Consolidated Financial Statements, included elsewhere in this Report.

The amounts included in Twelve Months 2016 primarily represent January and February 2016 results of operations, the period prior to the sale. All amounts related to the net gain on the sale are included in the Total Corporate and Other segment, discussed later. Since this business has been sold and is no longer part of our ongoing operations, a discussion of results for the periods presented has been excluded.

Total Corporate and Other

The table below presents information regarding the Total Corporate and Other segment’s results of operations:

For the Years Ended December 31,
201720162015
Corporate & OtherHealthTotal Corporate & OtherCorporate & OtherHealthTotal Corporate & OtherCorporate & OtherHealthTotal Corporate & Other
Revenues:
Net earned premiums$—$6.7$6.7$—$37.1$37.1$—$2,223.7$2,223.7
Fees and other income24.83.528.324.519.844.332.754.687.3
Net investment income35.16.541.644.08.852.821.224.545.7
Net realized gains on investments (1)30.1—30.1162.2—162.231.8—31.8
Amortization of deferred gains on disposal of businesses103.9—103.9394.5—394.513.0—13.0
Gain on pension plan curtailment———29.6—29.6———
Total revenues193.916.7210.6654.865.7720.598.72,302.82,401.5
Benefits, losses and expenses:
Policyholder benefits—(47.3)(47.3)—(52.7)(52.7)3.12,301.22,304.3
Selling, underwriting, general and administrative expenses (2)165.548.0213.5244.6165.7410.3127.3527.4654.7
Interest expense49.5—49.557.6—57.655.1—55.1
Loss on extinguishment of debt———23.0—23.0———
Total benefits, losses and expenses215.00.7215.7325.2113.0438.2185.52,828.63,014.1
Segment (loss) income before (benefit) provision for income taxes(21.1)16.0(5.1)329.6(47.3)282.3(86.8)(525.8)(612.6)
(Benefit) provision for income taxes(215.1)5.4(209.7)117.0(6.3)110.7(44.1)(157.9)(202.0)
Segment net income (loss)$194.0$10.6$204.6$212.6$(41.0)$171.6$(42.7)$(367.9)$(410.6)
(1)Net realized gains on investments for Corporate & Other in 2016 includes $146.7 million of gains included in overall net gain from the sale of Assurant Employee Benefits.
(2)Selling, underwriting, general and administrative expenses for Corporate & other in 2016 includes $26.6 million of loss on the retroactive component that was included within the net gain from the sale of Assurant Employee Benefits.

Corporate & Other

Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016

Net Income (Loss)

Corporate & Other net income decreased $18.6 million or 9%, to $194.0 million for Twelve Months 2017 compared with $212.6 million for Twelve Months 2016. The decrease was primarily related to $266.5 million of lower after-tax net gains associated with the sale of Assurant Employee Benefits, including a reduction in amortization of deferred gains and lower net realized gains on investments associated with the transaction. This decrease was partially offset by a one-time $177.0 million tax benefit from the reduction of net deferred tax liabilities following the enactment of the U.S. Tax Cuts and Jobs Act, a $27.1 million tax benefit from the release of a reserve for uncertain tax positions, and $15.0 million after-tax loss on extinguishment of debt recorded in 2016. Additionally, the decrease was offset by the absence of a $10.8 million after-tax intangible asset impairment charge recorded in 2016. The $177.0 million benefit was related to the re-measurement of the total deferred tax

assets and liabilities of the Company, including those that are allocated to the other reportable segments. This presentation is consistent with how management views the adjustment related to this item.

Total Revenues

Total revenues decreased $460.9 million or 70%, to $193.9 million for Twelve Months 2017 compared with $654.8 million for Twelve Months 2016. The decrease in revenues was mainly due to $437.3 million of lower after-tax net gains associated with the sale of Assurant Employee Benefits, including a reduction in amortization of deferred gains and lower net realized gains on investments associated with the transaction. Also, Twelve Months 2016 included a $29.6 million curtailment gain associated with our pension plan freeze.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses decreased $110.2 million or 34%, to $215.0 million in Twelve Months 2017 compared with $325.2 million in Twelve Months 2016. This decrease was primarily driven by activity from 2016, including a $26.6 million loss on the retroactive reinsurance component related to the sale of our Assurant Employee Benefits segment, a $23.0 million loss on extinguishment of debt, a $16.7 million intangible asset impairment charge related to trade names no longer used or defended by the Company and overall higher residual expenses related to the sale of Assurant Employee Benefits. Additionally, expenses in 2017 were significantly lower than 2016 due to the ongoing expense management initiatives. These decreases were partially offset by $12.5 million of integration and transaction related expenses associated with The Warranty Group acquisition.

Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

Net Income (Loss)

Results improved $255.3 million to net income of $212.6 million for Twelve Months 2016 compared with a net loss of $42.7 million for Twelve Months 2015. The improvement was primarily due to an additional $248.0 million after-tax in amortization of deferred gains and gains on disposal of businesses and an $84.6 million after-tax increase in net realized gains on investments, both related to the transfer of assets and other items associated with the sale of Assurant Employee Benefits segment. Partially offsetting these items were the initial $17.3 million after-tax loss on the retroactive reinsurance component related to the sale of our Assurant Employee Benefits segment, a $14.9 million after-tax post-close expense related to a previous disposition, a $10.8 million after-tax intangible asset impairment charge and a $15.0 million after-tax loss on extinguishment of debt.

Total Revenues

Total revenues increased $556.1 million or 563%, to $654.8 million for Twelve Months 2016 compared with $98.7 million for Twelve Months 2015. The increase in revenues was mainly due to an increase of $381.5 million in amortization of deferred gains and gains on disposal of business and an increase of $130.4 million in net realized gains on investments, both related to the sale of our Assurant Employee Benefits segment. In addition, Twelve Months 2016 included a $29.6 million one-time curtailment gain associated with our pension plan freeze.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $139.7 million or 75%, to $325.2 million in Twelve Months 2016 compared with $185.5 million in Twelve Months 2015. This increase was primarily attributable to the initial $26.6 million loss on the retroactive reinsurance component related to the sale of our Assurant Employee Benefits segment, $23.0 million post-close contractual indemnification expense related to a previous disposition and a $16.7 million intangible asset impairment charge. In addition, Twelve Months 2016 included a $23.0 million loss on extinguishment of debt as a result of our December 2016 cash tender offer for $100.0 million of our 6.75% Senior Notes.

Assurant Health

Assurant began to wind down its major medical operations in late 2015, and the Company substantially completed its exit of the health insurance market in 2016.

The Affordable Care Act

The Affordable Care Act introduced new and significant premium stabilization programs in 2014: reinsurance, risk adjustment, and risk corridor. As of December 31, 2017, we have no net reinsurance recoverables related to these programs. During Twelve Months 2017, we collected $33.0 million under the 2015 reinsurance program. During Twelve Months 2017, we

collected $4.7 million under the 2014 and 2015 risk adjustment programs. Finally, we have not recorded a net receivable under the risk corridor programs because payments from the U.S. Department of Health and Human Services are considered unlikely.

Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016

Net Income

Segment net income was $10.6 million for Twelve Months 2017 compared to a net loss of $41.0 million for Twelve Months 2016. The change in results was primarily due to lower expenses and favorable claims development as we continue to run off the business.

Total Revenues

Total revenues were $16.7 million for Twelve Months 2017 compared to $65.7 million for Twelve Months 2016. The decrease was primarily due to our exit of the health insurance market.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses were $0.7 million for Twelve Months 2017 compared to $113.0 million for Twelve Months 2016. The decrease was primarily related to lower expenses due to the substantial completion of the runoff of the business in 2017.

Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

Net Loss

Segment net loss decreased to a net loss of $41.0 million for Twelve Months 2016 from a net loss of $367.9 million for Twelve Months 2015. The decrease was primarily attributable to the establishment of a premium deficiency reserve and exit related costs in Twelve Months 2015 due to the aforementioned decision to put the segment into run off.

Total Revenues

Total revenues decreased to $65.7 million for Twelve Months 2016 from $2.30 billion for Twelve Months 2015 due to the exit of the health insurance market.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses decreased to $113.0 million for Twelve Months 2016 from $2.83 billion for Twelve Months 2015. Policyholder benefits decreased due to the reduction of in-force policies as a result of the exit from the health insurance market, including all of the individual Affordable Care Act medical policies which were terminated at the end of 2015. Selling, underwriting, general and administrative expenses decreased due to reduced commission expense resulting from the discontinuance of sales and decreased general expenses as we run off the business. This decrease was partially offset by an increase in guaranty fund assessment expenses.

Investments

The Company had total investments of $11.55 billion and $11.48 billion as of December 31, 2017 and 2016, respectively. Net unrealized gains on the Company's fixed maturity portfolio increased $204.8 million during 2017, from $701.3 million at December 31, 2016 to $906.1 million at December 31, 2017. This increase was mainly due to a decrease in Treasury yields and by a tightening in credit spreads. For more information on the Company's investments see Note 5 to the Consolidated Financial Statements included elsewhere in this Report.

The following table shows the credit quality of the Company's fixed maturity securities portfolio as of the dates indicated:

As of
Fixed Maturity Securities by Credit Quality (Fair Value)December 31, 2017December 31, 2016
Aaa / Aa / A$6,155.463.7%$6,000.762.7%
Baa2,982.530.9%2,903.830.3%
Ba400.84.1%435.24.6%
B and lower123.91.3%232.42.4%
Total$9,662.6100.0%$9,572.1100.0%

Major categories of net investment income were as follows:

Years Ended December 31,
201720162015
Fixed maturity securities$411.8$419.3$486.2
Equity securities22.825.129.9
Commercial mortgage loans on real estate31.541.772.7
Short-term investments7.25.52.0
Other investments25.224.340.3
Cash and cash equivalents15.817.518.4
Revenue from consolidated investment entities$9.8$—$—
Total investment income524.1533.4649.5
Investment expenses(21.9)(17.7)(23.3)
Expenses from consolidated investment entities(8.4)——
Net investment income493.8515.7626.2

Net investment income decreased $21.9 million, or 4%, to $493.8 million for Twelve Months 2017 from $515.7 million for Twelve Months 2016. The decrease is primarily attributable to lower invested assets, lower investment yields and a $0.9 million decrease in investment income from real estate joint venture partnerships.

Net investment income decreased $110.5 million, or 18%, to $515.7 million for Twelve Months 2016 from $626.2 million for Twelve Months 2015. The decrease is primarily attributable to lower investment yields, lower invested assets and a $7.9 million decrease in investment income from real estate joint venture partnerships.

As of December 31, 2017, the Company owned $66.9 million of securities guaranteed by financial guarantee insurance companies. Included in this amount was $59.4 million of municipal securities, whose credit rating was A+ with the guarantee, but would have had a rating of A- without the guarantee.

For more information on the Company's investments, please see Notes 5 and 7 to the Consolidated Financial Statements included elsewhere in this Report.

Liquidity and Capital Resources

Regulatory Requirements

Assurant, Inc. is a holding company and, as such, has limited direct operations of its own. Our holding company’s assets consist primarily of the capital stock of our subsidiaries. Accordingly, our holding company’s 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. The ability to pay such dividends and to make such other payments from our insurance subsidiaries will be limited by applicable laws and regulations of the states in which our subsidiaries are domiciled, which subject our subsidiaries to significant regulatory restrictions. The dividend requirements and regulations vary from state to state and by type of insurance provided by the applicable subsidiary. These laws and regulations require, among other things, our insurance subsidiaries to maintain minimum solvency requirements and limit the amount of dividends they can pay to the holding company. For further information on pending amendments to state insurance holding company laws, including the NAIC’s “Solvency Modernization Initiative,” see “Item 1A – Risk Factors – Risks Related to the Company – 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 is the level of capital needed to maintain desired financial strength ratings from A.M. Best.

Regulators or rating agencies could become more conservative in their methodology and criteria, increasing capital requirements for our insurance subsidiaries. In 2017, the following actions were taken by the rating agencies:

A.M. Best

•Withdrew the ratings of John Alden Life Insurance Company and Time Insurance Company (Assurant Health legal entities).
•Ratings of all other rated entities were affirmed with a stable outlook.

Moody's Investor Services ("Moody's")

•In connection with the pending TWG transaction, placed senior debt rating of Assurant, Inc. and financial strength ratings of rated entities on review for downgrade.

Standard and Poor’s (“S&P”)

•In connection with the pending TWG transaction, placed the long-term issuer credit rating of Assurant, Inc. on CreditWatch Negative.
•Affirmed the short-term issuer credit rating.
•Financial strength ratings of rated entities were affirmed with a stable outlook.

For further information on our ratings and the risks of ratings downgrades, see “Item 1 – Business” and “Item 1A – Risk Factors – Risks Related to the Company – A.M. Best, Moody’s and S&P rate the financial strength of our insurance company subsidiaries, and a decline in these ratings could affect our standing in the insurance industry and cause our sales and earnings to decrease.”

For 2018, the maximum amount of dividends our U.S. domiciled insurance subsidiaries could pay, under applicable laws and regulations without prior regulatory approval, is approximately $300.0 million.

Liquidity

As of December 31, 2017, we had approximately $540.0 million in holding company capital. We use the term “holding company capital” to represent the portion of cash and other liquid marketable securities held at Assurant, Inc., out of a total of $649.3 million, which we are not otherwise holding for a specific purpose as of the balance sheet date. We can use such capital for stock repurchases, stockholder dividends, acquisitions, and other corporate purposes. $250.0 million of the $540.0 million of holding company capital is intended to serve as a buffer against remote risks (such as large-scale catastrophe losses). Dividends or returns of capital paid by our insurance and non-insurance subsidiaries, net of infusions and excluding amounts used for acquisitions, were approximately $374.0 million for the year ended December 31, 2017, which included approximately $145.0 million from Assurant Health and capital formerly backing Assurant Employee Benefits and approximately $229.0 million from legal entities in our Global Housing, Global Lifestyle and Global Preneed operating segments. For the years ended December 31, 2016 and 2015, dividends, net of infusions and excluding amounts used or set aside for acquisitions, made to the holding company from its operating companies were $1.65 billion (including approximately $894.0 million of dividends from statutory insurance subsidiaries that received cash proceeds related to the sale of Assurant Employee Benefits) and $174.6 million, respectively. We use these cash inflows primarily to pay expenses, to make interest payments on indebtedness, to make dividend payments to our stockholders, to fund acquisitions and to repurchase our shares.

In addition to paying expenses and making interest payments on indebtedness, our capital management strategy provides for several uses of the cash generated by our subsidiaries, including without limitation, returning capital to shareholders through share repurchases and dividends, investing in our businesses to support growth in targeted areas, and making prudent and opportunistic acquisitions. From time to time, the Company may also seek to purchase outstanding debt in open market repurchases or privately negotiated transactions. During 2017, 2016 and 2015 we made share repurchases and paid dividends to our stockholders of $508.5 million, $994.8 million and $378.9 million, respectively. We expect 2018 operating segment dividends from Global Housing, Global Lifestyle and Global Preneed to be at least segment net income, subject to the growth of the business, rating agency and regulatory capital requirements.

In connection with the pending acquisition of TWG Holdings, the equityholders of TWG Holdings will receive consideration of 10,400,000 shares of Assurant common stock and cash. The cash consideration is subject to a collar mechanism based on the change between Assurant’s 10-day volume-weighted average stock price at the time of closing (the “closing price”) and $95.4762, the reference price as set forth in the A&R Merger Agreement. Pursuant to the collar mechanism, the cash consideration may increase or decrease by the value of the difference between the closing price and the reference price if the percentage change is no more than 10% (in either direction). There is no further adjustment to the cash consideration if the percentage change between the two prices is within 10% - 20% (in either direction). In the event that the percentage change is greater than 20% (in either direction), the disadvantaged party may terminate the agreement unless the other party elects to cure by adjusting the consideration to be received by the TWG Holdings equityholders. Assuming an increase or decrease with respect to the reference price of not more than 10%, the total cash consideration would range from approximately $800.0 million to $1.00 billion, depending on Assurant’s stock price at closing. The Company currently expects to finance the cash consideration and repayment of $591.3 million of TWG's existing debt through a combination of external financing and available cash at the holding company at the time of close.

On January 24, 2018, the Company entered into an amended and restated commitment letter with Morgan Stanley Senior Funding, Inc. ("Morgan Stanley"), JP Morgan Chase Bank, N.A. ("JP Morgan"), Wells Fargo, N.A. ("Wells Fargo"), U.S. Bank National Association, KeyBank National Association and Bank of Montreal (collectively, the "lenders") to modify the commitment letter dated as of October 17, 2017 pursuant to which the lenders have committed to provide to the Company, subject to the terms and conditions set forth therein, the full amount of a 364-day $1.50 billion senior unsecured bridge loan facility ("Bridge Loan Facility"). The amended and restated commitment letter replaces the interim commitment letter provided by Morgan Stanley, JP Morgan Chase and Wells Fargo on January 8, 2018. Subject to certain conditions, the Company may use the proceeds of the facility to finance the pending TWG transaction.

On December 15, 2017, the Company entered into a term loan agreement with a syndicate of banks arranged by JP Morgan, Morgan Stanley and Wells Fargo to establish a $350.0 million 364-day senior unsecured term loan credit facility (the “Term Loan Facility”). The Company may, subject to certain conditions, use the proceeds of the facility to finance the pending TWG transaction or to redeem $350.0 million of the Company's existing 2013 Senior Notes due March 2018. The agreement was amended and restated on January 29, 2018. The terms were modified to give effect to the amended and restated merger agreement but otherwise did not materially affect the rights or obligations of the Company and its subsidiaries thereunder.

On December 15, 2017, the Company entered into a five-year senior unsecured $450.0 million revolving credit agreement (the “2017 Credit Facility”) with a syndicate of banks arranged by JP Morgan and Wells Fargo. The 2017 Credit Facility replaces the Company’s prior five-year $400.0 million revolving credit facility (“2014 Credit Facility”), entered into on September 16, 2014. The 2014 Credit Facility was scheduled to expire in September 2019, but was terminated upon the effectiveness of the 2017 Credit Facility. The 2017 Credit Facility provides for revolving loans and the issuance of multi-bank, syndicated letters of credit and/or letters of credit from a sole issuing bank in an aggregate amount of $450.0 million and is available until December 2022, provided the Company is in compliance with all covenants. The 2017 Credit Facility has a sublimit for letters of credit issued thereunder of $50.0 million. The proceeds of these loans may be used for the Company’s commercial paper program or for general corporate purposes. The Company may increase the total amount available under the 2017 Credit Facility up to $575.0 million, subject to certain conditions. No bank is obligated to provide commitments above their share of the $450.0 million facility. The agreement was amended and restated on January 29, 2018. The terms were modified to give effect to the amended and restated merger agreement but otherwise did not materially affect the rights or obligations of the Company and its subsidiaries thereunder.

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’ excess 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 (“ALM”) 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 large, 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.

Alternative asset portfolio structures are analyzed for significant lines of business. An investment portfolio maturity structure is then selected from these profiles given our return hurdle and risk preference. Sensitivity testing of significant liability assumptions and new business projections is also performed.

Our liabilities generally have limited policyholder optionality, which means that the timing of payments is relatively insensitive to the interest rate environment. In addition, our investment portfolio is largely comprised of highly liquid 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. Therefore, we believe we have limited exposure to disintermediation risk.

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 our revolving credit facility. In addition, on January 22, 2018, we filed an automatically effective shelf registration statement on Form S-3 with the SEC. This registration statement allows us to issue equity, debt or other types of securities through one or more methods of distribution. The terms of any offering would be established at the time of the offering, subject to market conditions. If we decide to make an offering of securities, we will consider the nature of the cash requirement as well as the cost of capital in determining what type of securities we may offer.

On January 19, 2018, our Board of Directors declared a quarterly dividend of $0.56 per common share payable on March 19, 2018 to stockholders of record as of February 26, 2018. We paid dividends of $0.56 per common share on December 18, 2017 to stockholders of record as of November 27, 2017. This represents a 6% increase above the quarterly dividend of $0.53 per common share paid on September 19, 2017 to stockholders of record as of August 28, 2017, $0.53 per common share paid on June 20, 2017 to stockholders of record as of May 30, 2017, and $0.53 per common share paid on March 20, 2017 to stockholders of record as of February 27, 2017. Any determination to pay future dividends will be at the discretion of our Board of Directors and will be dependent upon: our subsidiaries’ payments of dividends and/or other statutorily permissible payments to us; our results of operations and cash flows; our financial position and capital requirements; general business conditions; legal, tax, regulatory and contractual restrictions on the payment of dividends; and other factors our Board of Directors deems relevant.

On November 14, 2016, our Board of Directors authorized the Company to repurchase up to an additional $600.0 million of its outstanding common stock. During the year ended December 31, 2017, we repurchased 3,933,209 shares of our outstanding common stock at a cost of $389.5 million, exclusive of commissions. As of December 31, 2017, $293.4 million remained under the total repurchase authorization (considering the November 2016 and previous authorizations). The timing and the amount of future repurchases will depend on market conditions, our financial condition, results of operations, liquidity and other factors.

Management believes the Company will have sufficient liquidity to satisfy its needs over the next twelve months, including the ability to pay interest on our senior notes and dividends on our common shares.

Retirement and Other Employee Benefits

We have sponsored a qualified pension plan, (the “Assurant Pension Plan”) and various non-qualified pension plans (including an Executive Pension Plan), along with a retirement health benefits plan covering our employees who meet specified eligibility requirements. The determination of the reported amounts associated with these plans requires an extensive use of assumptions which include, but are not limited to, the discount rate, expected return on plan assets and rate of future compensation increases. We determine these assumptions based upon currently available market and industry data, and historical performance of the plan and its assets. The actuarial assumptions used in the calculation of our aggregate projected benefit obligation vary and include an expectation of long-term appreciation in equity markets which is not changed by minor short-term market fluctuations, but does change when large interim deviations occur. The assumptions we use may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of the participants.

As of January 1, 2014, the Assurant Pension Plan and Executive Pension Plans are no longer offered to new hires. Subsequently, effective January 1, 2016, the Assurant Pension Plan was amended and split into two separate plans (Plan No. 1 and Plan No. 2). Plan No. 1 generally covers all eligible employees (including the active population as of January 1, 2016, the remainder of the terminated vested population and all Puerto Rico participants). Plan No. 2 included a subset of the terminated vested population and the total in-payment population as of January 1, 2016. Assets for both plans remain in the Assurant, Inc.

Pension Plan Trust; however, separate accounting entities were maintained for Plan No. 1 and Plan No. 2. Effective December 31, 2017, Plan No. 1 and Plan No. 2 were merged back together into the Assurant Pension Plan.

Effective March 1, 2016, the Assurant Pension Plan and various non-qualified pension plans (including an Executive Pension Plan) were frozen. No additional benefits will be earned after February 29, 2016.

During 2017, there were no contributions to the Assurant Pension Plan. Due to the Plan's current overfunded status, no contributions are expected to the Assurant Pension Plan over the course of 2018. See Note 22 to the Consolidated Financial Statements included elsewhere in this Report for more information.

Commercial Paper Program

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 by A.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 a $450.0 million senior revolving credit facility, of which $441.0 million was available at December 31, 2017, due to $9.0 million of outstanding letters of credit related to this program.

We did not use the commercial paper program during the twelve months ended December 31, 2017 and 2016 and there were no amounts relating to the commercial paper program outstanding at December 31, 2017 and December 31, 2016. The Company made no borrowings using the 2017 Credit Facility and no loans were outstanding at December 31, 2017.

Covenants

The 2017 Credit Facility and Term Loan Facility contain restrictive covenants, all of which were met as of December 31, 2017. These covenants include (but are not limited to):

(i)Maintenance of a maximum debt to total capitalization ratio on the last day of any fiscal quarter of not greater than 35%, subject to certain exceptions as set forth in the underlying credit agreements, and
(ii)Maintenance of a consolidated adjusted net worth in an amount not less than the “Minimum Amount”. For the purpose of this calculation the “Minimum Amount” is an amount equal to the sum of (a) the base amount $2.72 billion plus (b) 25% of consolidated net income for each fiscal quarter (if positive) ending after September 30, 2017, plus (c) 25% of the net proceeds received by the Company from any capital contribution to, or issuance of any Capital Stock or Hybrid Securities received after September 30, 2017.

At December 31, 2017, our ratio of debt to total capitalization as calculated under the covenant was 21%, the consolidated Minimum Amount described in clause (ii) above was $2.80 billion and our actual consolidated adjusted net worth as calculated under the covenant was $4.04 billion.

In the event of the breach of certain covenants all obligations under the 2017 Credit Facility and Term Loan Facility, including unpaid principal and accrued interest and outstanding letters of credit, may become immediately due and payable.

Senior Notes

In March 2013, we issued two series of senior notes with an aggregate principal amount of $700.0 million (the “2013 Senior Notes”). The first series is $350.0 million in principal amount, bears interest at 2.50% per year and is payable in a single installment in March 2018. The second series is $350.0 million in principal amount, bears interest at 4.00% per year and is payable in a single installment in March 2023.

Interest on our 2013 Senior Notes is payable semi-annually in March and September of each year. The interest expense incurred related to the 2013 Senior Notes was $23.8 million for the years ended December 31, 2017 and 2016, and $23.0 million for the year ended December 31, 2015. There was $6.6 million of accrued interest at both December 31, 2017 and 2016. The 2013 Senior Notes are unsecured obligations and rank equally with all of the Company’s other senior unsecured indebtedness. The Company may redeem each series of the 2013 Senior Notes in whole or in part at any time and from time to time before their maturity at the redemption price set forth in the Indenture.

In addition, we have senior notes outstanding in an aggregate principal amount of $375.0 million (the “2004 Senior Notes”). The 2004 Senior Notes bear interest at 6.75% per year and are due in February 2034.

In December 2016, the Company completed a cash tender offer and purchased $100.0 million aggregate principal amount of the outstanding 2004 Senior Notes due 2034, resulting in a $23.0 million loss on extinguishment of debt, for the year ended December 31, 2016.

Interest on the 2004 Senior Notes is payable semi-annually in February and August of each year. The interest expense incurred related to the 2004 Senior Notes (which included another series of $500.0 million principal 5.63% notes that were

repaid in February 2014) was $25.7 million, $32.1 million and $32.1 million for the years ended December 31, 2017, 2016, and 2015, respectively. There was $9.5 million of accrued interest at both December 31, 2017 and 2016. The 2004 Senior Notes are unsecured obligations and rank equally with all of our other senior unsecured indebtedness. The 2004 Senior Notes are not redeemable prior to maturity.

In management’s opinion, dividends from our subsidiaries together with our income and gains from our investment portfolio will provide sufficient liquidity to meet our needs in the ordinary course of business.

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 Years Ended December 31,
201720162015
Net cash provided by (used in):
Operating activities (1)$532.7$98.4$167.8
Investing activities(541.2)725.6264.3
Financing activities(26.7)(1,080.3)(462.4)
Net change in cash$(35.2)$(256.3)$(30.3)
(1)Includes effect of exchange rates changes and the reclassification of assets held for sale on cash and cash equivalents.

Cash Flows for the Years Ended December 31, 2017, 2016 and 2015

Operating Activities:

We typically generate operating cash inflows from premiums collected from our insurance products 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 was $532.7 million and $98.4 million for the years ended December 31, 2017 and 2016, respectively. The increase in cash provided by operating activities was primarily due to prior year activity as Assurant Health was paying significant claims without a corresponding collection of premiums while in run-off. Also contributing to the increase is the timing of payments in the normal course of business. These items were partially offset by changes in the premium stabilization program receivables related to Assurant Health and an $85.0 million payment in 2017 related to the lender-placed market conduct examination Settlement Agreements. Please see Note 25 - Commitments and Contingencies, to the Consolidated Financial Statements for additional information.

Net cash provided by operating activities was $98.4 million and $167.8 million for the years ended December 31, 2016 and 2015, respectively. The decrease in cash provided by operating activities was primarily due to Assurant Health paying claims without a corresponding collection of premiums since this business is now in runoff and the timing of other payments in the normal course of business. These items were partially offset by changes in the premium stabilization program receivables related to Assurant Health and an increase of our fee business in Global Lifestyle and Global Housing.

Investing Activities:

Net cash (used in) provided by investing activities was $(541.2) million and $725.6 million for the years ended December 31, 2017 and 2016, respectively. The change in investing activities is primarily due to the sale of Assurant Employee Benefits in 2016, mainly through reinsurance transactions, to Sun Life. Also contributing to the decrease was the 2017 acquisition of Green Tree Insurance Agency, Inc., the sale of commercial mortgage loans on real estate in 2016, change in our short-term investments and the purchase of invested assets related to the consolidated investment entities (the "CIEs"). See Note 6 - Variable Interest Entities, to the Consolidated Financial Statements for additional information. These are partially offset by a decrease in the purchases of fixed maturity securities and equity securities.

Net cash provided by investing activities was $725.6 million and $264.3 million for the years ended December 31, 2016 and 2015, respectively. The change in investing activities is primarily due to the sale of Assurant Employee Benefits segment, mainly through reinsurance transactions, to Sun Life, higher sales of fixed maturity securities, change in short term investments and an increase in sales of commercial mortgage loans. For more information on the sale of commercial mortgage loans See

Note 6 - Variable Interest Entities, to the Consolidated Financial Statements contained elsewhere in this Report. These increases are partially offset by an increase of purchases of fixed maturity securities.

Financing Activities:

Net cash used in financing activities was $26.7 million and $1.08 billion for the years ended December 31, 2017 and 2016, respectively. The change in cash used in financing activities was primarily due to a decrease in the repurchase of our outstanding common stock in 2017, partially offset by a net increase in cash provided by our CIEs. See Note 6 - Variable Interest Entities to the Consolidated Financial Statements for additional information.

Net cash used in financing activities was $1.08 billion and $462.4 million for the years ended December 31, 2016 and 2015, respectively. The change in cash used in financing activities was primarily due to an increase in the repurchase of our outstanding common stock in 2016.

The table below shows our cash outflows for taxes, interest and common stock dividends for the periods indicated:

For the Years Ended December 31,
201720162015
Income taxes paid$18.8$226.1$80.1
Interest paid on debt48.156.254.8
Common stock dividends119.0125.394.2
Total$185.9$407.6$229.1

Commitments and Contingencies

We have obligations and commitments to third parties as a result of our operations. These obligations and commitments, as of December 31, 2017, are detailed in the table below by maturity date as of the dates indicated:

As of December 31, 2017
TotalLess than 1 Year1-3 Years3-5 YearsMore than 5 Years
Contractual obligations :
Insurance liabilities (1)$8,848.6$1,510.7$814.9$710.5$5,812.5
Debt and related interest1,574.0393.778.678.61,023.1
Operating leases69.221.629.515.03.1
Pension obligations and postretirement benefit564.555.3114.5107.1287.6
Purchase agreements13.54.59.0——
Commitments:
Investment purchases outstanding:
Commercial mortgage loans on real estate6.16.1———
Capital contributions to consolidated VIEs20.020.0———
Capital contributions to non-consolidated VIEs19.519.5———
Liability for unrecognized tax benefit6.8—1.8—5.0
Total obligations and commitments$11,122.2$2,031.4$1,048.3$911.2$7,131.3
(1)Insurance liabilities reflect estimated cash payments to be made to policyholders excluding fully reinsured runoff operations whose inclusion would be potentially distortive. The total gross reserve excluded is $6.65 billion 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 15.

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.

Letters of Credit

In the normal course of business, letters of credit are issued primarily to support reinsurance arrangements. These letters of credit are supported by commitments with financial institutions. We had $18.1 million and $17.2 million of letters of credit outstanding as of December 31, 2017 and 2016, respectively.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that are reasonably likely to have a material effect on the financial condition, results of operations, liquidity, or capital resources of the Company.

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