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 included 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 Lifestyle, Global Housing, Global Preneed and Corporate and Other. 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 our frozen benefit plans. Corporate and Other also includes the amortization of deferred gains and gains associated with the sales of Fortis Financial Group, Long-Term Care and Assurant Employee Benefits through reinsurance agreements, expenses related to the acquisition of TWG, foreign gains (losses) from remeasurement of monetary assets and liabilities, the gain or loss on the sale of businesses, gains or losses associated with the valuation of our investment in Iké and other unusual or infrequent items. Additionally, the Corporate and Other segment includes amounts related to businesses disposed of through reinsurance and the runoff of the Assurant Health business.

The following discussion covers the year ended December 31, 2019 (“Twelve Months 2019”) and year ended December 31, 2018 (“Twelve Months 2018”). Please see the discussion that follows, for each of these segments, for a more detailed comparative analysis. Our comparative analysis of Twelve Months 2018 and the year ended December 31, 2017 is included under the heading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC on February 22, 2019.

Executive Summary

Overview:

We have undertaken several acquisitions and dispositions, which are reflected in our results. On May 31, 2018, we acquired TWG Holdings Limited and its subsidiaries (as subsequently reorganized, “TWG”) for total consideration of $2.47 billion. On August 1, 2018, we sold our Mortgage Solutions business to Xome, an indirect wholly owned subsidiary of WMIH Corp. On December 3, 2018, we sold Time Insurance Company, a subsidiary of the runoff Assurant Health business, to Haven Holdings, Inc.

In October 2019, we acquired the remaining 60% interest in MMI-CPR, LLC (dba Cell Phone Repair), a global franchisor of electronic device repair stores focusing on mobile device repair. In 2019, we also undertook a strategic review of our investment in Iké. As part of our initial investment in 2014, we entered into a put/call with the majority shareholders. In the third quarter of 2019, we decided to pursue the sale of our interests in Iké and recorded a partial impairment in our investment and an increase in our put obligation related to the decline in fair value of the business in connection with our decision to sell. On January 29, 2020, we entered into agreements to sell our interests in Iké to certain management shareholders of Iké. We expect closing to occur in the second quarter of 2020 resulting in an expected net cash outflow of $54 million, which could increase by up to an additional $40 million in the event we provide seller financing to the management shareholders at closing, plus transaction costs. In connection with this agreement, we recorded an incremental loss related to the agreed sale price. The sale is subject to customary closing conditions, including regulatory approvals. For additional information on this transaction, see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” and Note 5 to the Consolidated Financial Statements included elsewhere in this Report.

In August 2019, we issued $350.0 million of 3.70% senior notes due 2030, and used the net proceeds, along with cash on hand, to complete a cash tender offer to purchase $100.0 million of the $375.0 million then outstanding aggregate principal amount of our 6.75% senior notes due 2034 and to redeem $250.0 million of the $300.0 million then outstanding aggregate principal amount of our floating rate senior notes due 2021. A loss on extinguishment of debt of $31.4 million, primarily related to incremental consideration required to be paid to debtholders as a result of the interest rate differential over the remaining term as compared to current rates, was reported in Twelve Months 2019 as a result of the cash tender offer. See “– Liquidity and Capital Resources,” below for further details.

Summary of Financial Results:

Consolidated net income attributable to common stockholders increased $127.1 million, or 54%, to $363.9 million for Twelve Months 2019 from $236.8 million for Twelve Months 2018. The increase was driven by $128.7 million of lower reportable catastrophes (reportable catastrophe losses, net of reinsurance and client profit sharing adjustments, and including reinstatement and other premiums) and expansion in our Global Lifestyle segment, as well as full-year contributions from

TWG. The increase was partially offset by a $163.9 million after-tax loss related to a change in the fair value of Iké following the Company’s decision to sell the business.

Global Lifestyle net income increased $111.6 million, or 37%, to $409.3 million for Twelve Months 2019 from $297.7 million for Twelve Months 2018, primarily due to strong organic growth in mobile and full-year contributions from TWG, partially offset by continued declines in Global Financial Services and Other. TWG contributed approximately $130 million of full year net income to Global Lifestyle in 2019 compared to $74.7 million of income, excluding the $9.3 million after-tax benefit for client recoverables, for seven months in 2018.

Global Lifestyle net earned premiums, fees and other income increased $1.91 billion to $7.09 billion for the Twelve Months 2019 compared with $5.18 billion for Twelve Months 2018, primarily due to full-year contributions from TWG and growth in Connected Living, primarily driven by growth in new mobile subscribers and higher trade-in volumes in our repairs and logistics business, and continued growth in Global Automotive.

Global Housing net income increased $107.9 million, or 72%, to $258.7 million for Twelve Months 2019 from $150.8 million for Twelve Months 2018, primarily due to $128.8 million of lower reportable catastrophes. Excluding reportable catastrophes, segment net income decreased, primarily driven by declines in Lender-placed Insurance, mostly from the reduction in loans tracked from a financially insolvent client and higher non-catastrophe loss experience in Specialty and Other. The decrease was partially offset by the absence of Mortgage Solutions losses in Twelve Months 2018 and growth in Multifamily Housing.

Global Housing net earned premiums, fees and other income decreased $55.5 million to $2.03 billion for Twelve Months 2019 compared with $2.09 billion for Twelve Months 2018, primarily due to the sale of Mortgage Solutions. Excluding Mortgage Solutions, net earned premiums, fees and other income increased 3% primarily due to growth in Specialty and Other and Multifamily Housing, partially offset by declines in Lender-placed Insurance, including the impact of additional catastrophe reinsurance.

Global Preneed net income decreased $5.5 million, or 10%, to $52.2 million for Twelve Months 2019 from $57.7 million for Twelve Months 2018, primarily due to an out of period adjustment of $9.9 million related to a net over-capitalization of deferred acquisition costs occurring over a ten-year period. Excluding this adjustment, segment net income increased primarily due to overall growth in the business and lower mortality.

Global Preneed net earned premiums, fees and other income increased $11.4 million to $200.9 million for Twelve Months 2019 compared with $189.5 million for Twelve Months 2018, primarily driven by growth in prefunded funeral policies and prior period sales of the Final Need product.

Critical Factors Affecting Results

Our results depend on, among other things, the appropriateness of our product pricing, underwriting, the accuracy of our reserving methodology for future policyholder benefits and claims, the frequency and severity of reportable and non-reportable catastrophes, returns on and values of invested assets and our ability to manage our expenses and achieve expense savings. Our results will also depend on our ability to profitably grow all of our businesses, in particular our Connected Living, Multifamily Housing and Global Automotive businesses, and manage the pace of declines in placement rates in our Lender-placed Insurance business and the North American credit insurance business in Global Financial Services and Other. Factors affecting these items, including, but not limited to, conditions in financial markets, the global economy and the markets in which we operate, fluctuations in exchange rates and inflation, may have a material adverse effect on our results of operations or financial condition. For more information on these and other factors that could affect our results, see “Item 1A – Risk Factors.”

Our results may also be impacted by our ability to continue to grow in the markets in which we operate, including in our Connected Living, Multifamily Housing and Global Automotive businesses, and to manage our Lender-placed Insurance business, including the expected reduction in loans tracked from a financially insolvent client. Our mobile business is subject to volatility in mobile device trade-in volumes based on the actual and anticipated timing of the release of new devices and carrier promotional programs, as well as to changes in consumer preferences. Our Lender-placed Insurance revenues will also be impacted by changes in the housing market. In addition, across many of our businesses, we must respond to the threat of disruption. See “Item 1A – Risk Factors – Business and Competitive Risks – Significant competitive pressures, changes in customer preferences and disruption could adversely affect our results of operations.”

Management believes that we will have sufficient liquidity to satisfy our needs over the next twelve months, including the ability to pay interest on our debt and dividends on our common and preferred stock.

For Twelve Months 2019, net cash provided by operating activities totaled $1.41 billion; net cash used in investing activities totaled $619.8 million and net cash used in financing activities totaled $179.2 million. We had $1.87 billion in cash and cash equivalents as of December 31, 2019. Please see “ – Liquidity and Capital Resources” below for further details.

Revenues

We generate revenues primarily from the sale of our insurance policies, service contracts and related products and services and from income earned on our investments. Sales of insurance policies are recognized in revenue as earned premiums while sales of administrative services are recognized as fee income.

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, change in market value of equity securities and sales of investments. Currently, our investment portfolio is primarily invested in fixed maturity securities. Both investment income and 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.

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 also 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. Factors used in their calculation include experience derived from historical claim payments and actuarial assumptions. Calculations incorporate assumptions about the incidence of incurred claims, the extent to which all claims have been reported, reporting lags, expenses, inflation rates, future investment earnings, internal claims processing costs and other relevant factors. While the methods of making such estimates and establishing the related liabilities are periodically reviewed and updated, the estimation of reserves includes an element of uncertainty given that management is using historical information and methods to project future events and reserve outcomes.

The recorded reserves represent our best estimate at a point in time of the ultimate costs of settlement and administration of a claim or group of claims, based upon actuarial assumptions and projections using facts and circumstances known at the time of calculation. The adequacy of reserves may be impacted by future trends in claims severity, frequency, judicial theories of liability and other factors. These variables are affected by both external and internal events, including, but not limited to: changes in the economic cycle, inflation, changes in repair costs, natural or human-made catastrophes, judicial trends, legislative changes and claims handling procedures.

Many of these items are not directly quantifiable and not all future events can be anticipated when reserves are established. Reserve estimates are refined as experience develops. Adjustments to reserves, both positive and negative, are reflected in the consolidated statement of operations in the period in which such estimates are updated.

Because establishment of reserves is an inherently complex process involving significant judgment and estimates, there can be no certainty that future settlement amounts for claims incurred through the financial reporting date will not vary from reported claims reserves. Future loss development could require reserves to be increased or decreased, which could have a material effect on our earnings in the periods in which such increases or decreases are made. However, based on information currently available, we believe our reserve estimates are adequate. See “Item 1A – Risk Factors – Financial Risks – Our actual claims losses may exceed our reserves for claims, requiring us to establish additional reserves or to incur additional expense for settling unreserved liabilities, which could have a material adverse effect on our results of operations, profitability and capital” for more detail on this risk.

For additional information regarding our reserves, see Notes 2 and 17 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 Lifestyle and Global Housing

Ultimate loss and loss adjustment expenses are estimated utilizing generally accepted actuarial loss reserving methods. Both paid claims development as well as case incurred development are typically analyzed at the product or product grouping level, considering product size and data credibility. The reserving methods widely employed by us include the Chain Ladder, Munich Chain Ladder and Bornhuetter-Ferguson methods. 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, the legislative and regulatory environment, economic factors, natural catastrophes and other relevant factors. We consistently apply reserving principles and methodologies from year to year, while also giving due consideration to the potential variability of these factors.

While management has used judgment in establishing its best estimate of required reserves, different assumptions and variables could lead to significantly different reserve estimates. Two key measures of loss activity are loss frequency, which is a measure of the number of claims per unit of insured exposure, and loss severity, which is a measure of the average size of claims. Factors affecting loss frequency include the effectiveness of loss controls, changes in economic activity and weather patterns. Factors affecting loss severity include changes in policy limits, retentions, rate of inflation and judicial interpretations.

If the actual level of loss frequency and severity are higher or lower than expected, the ultimate reserves required will be different than management’s estimate. The effect of higher and lower levels of loss frequency and severity on our ultimate costs for claims occurring in 2019 would be as follows:

Change in both loss frequency and severity for all Global Lifestyle and Global Housing	Ultimate cost of claims occurring in 2019				Change in cost of claims occurring in 2019
3% higher	$	1,218.0			$	70.3
2% higher	$	1,194.0			$	46.3
1% higher	$	1,171.0			$	23.3
Base scenario (1)	$	1,147.7			$	—
1% lower	$	1,125.0			$	(22.7	)
2% lower	$	1,101.0			$	(46.7	)
3% lower	$	1,078.0			$	(69.7	)

(1)	Represents the sum of the case reserves and incurred but not reported reserves as of December 31, 2019 for Global Lifestyle and Global Housing.

Disposed and Runoff Short Duration Lines

We have 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 carried case reserves for these liabilities, as recommended by the various pool managers, and IBNR reserves totaling $24.3 million (before reinsurance) and $20.7 million (net of reinsurance) at December 31, 2019. 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 determining the exposures. There are significant unresolved industry legal issues, including such items as whether coverage exists and what constitutes an occurrence. 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.

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 (“preneed”) 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, the universal life-type accounting model is applied whereby 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, the long-duration accounting model is applied whereby 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, the long-duration accounting model is applied whereby 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 we have not been released from our contractual obligation to the policyholders, changes in and deviations from economic, mortality, morbidity, and withdrawal assumptions used in the calculation of these reserves will not directly affect our results of operations unless there is a default by the assuming reinsurer.

Deferred Acquisition Costs (“DAC”) and Value of Business Acquired (“VOBA”)

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 loss (and related liability) is recorded for the excess deficiency.

Long Duration Contracts

Acquisition costs for pre-funded funeral 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 insurance and flood, multifamily 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. Such costs are deferred and amortized over the estimated terms of the underlying contracts.

VOBA

As part of the acquisition of businesses that sell long-term extended service contracts, such as warranty contracts sold by TWG, and long-duration insurance contracts, such as life products, we establish an intangible asset related to VOBA, which represents the fair value of the expected future profits in unearned premium for insurance contracts acquired. For vehicle service contracts and extended service contracts such as those purchased in connection with the TWG acquisition, the amount is determined using estimates, for premium earnings patterns, paid loss development patterns, expense loads, and discount rates applied to cash flows that include a provision for credit risk. For vehicle service contracts and extended service contracts, VOBA is amortized consistent with the premium earning patterns of the underlying in-force contracts. For limited payment policies, preneed life insurance policies, universal life policies and annuities, the valuation of VOBA at the time of acquisition is derived from similar assumptions to those used to establish the associated claim or benefit reserves and is amortized over the expected life of the policies.

Investments

We regularly monitor our investment portfolio to ensure that 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, our intent and ability to retain the investment for a period of time sufficient to allow for recovery and our intent to sell or whether it is more likely than not that we 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 that affect one or more companies, industry sectors, or countries could result in additional impairments in future periods for other-than-temporary declines in value.

The impairment of a fixed maturity security that we have the intent to sell or that we will more likely than not 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, we are required to analyze our 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 equals the difference between the amortized cost of the fixed maturity security and its net present value.

See also Notes 2 and 8 to the Consolidated Financial Statements included elsewhere in this Report, “Item 1A – Risk Factors – Financial Risks – Our investment portfolio is subject to market risk, including changes in interest rates that may adversely affect our results of operations and financial condition” and “ – Investments” contained later in this Item 7.

Reinsurance

Reinsurance recoverables were $9.59 billion and $9.17 billion as of December 31, 2019 and 2018, respectively, which include amounts we are owed by reinsurers for claims paid as well as those included in reserve estimates that are subject to the reinsurance. Reinsurance premiums paid are amortized as reductions to premium over the terms of the underlying reinsured policies. Amounts recoverable from reinsurers are estimated in a manner consistent with claim and claim adjustment expense reserves or future policy benefits reserves. An estimated allowance for doubtful accounts is recorded on the basis of periodic evaluations of balances due from reinsurers (net of collateral), reinsurer solvency, historical disputes of reinsurance liabilities, management’s experience and current economic conditions. The ceding of insurance does not discharge our primary liability to our insureds.

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 $4.46 billion and $4.41 billion at December 31, 2019 and 2018, 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 as of December 31, 2019 and 2018:

	2019				2018
Ceded future policyholder benefits and expense	$	3,329.3			$	3,132.3
Ceded unearned premium	4,248.1				3,876.3
Ceded claims and benefits payable	1,895.5				2,046.1
Ceded paid losses	120.5				111.3
Total	$	9,593.4			$	9,166.0

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 adequate or available 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 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. 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 prolonged 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.

Contingencies

A loss contingency is recorded 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 record an estimated reserve at the low end of the estimated range. Contingencies affecting us primarily relate to legal and regulatory 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 we expect the temporary differences to reverse. 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. We have 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 12 to the Consolidated Financial Statements included elsewhere in this Report.

As of December 31, 2019 and 2018, we had a cumulative valuation allowance of $76.6 million and $26.4 million, respectively, against deferred tax assets of international subsidiaries. The change during the period is related to the new valuation allowance of $49.7 million established on the deferred taxes that arose related to losses incurred on our investment in Iké and a $0.5 million increase in other valuation allowances against foreign net operating loss carryforwards and other deferred tax assets. 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, we 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.

We believe it is more likely than not that the remainder of our 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 we

determine that it is not more likely than not that we 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 us 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 our ability to successfully execute our tax planning strategies. See also “Item 1A – Risk Factors – Financial Risks – The value of our deferred tax assets could become impaired, which could materially and adversely affect our results of operations and financial condition.”

Valuation and Recoverability of Goodwill

Our goodwill related to previous acquisitions of businesses was $2.34 billion and $2.32 billion as of December 31, 2019 and 2018, 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: a significant adverse change in legal factors, an adverse action or assessment by a regulator, unanticipated competition, loss of key personnel or a significant decline in our expected future cash flows due to changes in company-specific factors or the broader business climate. The evaluation of such factors requires considerable management judgment. Any adverse change in these factors could have a significant impact on the recoverability of goodwill and could have a material impact on our Consolidated Financial Statements.

Goodwill is tested for impairment at the reporting unit level, which is either at the operating segment or one level below, if that component is a business for which discrete financial information is available and segment management regularly reviews such information. Components within an operating segment can be aggregated into one reporting unit if they have similar economic characteristics. A goodwill impairment loss is measured as the excess of the carrying value, including goodwill, of the reporting unit over its fair value. An impairment loss is limited to the amount of goodwill allocated to the reporting unit.

Beginning in 2018, we disaggregated our Global Lifestyle operating segment into the following three reporting units: Connected Living, Global Automotive and Global Financial Services and Other. In 2018, the carrying amount of our Global Lifestyle legacy goodwill was allocated based on the fair value of the three new reporting units. The carrying amount of our goodwill from the TWG acquisition in 2018 was allocated to the three new reporting units based on the acquisition multiple and implied forward earnings contribution of each reporting unit. Our reporting units for goodwill testing were at the same level as the operating segment for Global Housing and Global Preneed.

The following table illustrates the amount of goodwill carried by operating segment as of the dates indicated:

	December 31,
	2019				2018
Global Lifestyle (1)	$	1,825.9			$	1,804.7
Global Housing	379.5				379.5
Global Preneed	138.0				137.6
Total	$	2,343.4			$	2,321.8

(1) As of December 31, 2019, $461.5 million, $1,291.7 million and $72.7 million of goodwill was assigned to the Connected Living, Global Automotive and Global Financial Services and Other reporting unit, respectively. As of December 31, 2018, $451.2 million, $1,281.3 million, and $72.2 million of goodwill was assigned to the Connected Living, Global Automotive and Global Financial Services and Other reporting unit, respectively.

In the fourth quarter of 2019, we performed a qualitative assessment for each of our Connected Living, Global Housing and Global Preneed reporting units. Based on these assessments, we determined that it was more likely than not that the reporting units’ fair values were more than their respective carrying amounts and therefore further impairment testing was not necessary. We performed quantitative tests on our Global Automotive and Global Financial Services and Other reporting units given the relative lower excess fair value over carrying value results from the prior year, concluded that the estimated fair values exceeded their respective book values by an increased amount over the prior year tests and therefore determined that goodwill was not impaired.

The determination of fair value of the reporting units requires many estimates and assumptions. These estimates and assumptions include, but are not limited to, earnings and required capital projections discussed above, discount rates, terminal growth rates, operating income and dividend forecasts for each reporting unit and the weighting assigned to the results of each of the three valuation methods described above. Changes in certain assumptions could have a significant impact on the goodwill impairment assessment.

Should the operating results of these reporting units decline substantially compared to projected results, or should further interest rate declines increase the net unrealized investment portfolio gain position, we could determine that we need to perform an updated impairment test due to the potential impairment indicators, which may require the recognition of a goodwill impairment loss in any of the reporting units.

Had the net book value for any of the reporting units exceeded its estimated fair value in the quantitative test, the Company would have recognized a goodwill impairment loss for the difference up to the amount of goodwill allocated to the reporting unit.

Refer to Note 15 to the Consolidated Financial Statements included elsewhere in this Report for further detail.

Recent Accounting Pronouncements

Please see Note 2 to the Consolidated Financial Statements included elsewhere in this Report.

Results of Operations

Assurant Consolidated

Overview

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

	For the Years Ended December 31,
	2019				2018
Revenues:
Net earned premiums	$	8,020.0			$	6,156.9
Fees and other income	1,311.2				1,308.1
Net investment income	675.0				598.4
Net realized gains (losses) on investments	66.3				(62.7		)
Amortization of deferred gains on disposal of businesses	14.3				56.9
Total revenues	10,086.8				8,057.6
Benefits, losses and expenses:
Policyholder benefits	2,654.7				2,342.6
Amortization of deferred acquisition costs and value of business acquired	3,322.1				2,300.8
Underwriting, general and administrative expenses	3,250.5				2,980.4
Iké net losses	163.0				—
Interest expense	110.6				100.3
Loss on extinguishment of debt	31.4				—
Total benefits, losses and expenses	9,532.3				7,724.1
Income before provision (benefit) for income taxes	554.5				333.5
Provision (benefit) for income taxes	167.7				80.9
Net income	386.8				252.6
Less: Net income attributable to non-controlling interest	(4.2		)		(1.6		)
Net income attributable to stockholders	382.6				251.0
Less: Preferred stock dividends	(18.7		)		(14.2		)
Net income attributable to common stockholders	$	363.9			$	236.8

Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

Net Income Attributable to Common Stockholders

Consolidated net income attributable to common stockholders increased $127.1 million, or 54%, to $363.9 million for Twelve Months 2019 from $236.8 million for Twelve Months 2018, primarily due to a $128.7 million reduction in reportable catastrophes and growth in our Global Lifestyle segment, benefiting from continued organic growth in Connected Living and

full year contributions from the TWG acquisition. The increase was also due to an increase in net realized gains on investments mostly due to an increase in the fair value of equity securities and sales of fixed maturity securities at net gains in 2019 compared to net losses in 2018, and a $44.1 million reduction in net charges associated with the TWG acquisition. These increases were partially offset by a $163.9 million after-tax loss related to a decrease in the estimated fair value of Iké (of which $38.4 million related to cumulative foreign currency losses recorded in other comprehensive income), lower after-tax amortization of deferred gains associated with the sale of Assurant Employee Benefits and $29.6 million of after-tax charges primarily related to the August 2019 tender offer for a portion of the Company’s senior notes maturing in 2034.

Global Lifestyle

Overview

The table below presents information regarding the Global Lifestyle segment’s results of operations for the periods indicated:

	For the Years Ended December 31,
	2019				2018
Revenues:
Net earned premiums	$	6,073.7			$	4,291.8
Fees and other income	1,020.5				891.5
Net investment income	250.8				189.4
Total revenues	7,345.0				5,372.7
Benefits, losses and expenses:
Policyholder benefits	1,516.2				1,145.6
Amortization of deferred acquisition costs and value of business acquired	3,015.7				2,025.8
Underwriting, general and administrative expenses	2,277.6				1,812.6
Total benefits, losses and expenses	6,809.5				4,984.0
Segment income before provision for income taxes	535.5				388.7
Provision for income taxes	126.2				91.0
Segment net income	$	409.3			$	297.7
Net earned premiums, fees and other income:
Connected Living (mobile and service contracts)	$	3,768.4			$	2,800.6
Global Automotive	2,873.6				1,909.2
Global Financial Services and Other	452.2				473.5
Total	$	7,094.2			$	5,183.3
Net earned premiums, fees and other income:
Domestic	$	5,020.1			$	3,560.9
International	2,074.1				1,622.4
Total	$	7,094.2			$	5,183.3

Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

Net Income

Segment net income increased $111.6 million, or 37%, to $409.3 million for Twelve Months 2019 from $297.7 million for Twelve Months 2018, primarily due to organic growth in our Connected Living business, mainly from mobile protection programs in Asia Pacific and North America, full year contributions from the TWG acquisition, improved operating performance in our European mobile business and higher domestic trade-in volumes from our mobile repairs and logistics business. The increases were partially offset by an increase in expenses related to continued investments in our Connected Living business, the absence of $9.3 million after-tax benefits for client recoverables that were included in Twelve Months 2018, unfavorable foreign exchange and the continued runoff of our domestic credit business. The TWG acquisition contributed approximately $130 million of full year net income to Global Lifestyle in 2019 compared to $74.7 million of income, excluding the $9.3 million after-tax benefit for client recoverables, for seven months in 2018.

Total Revenues

Total revenues increased $1.97 billion, or 37%, to $7.35 billion for Twelve Months 2019 from $5.37 billion for Twelve Months 2018. Net earned premiums increased $1.78 billion, or 42%, primarily due to full year of revenues from the TWG acquisition, organic growth in our Connected Living business, mainly due to subscriber growth from mobile protection programs, and continued growth in our Global Automotive business, due to strong prior period sales of warranty contracts. The increase was partially offset by unfavorable foreign exchange. Fees and other income increased $129.0 million, or 14%, primarily driven by higher trade-in volumes from our mobile repairs and logistics business and growth from mobile programs. Net investment income increased $61.4 million, or 32%, primarily due to full year contributions from the TWG acquisition and higher income from real estate related investments.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $1.83 billion, or 37%, to $6.81 billion for Twelve Months 2019 from $4.98 billion for Twelve Months 2018. Policyholder benefits increased $370.6 million, or 32%, primarily driven by a full year of policyholder benefits from the TWG acquisition and growth from our Connected Living and Global Automotive businesses, partially offset by favorable foreign exchange. Amortization of deferred acquisition costs and value of business acquired increased $989.9 million, or 49%, primarily due to a full year of expenses from the TWG acquisition. Underwriting, general and administrative expenses increased $465.0 million, or 26%, primarily due to growth in our global mobile programs, including higher trade-in volumes from our domestic repairs and logistics business, a full year of expenses from the TWG acquisition and continued investments in our Connected Living business, partially offset by favorable foreign exchange.

Global Housing

Overview

The table below presents information regarding the Global Housing segment’s results of operations for the periods indicated:

	For the Years Ended December 31,
	2019				2018
Revenues:
Net earned premiums	$	1,885.1			$	1,806.2
Fees and other income	148.6				283.0
Net investment income	95.2				80.8
Total revenues	2,128.9				2,170.0
Benefits, losses and expenses:
Policyholder benefits	869.5				938.4
Amortization of deferred acquisition costs and value of business acquired	221.5				204.5
Underwriting, general and administrative expenses	711.6				837.1
Total benefits, losses and expenses	1,802.6				1,980.0
Segment income before provision for income taxes	326.3				190.0
Provision for income taxes	67.6				39.2
Segment net income	$	258.7			$	150.8
Net earned premiums, fees and other income:
Lender-placed Insurance	$	1,109.2			$	1,149.7
Multifamily Housing	429.2				406.1
Specialty and Other	495.3				417.3
Mortgage Solutions	—				116.1
Total	$	2,033.7			$	2,089.2

Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

Net Income

Segment net income increased $107.9 million, or 72%, to $258.7 million for Twelve Months 2019 from $150.8 million for Twelve Months 2018, primarily due to after-tax reportable catastrophes of $40.9 million in Twelve Months 2019 compared to $169.7 million in Twelve Months 2018. Excluding reportable catastrophes, segment net income decreased $20.9 million, or 7%, primarily driven by a decline in Lender-placed Insurance mostly due to the cost of additional catastrophe reinsurance protection secured as part of the 2019 program and a reduction in loans tracked from a financially insolvent client and higher non-catastrophe loss experience from an increase in the frequency and severity of losses from our small commercial and sharing economy products. These decreases were partially offset by the absence of losses from the sale of our Mortgage Solutions business in Twelve Months 2018 and growth from Multifamily Housing.

Total Revenues

Total revenues decreased $41.1 million, or 2%, to $2.13 billion for Twelve Months 2019 from $2.17 billion for Twelve Months 2018. The decrease was mainly due to a decrease in fees and other income of $134.4 million, or 47%, primarily due to the sale of our Mortgage Solutions business. Net earned premiums increased $78.9 million, or 4%, primarily due to growth from our Specialty and Other business, mainly small commercial and sharing economy products, premium rate increases in Lender-placed Insurance and continued growth from renters insurance in our Multifamily Housing business, partially offset by a decline in Lender-placed Insurance from lower placement rates, the reduction in loans tracked from a financially insolvent client and the cost of additional catastrophe reinsurance protection. Net investment income increased $14.4 million, or 18%, primarily due to higher income from real estate related investments and an increase in invested assets.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses decreased $177.4 million, or 9%, to $1.80 billion for Twelve Months 2019 from $1.98 billion for Twelve Months 2018. The decrease was primarily due to a decrease in underwriting, general and administrative expenses of $125.5 million, or 15%, primarily due to the sale of our Mortgage Solutions business. Total policyholder benefits decreased $68.9 million, or 7%, primarily due to a decrease of $164.2 million in reportable catastrophe losses, partially offset by higher non-catastrophe loss experience mainly from our small commercial and sharing economy products. Amortization of deferred acquisition costs increased $17.0 million, or 8%, primarily related to growth in our Specialty and Other and Multifamily Housing businesses.

Global Preneed

Overview

The table below presents information regarding the Global Preneed segment’s results of operations for the periods indicated:

	For the Years Ended December 31,
	2019				2018
Revenues:
Net earned premiums	$	61.2			$	58.4
Fees and other income	139.7				131.1
Net investment income	285.3				278.0
Total revenues	486.2				467.5
Benefits, losses and expenses:
Policyholder benefits	269.0				263.3
Amortization of deferred acquisition costs and value of business acquired	84.9				70.5
Underwriting, general and administrative expenses	67.3				60.1
Total benefits, losses and expenses	421.2				393.9
Segment income before provision for income taxes	65.0				73.6
Provision for income taxes	12.8				15.9
Segment net income	$	52.2			$	57.7

Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

Net Income

Segment net income decreased $5.5 million, or 10%, to $52.2 million for Twelve Months 2019 from $57.7 million for Twelve Months 2018, primarily due to a $9.9 million after-tax expense related to an out of period adjustment related to the net over-capitalization of deferred acquisition costs occurring over a ten-year period and increased general expense, partially offset by growth in the domestic preneed business and lower mortality.

Total Revenues

Total revenues increased $18.7 million, or 4%, to $486.2 million for Twelve Months 2019 from $467.5 million for Twelve Months 2018. Fees and other income increased $8.6 million, or 7%, primarily due to growth in the U.S. business, partially offset by unfavorable foreign exchange. Net investment income increased $7.3 million, or 3%, primarily due to an increase in invested assets in line with the growth of the domestic preneed business, partially offset by unfavorable foreign exchange.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $27.3 million, or 7%, to $421.2 million for Twelve Months 2019 from $393.9 million for Twelve Months 2018, primarily due to a $14.2 million pre-tax out of period adjustment related to the net over-capitalization of deferred acquisition costs occurring over a ten-year period, increased information technology expense and growth in the domestic preneed business, partially offset by favorable foreign exchange.

Corporate and Other

Overview:

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

	For the Years Ended December 31,
	2019				2018
Revenues:
Net earned premiums	$	—			$	0.5
Fees and other income	2.4				2.5
Net investment income	43.7				50.2
Net realized gains (losses) on investments	66.3				(62.7		)
Amortization of deferred gains on disposal of businesses	14.3				56.9
Total revenues	126.7				47.4
Benefits, losses and expenses:
Policyholder benefits	—				(4.7		)
General and administrative expenses	194.0				270.6
Iké net losses	163.0				—
Interest expense	110.6				100.3
Loss on extinguishment of debt	31.4				—
Total benefits, losses and expenses	499.0				366.2
Segment loss before benefit for income taxes	(372.3		)		(318.8		)
Benefit for income taxes	(38.9		)		(65.2		)
Segment net (loss) income	(333.4		)		(253.6		)
Less: Net income attributable to non-controlling interest	(4.2		)		(1.6		)
Net (loss) income attributable to stockholders	(337.6		)		(255.2		)
Less: Preferred stock dividends	(18.7		)		(14.2		)
Net (loss) income attributable to common stockholders	$	(356.3	)		$	(269.4	)

Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

Net (Loss) Income Attributable to Common Stockholders

Segment net loss attributable to common stockholders increased $86.9 million, or 32%, to a net loss of $356.3 million for Twelve Months 2019 from a net loss of $269.4 million for Twelve Months 2018, primarily due to a $163.9 million of after-tax loss related to a decrease in the estimated fair value of Iké, an increase in net realized gains on investments driven by an increase in the fair value of equity securities and sales of fixed maturity securities at net gains in 2019 compared to net losses in 2018, a $44.1 million after-tax reduction in net charges associated with the TWG acquisition and a $24.1 million after-tax decrease in the loss on the sale of our Mortgage Solutions business. The decreases were partially offset by $29.6 million of after-tax charges related to the August 2019 tender offer for a portion of the Company’s senior notes maturing in 2034, additional interest expense and preferred dividends from acquisition related financing and lower amortization of deferred gains with the sale of Assurant Employee Benefits.

Total Revenues

Total revenues increased $79.3 million, or 167%, to $126.7 million for Twelve Months 2019 from $47.4 million for Twelve Months 2018, primarily due to an increase in net realized gains on investments mostly due to an increase in the fair value of equity securities and sales of fixed maturity securities at net gains in 2019 compared to net losses in 2018, partially offset by lower amortization of deferred gains associated with the sale of Assurant Employee Benefits.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $132.8 million, or 36%, to $499.0 million for Twelve Months 2019 from $366.2 million for Twelve Months 2018. The increase in expenses for Twelve Months 2019 was primarily due to a $163.0 million loss related to a decrease in estimated fair value of Iké, $37.4 million of debt related charges primarily related to the August 2019 tender offer for a portion of the Company’s senior notes maturing 2034 and the absence of $17.7 million of gains from the sale of Time Insurance Company, a legal entity associated with the previously exited Assurant Health business. These increases were partially offset by $59.2 million decrease in net charges associated with the TWG acquisition and a $30.7 million change due to the comparison to the 2018 loss on the sale of our Mortgage Solutions business. Additionally, general and administrative expenses for Twelve Months 2019 included a $26.7 million gain related to the reduction of the valuation allowance on the Company’s Patient Protection and Affordable Health Care Act of 2010 (“ACA”) risk corridor program receivables. The reduction in the allowance related to improved collection prospects following recent litigation activity as well as the Company’s entry into an agreement to effectively sell its right to any future claim proceeds received by the Company related to the risk corridor program receivables. For more information, see Note 4 to the Consolidated Financial Statements included elsewhere in this Report.

Investments

We had total investments of $14.57 billion and $13.40 billion as of December 31, 2019 and 2018, respectively. Net unrealized gains on our fixed maturity securities portfolio increased $834.5 million during Twelve Months 2019, from $423.1 million at December 31, 2018 to $1.26 billion at December 31, 2019. The increase was mainly due to a decrease in U.S. Treasury yields and tightening credit spreads.

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

		Fair Value as of
Fixed Maturity Securities by Credit Quality		December 31, 2019							December 31, 2018
Aaa / Aa / A		$	8,014.7			65.1	%		$	7,329.8			65.1	%
Baa		3,734.7				30.3	%		3,322.7				29.5	%
Ba		480.7				3.9	%		447.9				4.0	%
B and lower		92.3				0.7	%		156.7				1.4	%
Total		$	12,322.4			100.0	%		$	11,257.1			100.0	%

The following table shows the major categories of net investment income for the periods indicated:

	Years Ended December 31,
	2019				2018
Fixed maturity securities	$	492.8			$	451.6
Equity securities	22.1				21.5
Commercial mortgage loans on real estate	36.6				33.4
Short-term investments	13.6				22.0
Other investments	49.2				41.6
Cash and cash equivalents	36.1				25.7
Revenue from consolidated investment entities (1)	119.2				77.8
Total investment income	769.6				673.6
Investment expenses	(24.5		)		(23.3		)
Expenses from consolidated investment entities (1)	(70.1		)		(51.9		)
Net investment income	$	675.0			$	598.4

(1)	The following table shows the revenues net of expenses from consolidated investment entities (“CIEs”) for the periods indicated. Refer to Note 9 to the Consolidated Financial Statements included elsewhere in this Report for further detail.

	Years Ended December 31,
	2019				2018
Investment income from direct investments in:
Real estate funds (1)	$	25.1			$	11.3
CLO entities	17.0				9.5
Investment management fees	7.0				5.1
Net investment income from consolidated investment entities	$	49.1			$	25.9

(1)	The investment income from the real estate funds includes income attributable to non-controlling interest of $3.8 million and $2.1 million for the years ended December 31, 2019 and 2018, respectively.

Net investment income increased $76.6 million, or 13%, to $675.0 million for Twelve Months 2019 from $598.4 million for Twelve Months 2018 benefiting from the investments acquired from the TWG acquisition. In addition to TWG, the increase was also due to higher income from CIEs, primarily related to our investment in our real estate fund resulting from an increase in the fair market value of certain real estate properties and income from our direct investment in Assurant-issued CLO structures launched in 2019. The increase in net investment income was also due to proceeds from the sale of direct real estate venture properties and an increase in fair market value of certain other properties, as well as increased income from higher overall invested assets consistent with the underlying growth of our business. The increase was partially offset by the absence of $2.9 million of interest income related to the recovery of losses on certain mortgage-backed securities and $2.4 million of interest income from the reinvestment of debt proceeds in anticipation of the TWG acquisition that were recorded for the Twelve Months 2018.

As of December 31, 2019, we owned $69.6 million of securities guaranteed by financial guarantee insurance companies. Included in this amount was $57.9 million of municipal securities, whose credit rating was A+ with the guarantee, but would have had a rating of A- without the guarantee.

As we continue to focus on driving profitable growth, in February 2020 we made the strategic decision to outsource the day-to-day management of our investment portfolio. We expect to complete the implementation of our new asset management model in the second quarter of 2020.

For more information on our investments, see Notes 8 and 10 to the Consolidated Financial Statements included elsewhere in this Report.

Liquidity and Capital Resources

Regulatory Requirements

Assurant, Inc. is a holding company and, as such, has limited direct operations of its own. Our assets consist primarily of the capital stock of our subsidiaries. Accordingly, our future cash flows depend upon the availability of dividends and other statutorily permissible payments from our subsidiaries, such as payments under our tax allocation agreement and under management agreements with our subsidiaries. Our insurance subsidiaries’ ability to pay such dividends and to make such other payments will be limited by applicable laws and regulations of the jurisdictions in which our subsidiaries are domiciled, which subject our subsidiaries to significant regulatory restrictions. The dividend requirements and regulations vary from jurisdiction to jurisdiction 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. See “Item 1 – Business – Regulation – U.S. Insurance Regulation” and “Item 1A – Risk Factors – Legal and Regulatory Risks – Changes in insurance regulation may reduce our profitability and limit our growth.” Along with solvency regulations, the primary driver in determining the amount of capital used for dividends from insurance subsidiaries is the level of capital needed to maintain desired financial strength ratings from A.M. Best Company (“A.M. Best”).

Regulators or rating agencies could become more conservative in their methodology and criteria, increasing capital requirements for our insurance subsidiaries. In 2019, the following actions were taken by the rating agencies:

A.M. Best

•	Affirmed all ratings of Assurant entities with a stable outlook, except for two of our subsidiaries that sold the Assurant Employee Benefits business through reinsurance, whose financial strength ratings were downgraded from A- to B++ due to their diminished profile following the sale. The outlook for the ratings of these two entities was revised from negative to stable.

•	Withdrew the A ratings of two U.K. subsidiaries as the Company elected to no longer have these subsidiaries participate in the interactive process.

•	Assigned a bbb+ to our new senior debt issuance with a stable outlook.

Moody’s

•	Assigned a Baa3 rating to our new senior debt issuance with a stable outlook.

S&P

•	Assigned a BBB to our new senior debt issuance with a stable outlook.

•	All ratings were affirmed with a stable outlook.

For further information on our ratings and the risks of ratings downgrades, see “Item 1 – Business – Ratings” and “Item 1A – Risk Factors – Financial Risks – A decline in the financial strength ratings of our insurance company subsidiaries could adversely affect our results of operations and financial condition.”

For the year ending December 31, 2020, the maximum amount of dividends our regulated U.S. domiciled insurance subsidiaries could pay us, under applicable laws and regulations without prior regulatory approval, is $423.7 million. In addition, our international and non-insurance subsidiaries provide additional sources of dividends.

Holding Company

As of December 31, 2019, we had approximately $533.9 million in holding company liquidity, $308.9 million above our targeted minimum level of $225.0 million. The target minimum level of holding company liquidity, which can be used for unforeseen capital needs at our subsidiaries or liquidity needs at the holding company, is calibrated based on approximately one year of corporate operating and interest expenses and MCPS dividends. We use the term “holding company liquidity” to represent the portion of cash and other liquid marketable securities held at Assurant, Inc., out of a total of $648.0 million of holding company investment securities and cash, which we are not otherwise holding for a specific purpose as of the balance sheet date. We can use such assets for stock repurchases, stockholder dividends, acquisitions and other corporate purposes.

Dividends or returns of capital paid by our subsidiaries, net of infusions and excluding amounts used for acquisitions or received from dispositions, were approximately $748.0 million and $739.0 million for Twelve Months 2019 and Twelve Months 2018, 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, making interest payments on indebtedness and making dividend payments on our preferred stock, our capital management strategy provides for several uses of the cash generated by our subsidiaries, including

without limitation, returning capital to common stockholders through share repurchases and dividends, investing in our business to support growth in targeted areas and making prudent and opportunistic acquisitions. From time to time, we may also seek to purchase outstanding debt in open market repurchases or privately negotiated transactions. During Twelve Months 2019 and Twelve Months 2018, we made common stock repurchases and paid dividends to our common stockholders of $426.3 million and $266.1 million, respectively. We expect to deploy capital primarily to support business growth, fund other investments and return capital to shareholders, subject to Board approval and market conditions.

In 2014, we made an approximately 40% investment in Iké, a services assistance business, for which we paid approximately $110.0 million. We also entered into a shareholder agreement with the majority shareholders that provided us with the right to acquire the remainder of Iké from the majority shareholders, and the majority shareholders the right to put their interests in Iké to us, in mid-2019. In April 2019, we entered into a cooperation agreement with the majority shareholders of Iké to explore strategic alternatives. We also agreed to delay the call and put rights to January 31, 2020. In the third quarter of 2019, we decided to pursue the sale of our interests in Iké and on January 29, 2020, we entered into agreements to sell our interest in Iké to certain management shareholders, which is subject to regulatory approval. We expect closing to occur in the second quarter of 2020 resulting in an expected net cash outflow of $54 million, which could increase by up to an additional $40 million in the event we provide seller financing to the management shareholders at closing, plus transaction costs. There can be no assurance that our efforts to sell our interests in Iké will be successful. See Note 5 to the Consolidated Financial Statements included elsewhere in this Report.

Assurant Subsidiaries

The primary sources of funds for our subsidiaries consist of premiums and fees collected, proceeds from the sales and maturity of investments and net investment income. Cash is primarily used to pay insurance claims, agent commissions, operating expenses and taxes. We generally invest our subsidiaries’ 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 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 the five-year senior unsecured $450.0 million revolving credit agreement (the “Credit Facility”) with a syndicate of banks arranged by JPMorgan Chase Bank, N.A. and Wells Fargo Bank, National Association. In addition, in January 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 and 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.

Dividends and Repurchases

On January 14, 2020, the Board declared a quarterly dividend of $0.63 per common share payable on March 16, 2020 to stockholders of record as of February 24, 2020. We paid dividends of $0.63 per common share on December 16, 2019 to stockholders of record as of November 25, 2019. This represents a 5% increase to the quarterly dividend of $0.60 per common share paid on September 16, 2019 to stockholders of record as of August 26, 2019, $0.60 per common share paid on June 18,

2019 to stockholders of record as of May 28, 2019, and $0.60 per common share paid on March 18, 2019 to stockholders of record as of February 25, 2019.

On January 14, 2020, the Board declared a quarterly dividend of $1.6250 per share of MCPS payable on March 16, 2019 to stockholders of record as of March 1, 2019. We paid dividends of $1.6250 per share of MCPS on December 16, 2019 to stockholders of record as of December 1, 2019, $1.6250 per share of MCPS on September 16, 2019 to stockholders of record as of September 1, 2019, $1.6250 per share of MCPS on June 17, 2019 to stockholders of record as of June 1, 2019, and $1.6250 per share of MCPS on March 15, 2019 to stockholders of record as of March 1, 2019.

Any determination to pay future dividends will be at the discretion of the Board and will be dependent upon various factors, including: our subsidiaries’ payments of dividends and other statutorily permissible payments to us; our results of operations and cash flows; our financial condition and capital requirements; general business conditions and growth prospects; legal, tax, regulatory and contractual restrictions on the payment of dividends; and other factors the Board deems relevant. Payments of dividends on shares of common stock are subject to the preferential rights of the MCPS described below. The Credit Facility also contains limitations on our ability to pay dividends to our stockholders if we are in default, or such dividend payments would cause us to be in default, of our obligations thereunder. In addition, if we defer the payment of interest on our Subordinated Notes, we generally may not make payments on our capital stock.

On November 5, 2018, the Board authorized us to repurchase up to an additional $600.0 million of our outstanding common stock. During Twelve Months 2019, we repurchased 2,417,498 shares of our outstanding common stock at a cost of $274.9 million, exclusive of commissions. As of December 31, 2019, $486.3 million remained under the Board repurchase authorization. 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 that we will have sufficient liquidity to satisfy our needs over the next twelve months, including the ability to pay interest on our debt and dividends on our common and preferred stock.

Mandatory Convertible Preferred Stock

In March 2018, we issued 2,875,000 shares of our MCPS. Each outstanding share of MCPS will convert automatically on March 15, 2021 into between 0.9374 (the “minimum conversion rate”) and 1.1248 shares of common stock, subject to customary anti-dilution adjustments. At any time prior to March 2021, holders may elect to convert each share of MCPS into shares of common stock at the minimum conversion rate or in the event of a fundamental change at the specified rates defined in the Certificate of Designations of the Mandatory Convertible Preferred Stock.

Dividends on the Mandatory Convertible Preferred Stock will be payable on a cumulative basis when, as and if declared, at an annual rate of 6.50% of the liquidation preference of $100.00 per share. We may pay declared dividends in cash or, subject to certain limitations, in shares of our common stock, or in any combination of cash and shares of our common stock quarterly, commencing in June 2018 and ending in March 2021. No dividend or distribution may be declared or paid on common stock or any other class or series of junior stock, and no common stock or any other class or series of junior stock or parity stock may be purchased, redeemed or otherwise acquired for consideration unless all accumulated and unpaid dividends on the MCPS for all preceding dividend periods have been declared and paid in full, subject to certain limited exceptions. We paid preferred stock dividends of $18.7 million and $14.2 million for Twelve Months 2019 and Twelve Months 2018, respectively. For additional information regarding the MCPS, see Note 20 in the Consolidated Financial Statements included elsewhere in this Report.

Credit Facility and Commercial Paper Program

We have a Credit Facility that provides for revolving loans and the issuance of multi-bank, syndicated letters of credit and letters of credit from a sole issuing bank in an aggregate amount of $450.0 million, which may be increased up to $575.0 million. The Credit Facility is available until December 2022, provided we are in compliance with all covenants. The Credit Facility has a sub-limit for letters of credit issued thereunder of $50.0 million. The proceeds from these loans may be used for our commercial paper program or for general corporate purposes.

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-3 by Moody’s and A-2 by S&P. Our subsidiaries do not maintain commercial paper or other borrowing facilities. This program is currently backed up by the Credit Facility, of which $441.0 million was available as of December 31, 2019, and $9.0 million letters of credit were outstanding.

We did not use the commercial paper program during Twelve Months 2019 or Twelve Months 2018 and there were no amounts relating to the commercial paper program outstanding as of December 31, 2019 or 2018. We made no borrowings using the Credit Facility during Twelve Months 2019 or Twelve Months 2018 and no loans were outstanding as of December 31, 2019 or 2018.

Covenants

The Credit Facility contains restrictive covenants including, but not limited to:

(i)	Maintenance of a maximum consolidated total debt to capitalization ratio on the last day of any fiscal quarter of not greater than 0.35 to 1.0; and

(ii)

Maintenance of a consolidated adjusted net worth in an amount not less than a “Minimum Amount” equal to the sum of (a) the greater of 70% of our consolidated adjusted net worth on the date of the closing of the TWG acquisition and $2.72 billion, (b) 25% of consolidated net income for each fiscal quarter (if positive) beginning with the first fiscal quarter ending after the date of the closing of the TWG acquisition and (c) 25% of the net cash proceeds received from any capital contribution to, or issuance of any capital stock, disqualified capital stock and hybrid securities, received after the closing of the TWG acquisition.

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

Senior and Subordinated Notes

The following table shows the principal amount and carrying value of our outstanding debt, less unamortized discount and issuance costs as applicable, as of December 31, 2019 and 2018:

	December 31, 2019								December 31, 2018
	Principal Amount				Carrying Value				Principal Amount				Carrying Value
Floating Rate Senior Notes due March 2021 (1)	$	50.0			$	49.9			$	300.0			$	298.1
4.00% Senior Notes due March 2023	350.0				348.5				350.0				348.1
4.20% Senior Notes due September 2023	300.0				297.8				300.0				296.8
4.90% Senior Notes due March 2028	300.0				296.8				300.0				297.6
3.70% Senior Notes due February 2030	350.0				346.8				—				—
6.75% Senior Notes due February 2034	275.0				272.1				375.0				370.9
7.00% Fixed-to-Floating Rate Subordinated Notes due March 2048 (2)	400.0				395.0				400.0				394.5
Total debt					$	2,006.9							$	2,006.0

(1)	Bears floating interest at a rate equal to three-month LIBOR plus 1.25%.

(2)	Bears a 7.00% annual interest rate from March 2018 to March 2028 and annual interest rate equal to three-month LIBOR plus 4.135% thereafter.

2030 Senior Notes: In August 2019, we issued senior notes with an aggregate principal amount of $350.0 million which bear interest at a rate of 3.70% per year, mature in February 2030 and were issued at a 0.035% discount to the public (the “2030 Senior Notes”). Interest is payable semi-annually in arrears beginning in February 2020. Prior to November 2029, we may redeem the 2030 Senior Notes at any time in whole or from time to time in part at a make-whole premium plus accrued and unpaid interest. On or after that date, we may redeem the 2030 Senior Notes at any time in whole or from time to time in part at a redemption price equal to 100% of the principal amount being redeemed plus accrued and unpaid interest.

We used the net proceeds from the offering, together with cash on hand to purchase $100.0 million of our 6.75% senior notes due 2034 in a cash tender offer, to redeem $250.0 million of our floating rate senior notes due 2021 and to pay related premiums, fees and expenses.

2021, 2023 and 2028 Senior Notes

In March 2018, we issued the following three series of senior notes with an aggregate principal amount of $900.0 million:

•

2021 Senior Notes: The first series of senior notes is $300.0 million in principal amount, bears floating interest rate equal to three-month LIBOR plus 1.25% (3.21% as of December 31, 2019) and matures in March 2021 (the “2021 Senior Notes”). Interest on the 2021 Senior Notes is payable quarterly. Commencing on or after March 2019, we may redeem the 2021 Senior Notes at any time in whole or from time to time in part at a redemption price equal to 100% of the principal amount being redeemed plus accrued and unpaid interest. In August 2019, we redeemed $250.0 million of the $300.0 million then outstanding aggregate principal amount of the 2021 Senior Notes.

•

2023 Senior Notes: The second series of senior notes is $300.0 million in principal amount, bears interest at 4.20% per year, matures in September 2023 and was issued at a 0.233% discount to the public (the “2023 Senior Notes”). Interest on the 2023 Senior Notes is payable semi-annually. Prior to August 2023, we may redeem the 2023 Senior Notes at any time in whole or from time to time in part at a make-whole premium plus accrued and unpaid interest.

On or after that date, we may redeem the 2023 Senior Notes at any time in whole or from time to time in part at a redemption price equal to 100% of the principal amount being redeemed plus accrued and unpaid interest.

•

2028 Senior Notes: The third series of senior notes is $300.0 million in principal amount, bears interest at 4.90% per year, matures in March 2028 and was issued at a 0.383% discount to the public (the “2028 Senior Notes”). Interest on the 2028 Senior Notes is payable semi-annually. Prior to December 2027, we may redeem the 2028 Senior Notes at any time in whole or from time to time in part at a make-whole premium plus accrued and unpaid interest. On or after that date, we may redeem the 2028 Senior Notes at any time in whole or from time to time in part at a redemption price equal to 100% of the principal amount being redeemed plus accrued and unpaid interest.

The interest rate payable on each of the 2021 Senior Notes, the 2023 Senior Notes, the 2028 Senior Notes and the 2030 Senior Notes will be subject to adjustment from time to time, if either Moody’s or S&P downgrades the credit rating assigned to such series of senior notes to Ba1 or below or to BB+ or below, respectively, or subsequently upgrades the credit ratings once the senior notes are at or below such levels. For more details on the increase in interest rate over the issuance rate by rating, see Note 19 to our Consolidated Financial Statements included elsewhere in this Report.

Subordinated Notes

In March 2018, we issued fixed-to-floating rate subordinated notes due March 2048 with a principal amount of $400.0 million (the “Subordinated Notes”), which bear interest from March 2018 to March 2028 at an annual rate of 7.00%, payable semi-annually. The Subordinated Notes will bear interest at an annual rate equal to three-month LIBOR plus 4.135%, payable quarterly, beginning in June 2028. On or after March 2028, we may redeem the Subordinated Notes in whole at any time or in part from time to time, at a redemption price equal to their principal amount plus accrued and unpaid interest provided that if they are not redeemed in whole, a minimum amount must remain outstanding. At any time prior to March 2028, we may redeem the Subordinated Notes in whole but not in part after the occurrence of a tax event, rating agency event or regulatory capital event as defined in the global note representing the Subordinated Notes, at a redemption price equal to (i) with respect to a rating agency event 102% of their principal amount and (ii) with respect to a tax event or regulatory capital event, their principal amount plus accrued and unpaid interest.

In addition, so long as no event of default with respect to the Subordinated Notes has occurred and is continuing, we have the right, on one or more occasions, to defer the payment of interest on the Subordinated Notes for one or more consecutive interest periods for up to five years as described in the global note representing the Subordinated Notes. During a deferral period, interest will continue to accrue on the Subordinated Notes at the then-applicable interest rate. At any time when we have given notice of our election to defer interest payments on the Subordinated Notes, we generally may not make payments on or redeem or purchase any shares of our capital stock or any of our debt securities or guarantees that rank upon our liquidation on a parity with or junior to the Subordinated Notes, subject to certain limited exceptions.

Other Notes

In March 2013, we issued two series of senior notes with an aggregate principal amount of $700.0 million. The first series was $350.0 million in principal amount, bore interest at 2.50% per year and was repaid at maturity in March 2018. The second series is $350.0 million in principal amount and was issued at a 0.365% discount to the public. This series bears interest at 4.00% per year and matures in March 2023. Interest is payable semi-annually. We may redeem the outstanding series of senior notes in whole or in part at any time and from time to time before maturity at the redemption price set forth in the global note representing the outstanding series of senior notes.

In February 2004, we issued senior notes with an aggregate principal amount of $475.0 million at a 0.61% discount to the public, which bear interest at 6.75% per year and matures in February 2034. Interest is payable semi-annually. These senior notes are not redeemable prior to maturity. In December 2016 and August 2019, we completed a cash tender offer of $100.0 million each in aggregate principal amount of such senior notes. A loss on extinguishment of debt of $31.4 million was reported for the year ended December 31, 2019 and the outstanding aggregate principal amount of the senior notes was $275.0 million as of December 31, 2019.

See Note 19 to the Consolidated Financial Statements included elsewhere in this Report for more information.

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. 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 prolonged 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.

Effective January 1, 2014, the Assurant Pension Plan and Executive Pension Plans became closed to new hires. Subsequently, the Assurant Pension Plan was amended and restated as of January 1, 2016, and split into two separate plans (“Plan No. 1” and “Plan No. 2”). Plan No. 1 generally covered 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 generally included a subset of the terminated vested population and the total population that commenced distribution of their accrued benefit prior to January 1, 2016. Assets for both Plan No. 1 and Plan No. 2 remained in the Assurant, Inc. Pension Plan Trust. Effective December 31, 2017, Plan No. 1 and Plan No. 2 were merged back together into the Assurant Pension Plan.

During 2019, 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 2020. See Note 24 to the Consolidated Financial Statements included elsewhere in this Report for more information.

Cash Flows

We monitor cash flows at the consolidated, holding company and subsidiary levels. Cash flow forecasts at the consolidated and subsidiary levels are provided on a monthly basis, and we use trend and variance analyses to project future cash needs making adjustments to the forecasts when needed.

The table below shows our recent net cash flows for the periods indicated:

	For the Years Ended December 31,
	2019				2018
Net cash provided by (used in):
Operating activities	$	1,413.4			$	656.7
Investing activities	(619.8		)		(2,202.5		)
Financing activities	(179.2		)		1,838.0
Effect of exchange rate changes on cash and cash equivalents	(1.3		)		(35.0		)
Net change in cash	$	613.1			$	257.2

Cash Flows for the Years Ended December 31, 2019 and 2018

Operating Activities:

We typically generate operating cash inflows from premiums collected from our insurance products, fees received for services and income received from our investments while outflows consist of policy acquisition costs, benefits paid and operating expenses. These net cash flows are then invested to support the obligations of our insurance products and required capital supporting these products. Our cash flows from operating activities are affected by the timing of premiums, fees, and investment income received and expenses paid.

Net cash provided by operating activities was $1.41 billion and $656.7 million for Twelve Months 2019 and Twelve Months 2018, respectively. The increase in net cash provided by operating activities was primarily due to growth of our Global Lifestyle business that benefitted from the TWG acquisition and organic growth in Connected Living from new and existing mobile protection programs domestically and internationally as well as a decrease in claim payments for reportable catastrophes. Additionally, Twelve Months 2018 included a $41.5 million payment of an accrued indemnification liability related to the previous sale of our general agency business in the prior year.

Investing Activities:

Net cash used in investing activities was $619.8 million and $2.20 billion for Twelve Months 2019 and Twelve Months 2018, respectively. The decrease in net cash used in investing activities was primarily due to the acquisition of TWG in the Second Quarter 2018 when $1.49 billion of cash was used to fund a portion of the $2.47 billion purchase price. In addition, cash from our CIEs was lower due to the timing of CLO structures launched in each year. For additional information, see Note 9 to the Consolidated Financial Statements included elsewhere in the Report. The reductions in cash were partially offset by normal changes in our operating portfolio.

Financing Activities:

Net cash provided by (used in) in financing activities was $179.2 million and $1.84 billion for Twelve Months 2019 and Twelve Months 2018, respectively. The decrease in net cash provided by financing activities was primarily due to TWG acquisition related financing obtained in Twelve Months 2018. Net proceeds from the issuance of debt and preferred stock related to the TWG acquisition were $1.29 billion for Twelve Months 2018 and $276.4 million for Twelve Months 2019. A portion of the net proceeds for Twelve Months 2018 were used to repay in full the Company’s then outstanding 2.50% senior notes due 2018. The decrease in net cash provided by financing activities also included a $619.8 million decrease in cash provided by our CIEs, net of repayments of borrowings to short-term warehouse facilities, primarily related to the timing of CLO structures launched in each year and a $31.4 million loss on extinguishment of debt primarily related to the tender offer of $100.0 million of its 6.75% senior notes due 2034. For additional information, see Note 12 to the Consolidated Financial Statements included elsewhere in this Report.

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

	For the Years Ended December 31,
	2019				2018
Income taxes paid	$	93.1			$	93.9
Interest paid on debt	103.2				79.5
Common stock dividends	151.3				133.8
Preferred stock dividends	18.7				14.2
Total	$	366.3			$	321.4

Commitments and Contingencies

We have obligations and commitments to third parties as a result of our operations, as detailed in the table below by maturity date as of December 31, 2019:

	As of December 31, 2019
	Total				Less than 1 Year				1-3 Years				3-5 Years				More than 5 Years
Contractual obligations:
Insurance liabilities (1)	$	8,948.3			$	1,157.8			$	768.5			$	741.7			$	6,280.3
Debt and related interest	3,436.0				102.4				252.0				814.9				2,266.7
Operating leases	101.4				20.4				33.1				19.3				28.6
Pension obligations and postretirement benefits	578.5				69.4				114.4				114.1				280.6
Purchase agreements	4.5				4.5				—				—				—
Commitments:
Investment purchases outstanding:
Commercial mortgage loans on real estate	1.8				1.8				—				—				—
Capital contributions to consolidated VIEs	1.6				1.6				—				—				—
Capital contributions to non-consolidated VIEs	27.4				27.4				—				—				—
Liability for unrecognized tax benefits	14.0				—				10.3				—				3.7
Total obligations and commitments	$	13,113.5			$	1,385.3			$	1,178.3			$	1,690.0			$	8,859.9

(1)

Insurance liabilities reflect undiscounted estimated cash payments to be made to policyholders, net of expected future premium cash receipts on in-force policies and excluding fully reinsured runoff operations. The total gross reserve for fully reinsured runoff operations that was excluded was $4.86 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 18 to the Consolidated Financial Statements included elsewhere in this Report. As a result, the amounts presented in this table do not agree to the future policy benefits and expenses and claims and benefits payable in the consolidated balance sheets.

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 in which we are the reinsurer. These letters of credit are supported by commitments under which we are required to indemnify the financial institution issuing the letter of credit if the letter of credit is drawn. We had $12.1 million and $13.2 million of letters of credit outstanding as of December 31, 2019 and 2018, 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.