Assurant 10-Q 2021-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2021

OR

For the transition period from to

Assurant, Inc.

(Exact name of registrant as specified in its charter)

55 Broadway, Suite 2901

New York, New York 10006

(212) 859-7000

(Address, including zip code, and telephone number, including area code, of Registrant’s Principal Executive Offices)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding at October 29, 2021 was 56,976,709.

ASSURANT, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS

Assurant, Inc.

Consolidated Balance Sheets (unaudited)

Showing the first 8K of 184K characters. Open the full section

(In millions, except number of shares and per share amounts)

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and the annual audited consolidated financial statements for the year ended December 31, 2020 and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Annual Report”) filed with the U.S. Securities and Exchange Commission (the “SEC”) and the unaudited consolidated financial statements for the three and nine months ended September 30, 2021 and accompanying notes (the “Consolidated Financial Statements”) included elsewhere in this Quarterly Report on Form 10-Q (this “Report”).

Some of the statements included in this MD&A and elsewhere in this Report, including our financial plans and any statements regarding our anticipated future financial performance, business prospects, growth and operating strategies and similar matters, are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these statements by the use of words such as “will,” “may,” “can,” “anticipates,” “expects,” “estimates,” “projects,” “intends,” “plans,” “believes,” “targets,” “forecasts,” “potential,” “approximately,” and the negative version of those words and other words and terms with a similar meaning. Any forward-looking statements contained in this Report are based upon our historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that our future plans, estimates or expectations will be achieved. Our actual results might differ materially from those projected in the forward-looking statements. We undertake no obligation to update or review any forward-looking statement, whether as a result of new information, future events or other developments. The following factors could cause our actual results to differ materially from those currently estimated by management:

(i)the loss of significant clients, distributors or other parties with whom we do business, or if we are unable to renew contracts with them on favorable terms, or if those parties face financial, reputational or regulatory issues;

(ii) significant competitive pressures, changes in customer preferences and disruption;

(iii) the failure to implement our strategy and to attract and retain key personnel, including key executives and senior management;

(iv) the failure to find suitable acquisitions at attractive prices, integrate acquired businesses effectively or grow organically;

(v) our inability to recover should we experience a business continuity event;

(vi) the failure to manage vendors and other third parties on whom we rely to conduct business and provide services to our clients;

(vii) risks related to our international operations;

(viii) declines in the value of mobile devices, the risk of guaranteed buybacks, or export compliance or other risks in our mobile business;

(ix) our inability to develop and maintain distribution sources or attract and retain sales representatives and executives with key client relationships;

(x) risks associated with joint ventures, franchises and investments in which we share ownership and management with third parties;

(xi) negative publicity relating to our business or industry;

(xii) the impact of general economic, financial market and political conditions and conditions in the markets in which we operate;

(xiii) the impact of the COVID-19 pandemic and measures taken in response thereto;

(xiv) the impact of catastrophic and non-catastrophe losses, including as a result of climate change;

(xv) the adequacy of reserves established for claims and our inability to accurately predict and price for claims;

(xvi) a decline in financial strength ratings of our insurance subsidiaries or in our corporate senior debt ratings;

(xvii) fluctuations in exchange rates;

(xviii) an impairment of goodwill or other intangible assets;

(xix) the failure to maintain effective internal control over financial reporting;

(xx) unfavorable conditions in the capital and credit markets;

(xxi) a decrease in the value of our investment portfolio, including due to market, credit and liquidity risks, and changes in interest rates;

(xxii) impairment of our deferred tax assets;

(xxiii) the unavailability or inadequacy of reinsurance coverage and the credit risk of reinsurers, including those to whom we have sold business through reinsurance;

(xxiv) the credit risk of some of our agents, third-party administrators and clients;

(xxv) the inability of our subsidiaries to pay sufficient dividends to the holding company and limitations on our ability to declare and pay dividends or repurchase shares;

(xxvi) the failure to effectively maintain and modernize our information technology systems and infrastructure, or the failure to integrate those of acquired businesses;

(xxvii) breaches of our information systems or those of third parties with whom we do business, or the failure to protect the security of data in such systems, including due to cyber-attacks and as a result of working remotely;

(xxviii) the costs of complying with, or the failure to comply with, extensive laws and regulations to which we are subject, including those related to privacy, data security, data protection or tax;

(xxix) the impact of litigation and regulatory actions;

(xxx) reductions or deferrals in the insurance premiums we charge;

(xxxi) changes in insurance, tax and other regulation;

(xxxii) volatility in our common stock price and trading volume; and

(xxxiii) employee misconduct.

For additional information on factors that could affect our actual results, please refer to “Critical Factors Affecting Results” below and in Item 7 of our 2020 Annual Report, and “Item 1A—Risk Factors” below and in our 2020 Annual Report.

General

Global Preneed Discontinued Operations

In August 2021, we completed the sale of the legal entities which comprise the businesses previously reported as the Global Preneed segment and certain businesses previously disposed of through reinsurance, which were previously reported in the Corporate and Other segment (collectively, the “disposed Global Preneed business”) to subsidiaries of CUNA Mutual Group (“CUNA”) for total cash consideration of $1.25 billion, subject to certain purchase price adjustments at closing. For additional information, refer to Note 4 to the Consolidated Financial Statements included elsewhere in this Report.

Prior to the sale, we had determined that the disposed Global Preneed business met the criteria to be classified as held for sale and that the sale represented a strategic shift that will have a major impact on our operations and financial results. Accordingly, the results of operations of the disposed Global Preneed business are presented as net income from discontinued operations in the consolidated statements of operations and segregated in the consolidated statement of cash flows for all periods presented, and the assets and liabilities for the disposed Global Preneed business have been classified as held for sale and segregated for all periods presented in the consolidated balance sheets. Transactions between the disposed Global Preneed business and businesses in our continuing operations are not eliminated to appropriately reflect the continuing operations and the assets, liabilities and results of the disposed Global Preneed business. Refer to “—Results of Operations—Discontinued Operations” below and Note 4 to the Consolidated Financial Statements included elsewhere in this Report.

Reportable Segments

As of September 30, 2021, the Company had three reportable segments which are defined based on the manner in

Showing the first 8K of 97K characters. Open the full section

Our 2020 Annual Report described our Quantitative and Qualitative Disclosures About Market Risk. As of September 30, 2021, due to the closing of the Global Preneed transaction in August 2021, there were material decreases to interest rate risk, inflation risk and foreign exchange risk.

Interest Rate Risk

Our interest rate sensitivity has decreased by approximately 68% given that: (i) the duration of the fixed maturity portfolio has decreased from 7.5 years to 4.7 years as the anticipated cash outflow characteristics of our remaining insurance liabilities are now substantially shorter, and (ii) our fixed maturity investments decreased $6.76 billion, or approximately 50%.

Our exposure to interest rate risk on reserves is immaterial given that a majority of our interest-sensitive reserves, mainly group long-term disability and group term life of waiver premium, were included in the disposed Global Preneed business.

Inflation Risk

Inflation risk arises as we invest in assets that are not indexed to the level of inflation, whereas the corresponding liabilities are indexed to the level of inflation. All of our insurance policies that had death benefits that were guaranteed to grow with the CPI were included in the disposed Global Preneed business and therefore the risk is mitigated.

Foreign Exchange Risk

Our exposure to Canadian dollar foreign exchange risk has also been significantly reduced, by approximately 80%. Total invested Canadian assets as of December 31, 2020 and September 30, 2021 were $2.29 billion and $426.6 million, respectively. The remaining Canadian assets are held to match expected Canadian liabilities.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 30, 2021. Based on such evaluation, management, including our CEO and CFO, has concluded that as of September 30, 2021, our disclosure controls and procedures were effective and provide reasonable assurance that information we are required to disclose in our reports pursuant to Rule 13a-15(e) or 15d-15(e) under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms. Our CEO and CFO also have concluded that as of September 30, 2021, information that we are required to disclose in our reports under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act) during the quarterly period ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

For a description of any material pending legal proceedings in which we are involved, see “Commitments and Contingencies—Legal and Regulatory Matters” in Note 16 to the Consolidated Financial Statements included elsewhere in this Report, which is hereby incorporated by reference.

Certain factors may have a material adverse effect on our business, financial condition, results of operations and cash flows, and you should carefully consider them. It is not possible to predict or identify all such factors. For a discussion of potential risks or uncertainties affecting us, please refer to the information under the heading “Item 1A—Risk Factors” in our 2020 Annual Report. Additional risks and uncertainties that are not yet identified or that we currently believe to be immaterial may also materially harm our business, financial condition, results of operations and cash flows.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities:

(1)Shares purchased pursuant to the November 2018 and January 2021 publicly announced share repurchase authorizations of up to $600.0 million each of outstanding common stock. In May 2021, the Board authorized the repurchase of up to an additional $900.0 million aggregate cost at purchase of outstanding common stock. As of September 30, 2021, $1.13 billion aggregate cost at purchase remained unused under the existing January 2021 and May 2021 repurchase authorizations.

The following exhibits either (a) are filed with this Report or (b) have previously been filed with the SEC and are incorporated herein by reference to those prior filings.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 4, 2021