Assurant 10-Q 2023-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2023

OR

For the transition period from to

Commission file number 001-31978

Assurant, Inc.

(Exact name of registrant as specified in its charter)

260 Interstate North Circle SE

Atlanta, Georgia 30339

(770) 763-1000

(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 April 28, 2023 was 53,151,563.

ASSURANT, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

TABLE OF CONTENTS

Assurant, Inc.

Consolidated Balance Sheets (unaudited)

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(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, 2022 and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”) filed with the U.S. Securities and Exchange Commission (the “SEC”) and the unaudited consolidated financial statements for the three months ended March 31, 2023 and accompanying notes (the “Consolidated Financial Statements”) included elsewhere in this Quarterly Report on Form 10-Q (this “Report”). The following discussion and analysis covers the three months ended March 31, 2023 (“First Quarter 2023” and “Three Months 2023”) and the three months ended March 31, 2022 (“First Quarter 2022” and “Three Months 2022”).

Some of the statements in this Report, including our business and financial plans and any statements regarding our anticipated future financial performance, business prospects, growth and operating strategies and similar matters, may constitute 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 “outlook,” “objective,” “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 execute our strategy, including through the continuing service of key executives, senior leaders, highly-skilled personnel and a high-performing workforce;

(iv)the failure to find suitable acquisitions at attractive prices, integrate acquired businesses or divest of non-strategic businesses effectively or identify new areas for organic growth;

(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 and availability of mobile devices, and 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)the impact of catastrophe and non-catastrophe losses, including as a result of climate change and the current inflationary environment;

(xii)negative publicity relating to our business, industry or clients;

(xiii)the impact of general economic, financial market and political conditions and conditions in the markets in which we operate, including the current inflationary environment;

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

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

(xvi)fluctuations in exchange rates, including in the current environment;

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

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

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

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

(xxi)an impairment in the value of our deferred tax assets;

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

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

(xxiv)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;

(xxv)limitations in the analytical models we use to assist in our decision-making;

(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 technology 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 cyberattacks 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 regulations, including the Inflation Reduction Act of 2022;

(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 2022 Annual Report, and “Item 1A—Risk Factors” below and in our 2022 Annual Report.

Reportable Segments

As of March 31, 2023, we had three reportable segments which are defined based on the manner in which the Company’s chief operating decision maker, our Chief Executive Officer (“CEO”), reviews the business to assess performance and allocate resources, and which align to the nature of the products and services offered:

• Global Lifestyle: includes mobile device solutions, extended service products and related services for consumer electronics and appliances, and credit and other insurance products (referred to as “Connected Living”); and vehicle protection, leased and financed solutions and related services (referred to as “Global Automotive”);

• Global Housing: includes lender-placed and voluntary homeowners insurance and manufactured housing insurance, and lender-placed flood insurance (referred to as “Homeowners”); and renters insurance and related and other products (referred to as “Renters and Other”); and

• Corporate and Other: includes corporate employee-related expenses and activities of the holding company.

We define Adjusted EBITDA, our segment measure of profitability, as net income, excluding net realized gains (losses) on investments and fair value changes to equity securities, non-core operations (defined below), restructuring costs related to strategic exit activities (outside of normal periodic restructuring and cost management activities), Assurant Health runoff operations (described above), interest expense, provision (benefit) for income taxes, depreciation expense, amortization of purchased intangible assets, as well as other highly variable or unusual items.

Revision of Prior Period Financial Statements

Beginning with second quarter 2022, we changed the calculation of our segment measure of profitability, Adjusted EBITDA, to exclude certain businesses which we expect to fully exit, including the long-tail commercial liability businesses in Global Housing (sharing economy and small commercial businesses), as well as certain legacy long-duration insurance policies within Global Lifestyle (collectively referred to as “non-core operations”). The non-core operations have been or are in the process of being exited by the Company. All prior period amounts have been revised, which impacts segment Adjusted EBITDA but does not impact consolidated net income. See Note 4 to the Consolidated Financial Statements included elsewhere in this Report for more information.

We have also revised our prior period financial statements to reflect the correction of an error identified in second quarter 2022 related to reinsurance of claims and benefits payable within the Connected Living business unit in our Global Lifestyle segment, as well as other immaterial errors which were previously recorded in the periods in which we identified them. See

Notes 2 and 16 to the Consolidated Financial Statements included elsewhere in this Report for more information. Additionally, prior period disclosures have been revised to include Hurricane Eta, which should have been classified as a reportable catastrophe.

Executive Summary

Summary of Financial Results

Consolidated net income decreased $35.4 million, or 24%, to $113.6 million for First Quarter 2023 from $149.0 million for First Quarter 2022. The decline was primarily due to lower earnings in Global Housing, including higher reportable catastrophes (defined as individual catastrophic events that generate losses in excess of $5.0 million pre-tax, net of reinsurance and client profit sharing adjustments, and including reinstatement and other premiums), and Global Lifestyle, as well as a higher effective tax rate compared to a favorable rate in the prior year period. The decline was partially offset by a decrease in net unrealized losses.

Global Lifestyle Adjusted EBITDA decreased $27.8 million, or 12%, to $198.9 million for First Quarter 2023 from $226.7 million for First Quarter 2022, primarily driven by lower Connected Living results mainly from an increase in claims costs within extended service contracts compared to favorable loss experience in first quarter 2022, as well as weaker international performance mainly from Asia Pacific and the unfavorable impact of foreign exchange. Global Automotive also declined from ongoing higher claims costs. The decline in Global Lifestyle was partially offset by higher investment income.

Global Lifestyle net earned premiums, fees and other income increased $51.7 million, or 3%, to $2.04 billion for First Quarter 2023 from $1.99 billion for First Quarter 2022, primarily driven by prior period sales in Global Automotive. Connected Living decreased mainly from the approximately $65.0 million impact from previously disclosed mobile contract changes, as well as runoff mobile programs, which were partially offset by growth in extended service contracts and North American mobile subscribers.

Global Housing Adjusted EBITDA decreased $36.0 million, or 34%, to $68.4 million for First Quarter 2023 from $104.4 million for First Quarter 2022. Pre-tax reportable catastrophes increased $43.3 million, due to severe weather and tornado events. Excluding reportable catastrophes, Adjusted EBITDA increased $7.3 million, or 7%, primarily due to Homeowners from higher lender-placed net earned premiums, which was partially offset by $32.0 million of higher non-catastrophe loss experience across all major products and increased catastrophe reinsurance costs.

Global Housing net earned premiums, fees and other income increased $48.0 million, or 11%, to $505.3 million for First Quarter 2023 from $457.3 million for First Quarter 2022, largely driven by Homeowners from an increase in lender-placed policies in-force as well as higher average insured values and premium rates.

Corporate and Other Adjusted EBITDA was $(24.4) million for First Quarter 2023 compared to $(22.2) million for First Quarter 2022. The change in results was primarily due to lower net investment income from lower asset balances.

Critical Factors Affecting Results

Our results depend on, among other things, the appropriateness of our product pricing, underwriting, the accuracy of our reserving methodology for future policyholder benefits and claims, the frequency and severity of reportable and non-reportable catastrophes, returns on and values of invested assets, our investment income and our ability to realize greater operational efficiencies and manage our expenses. Our results also depend on our ability to profitably grow our businesses, including our Connected Living and Global Automotive businesses, and improve our performance in our Homeowners business. Factors affecting these items, including conditions in the financial markets, the global economy, political conditions and the markets in which we operate, fluctuations in exchange rates, interest rates and inflation, including the current period of inflationary pressures, may have a material adverse effect on our results of operations or financial condition. For more information on these and other factors that could affect our results, see “Item 1A—Risk Factors” below and in our 2022 Annual Report, and “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Factors Affecting Results” in our 2022 Annual Report.

Our results may be impacted by our ability to continue to grow in the markets in which we operate, including in our Connected Living and Global Automotive businesses, which will be impacted by our ability to provide a superior digital-first customer experience, including from our investments in technology and digital initiatives, and capitalize on the smart home opportunity. Our mobile business is subject to volatility in mobile device trade-in volumes and margins based on the actual and anticipated timing of the release of new devices and carrier promotional programs, as well as to changes in consumer preferences. Our Homeowners revenues will be impacted by changes in the housing market. In addition, across many of our businesses, we must respond to the threat of disruption and competition for talent, which has increased due to labor shortages and wage inflation. See “Item 1A—Risk Factors—Business, Strategic and Operational Risks—Significant competitive

pressures, changes in customer preferences and disruption could adversely affect our results of operations”, “—Our mobile business is subject to the risk of declines in the value and availability of mobile devices in our inventory, and to export compliance and other risks” and “—The success of our business depends on the execution of our strategy, including through the continuing service of key executives, senior leaders, highly-skilled personnel and a high-performing workforce” in our 2022 Annual Report.

Critical Accounting Policies and Estimates

Our 2022 Annual Report describes the accounting policies and estimates that are critical to the understanding of our results of operations, financial condition and liquidity. The accounting policies and estimation process described in the 2022 Annual Report were consistently applied to the unaudited interim Consolidated Financial Statements for First Quarter 2023.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see Note 3 to the Consolidated Financial Statements included elsewhere in this Report for more information.

Results of Operations

Assurant Consolidated

The table below presents information regarding our consolidated results of operations for the periods indicated:

For the Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Net income decreased $35.4 million, or 24%, to $113.6 million for First Quarter 2023 from $149.0 million for First Quarter 2022, primarily due to lower earnings in Global Housing, including $34.2 million of higher reportable catastrophes, and in Global Lifestyle, as well as the absence of a $9.0 million one-time tax benefit from one of our international businesses that was recorded in First Quarter 2022. The decrease was partially offset by lower net unrealized losses from changes in fair value of equity securities. First Quarter 2022 included $43.5 million of after-tax net unrealized losses from changes in fair value of equity securities, mostly related to four equity positions that went public through SPAC mergers and preferred stocks due to an increase in interest rates, compared to $1.8 million of after-tax net unrealized losses in First Quarter 2023.

Global Lifestyle

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

For the Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Adjusted EBITDA decreased $27.8 million, or 12%, to $198.9 million for First Quarter 2023 from $226.7 million for First Quarter 2022, primarily due to declines across Connected Living and Global Automotive, driven by elevated loss experience from higher claims costs primarily due to inflation in both Global Automotive and extended service contracts within Connected Living, as well as weaker international performance in Connected Living, mainly from Asia Pacific and the unfavorable impact of foreign exchange, and lower margins in our domestic mobile trade-in and upgrade programs, due to device mix from carrier promotions and slightly lower volumes. These decreases were partially offset by higher net investment income (after client profit sharing adjustments), organic growth in Global Automotive and modest domestic mobile subscriber growth.

Total revenues increased $71.0 million, or 3%, to $2.12 billion for First Quarter 2023 from $2.05 billion for First Quarter 2022. Net earned premiums increased $87.7 million, or 5%, primarily driven by continued organic growth from strong prior period U.S. sales in our Global Automotive business across all distribution channels and growth in extended service contracts and domestic mobile subscribers. This was partially offset by the run-off of certain global mobile programs, the impact of foreign exchange and a mobile program contract change that resulted in lower retention of premiums net of reinsurance. Net investment income increased $19.3 million, or 34%, primarily due to higher yields on fixed maturity securities, cash and short-term investments. The increase in total revenues was partially offset by a decrease in fees and other income of $36.0 million, or 12%, mainly due to a mobile program contract change related to an in-store mobile service and repair program.

Total benefits, losses and expenses increased $98.8 million, or 5%, to $1.92 billion for First Quarter 2023 from $1.82 billion for First Quarter 2022. Policyholder benefits increased $60.1 million, or 19%, primarily due to elevated loss experience from higher claims costs primarily due to inflation in both Global Automotive and extended service contracts within Connected Living, as well as growth in the Global Automotive business. Underwriting, selling, general and administrative expenses increased $38.7 million, or 3%, primarily due to higher commission expenses from growth in the Global Automotive business, partially offset by lower cost of sales mainly due to a mobile program contract change related to an in-store mobile service and repair program.

Global Housing

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

For the Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Adjusted EBITDA decreased $36.0 million, or 34%, to $68.4 million for First Quarter 2023 from $104.4 million for First Quarter 2022. Pre-tax reportable catastrophes for First Quarter 2023 increased $43.3 million to $49.5 million, compared to $6.2 million for First Quarter 2022, due to severe weather and tornado events. Excluding reportable catastrophes, Adjusted EBITDA increased $7.3 million, or 7%, mainly due to improved performance in Homeowners from higher lender-placed net earned premiums. The increase was partially offset by $32.0 million of higher non-catastrophe loss experience across all major products, driven by higher claims severity primarily due to inflation, and increased catastrophe reinsurance costs.

Total revenues increased $50.3 million, or 11%, to $526.5 million for First Quarter 2023 from $476.2 million for First Quarter 2022. Net earned premiums increased $51.5 million, or 12%, primarily driven by our Homeowners business from higher lender-placed policies in force, average insured values and premium rates, including contributions from new and existing clients, partially offset by exits from certain international markets and higher catastrophe reinsurance costs. Net investment income increased $2.3 million, or 12%, primarily due to higher yields on fixed maturity securities, cash and short term investments, partially offset by lower real estate related income. The increase in total revenues was partially offset by a $3.5 million, or 10%, decrease in fees and other income, mainly driven by a decline in Renters and Other.

Total benefits, losses and expenses increased $86.3 million, or 23%, to $458.1 million for First Quarter 2023 from $371.8 million for First Quarter 2022. Policyholder benefits increased $95.9 million, or 59%, due to higher non-catastrophe and catastrophe loss experience as described above. The increase in total benefits, losses and expenses was partially offset by a $9.6 million, or 5%, decrease in underwriting, selling, general and administrative expenses, primarily due to exits from certain international markets and higher reimbursements from the National Flood Insurance Program for processing flood claims for Hurricane Ian.

Corporate and Other

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

For the Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Adjusted EBITDA was $(24.4) million for First Quarter 2023 compared to $(22.2) million for First Quarter 2022. The change in results was primarily due to lower net investment income, mostly due to lower invested assets from the use of the Global Preneed sale proceeds in the prior year for share repurchases, partially offset by lower general and administrative expenses.

Total revenues decreased $4.2 million, or 48%, to $4.6 million for First Quarter 2023 from $8.8 million for First Quarter 2022, primarily driven by a decrease in net investment income of $4.0 million, or 47%, mostly due to lower invested assets from the use of the Global Preneed sale proceeds in the prior year for share repurchases and the reduction of net investment income from a subsidiary that was sold in second quarter 2022, partially offset by higher cash yields.

Total benefits, losses and expenses decreased $2.0 million, or 6%, to $29.0 million for First Quarter 2023 from $31.0 million for First Quarter 2022, primarily driven by the reduction of expenses from a subsidiary that was sold in second quarter 2022.

Investments

We had total investments of $7.82 billion and $7.52 billion as of March 31, 2023 and December 31, 2022, respectively. Net unrealized losses on our fixed maturity securities portfolio decreased by $100.2 million during Three Months 2023, from $637.1 million as of December 31, 2022 to a net unrealized loss of $536.9 million as of March 31, 2023, primarily due to a decrease in Treasury yields.

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

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

Net investment income increased $18.9 million, or 22%, to $105.2 million for First Quarter 2023 from $86.3 million for First Quarter 2022, primarily driven by higher yields on fixed maturity securities, short-term investments and cash and cash equivalents, partially offset by a decrease in income from other investments due to lower real estate joint venture sales.

Net realized losses on investments and fair value changes to equity securities were $10.6 million for First Quarter 2023 compared to $62.4 million for First Quarter 2022. First Quarter 2023 was primarily driven by normal course sales of fixed maturity securities, changes in fair value of our remaining equity positions that went public through SPAC mergers, and impairments of other investments accounted for under the measurement alternative. First Quarter 2022 was primarily driven by $45.8 million of net unrealized losses from changes in fair value on SPAC equity positions and $17.9 million of net unrealized losses from preferred stocks due to an increase in interest rates, partially offset by $10.0 million of unrealized gains from an equity security accounted for under the measurement alternative in connection with a market observable event that occurred in First Quarter 2022. The net realized losses were also driven by $21.5 million in net realized losses on sales of fixed maturity securities that was partially offset by $10.9 million in net realized gains on sales of equity securities.

Liquidity and Capital Resources

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

Regulatory Requirements

Assurant, Inc. is a holding company and, as such, has limited direct operations of its own. Our assets consist primarily of the capital stock of our subsidiaries. Accordingly, our future cash flows depend upon the availability of dividends and other statutorily permissible payments from our subsidiaries, such as payments under our tax allocation agreement and under management agreements with our subsidiaries. Our subsidiaries’ ability to pay such dividends and make such other payments is

regulated by the states and territories in which our subsidiaries are domiciled. These dividend regulations vary from jurisdiction to jurisdiction and by type of insurance provided by the applicable subsidiary, but generally require our insurance subsidiaries to maintain minimum solvency requirements and limit the amount of dividends these subsidiaries 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” in our 2022 Annual Report. 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”). For the year ending December 31, 2023, the maximum amount of dividends our regulated U.S. domiciled insurance subsidiaries could pay us, under applicable laws and regulations currently in effect and without prior regulatory approval, is approximately $344.7 million. In addition, our international and non-insurance subsidiaries provide additional sources of dividends.

Regulators or rating agencies could become more conservative in their methodology and criteria, increasing capital requirements for our insurance subsidiaries or the enterprise. For further information on our ratings and the risks of ratings downgrades, see “Item 1—Business—Ratings” and “Item 1A—Risk Factors—Financial Risks—A decline in the financial strength ratings of our insurance subsidiaries could adversely affect our results of operations and financial condition” in our 2022 Annual Report.

Holding Company

As of March 31, 2023, we had approximately $382.7 million in holding company liquidity, which was $157.7 million above our targeted minimum level of $225.0 million. The target minimum level of holding company liquidity, which can be used for unforeseen capital needs at our subsidiaries or liquidity needs at the holding company, is calibrated based on approximately one year of corporate operating losses and interest expenses. We use the term “holding company liquidity” to represent the portion of cash and other liquid marketable securities held at Assurant, Inc., out of a total of $469.5 million of holding company investment securities and cash, which we are not otherwise holding for a specific purpose as of the balance sheet date. We can use such assets for stock repurchases, stockholder dividends, acquisitions and other corporate purposes.

Dividends or returns of capital paid by our subsidiaries, net of infusions of liquid assets and excluding amounts used for or as a result of acquisitions or received from dispositions, were $112.0 million and $549.5 million for Three Months 2023 and Twelve Months 2022, respectively. We use these cash inflows primarily to pay holding company operating expenses, to make interest payments on indebtedness, to make dividend payments to our common stockholders, to fund investments and acquisitions, and to repurchase our common stock. From time to time, we may also seek to purchase outstanding debt in open market repurchases or privately negotiated transactions.

Dividends and Repurchases

During Three Months 2023, we paid common stock dividends of $37.0 million. We paid dividends of $0.70 per common share on March 20, 2023 to stockholders of record as of February 27, 2023. Any determination to pay future dividends will be at the discretion of the Board and will be dependent upon various factors, including: our subsidiaries’ payments of dividends and other statutorily permissible payments to us; our results of operations and cash flows; our financial condition and capital requirements; general business conditions and growth prospects; any legal, tax, regulatory and contractual restrictions on the payment of dividends; and any other factors the Board deems relevant. The Credit Facility (as defined below) also contains limitations on our ability to pay dividends to our stockholders and repurchase capital stock if we are in default, or such dividend payments or repurchases would cause us to be in default, of our obligations thereunder. In addition, if we elect to defer the payment of interest on our 7.00% Fixed-to-Floating Rate Subordinated Notes due March 2048 or our 5.25% Subordinated Notes due January 2061 (refer to “—Senior and Subordinated Notes” below), we generally may not make payments on or repurchase any shares of our capital stock.

We did not repurchase any shares of our outstanding common stock during Three Months 2023. In May 2021, the Board authorized a share repurchase program for up to $900.0 million of our outstanding common stock. As of March 31, 2023, $274.5 million aggregate cost at purchase remained unused under the repurchase authorization. The timing and the amount of future repurchases will depend on various factors, including those listed above.

Assurant Subsidiaries

The primary sources of funds for our subsidiaries consist of premiums and fees collected, proceeds from the sales and maturity of investments and net investment income. Cash is primarily used to pay insurance claims, agent commissions, operating expenses and taxes. We generally invest our subsidiaries’ funds in order to generate investment income.

We conduct periodic asset liability studies to measure the duration of our insurance liabilities, to develop optimal asset portfolio maturity structures for our significant lines of business and ultimately to assess that cash flows are sufficient to meet the timing of cash needs. These studies are conducted in accordance with formal company-wide Asset Liability Management guidelines.

To complete a study for a particular line of business, models are developed to project asset and liability cash flows and balance sheet items under a varied set of plausible economic scenarios. These models consider many factors including the current investment portfolio, the required capital for the related assets and liabilities, our tax position and projected cash flows from both existing and projected new business. For risks related to modeling, see “Item 1A – Risk Factors – Financial Risks –Actual results may differ materially from the analytical models we use to assist in our decision-making in key areas such as pricing, catastrophe risks, reserving and capital management.” in our 2022 Annual Report.

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 appetite. Scenario 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 generally insensitive to the interest rate environment. In addition, our investment portfolio is largely comprised of highly liquid public fixed-maturity securities with a sufficient component of such securities invested that are near maturity which may be sold with minimal risk of loss to meet cash needs.

Generally, our subsidiaries’ premiums, fees and investment income, along with planned asset sales and maturities, provide sufficient cash to pay claims and expenses. However, there may be instances when unexpected cash needs arise in excess of that available from usual operating sources. In such instances, we have several options to raise needed funds, including selling assets from the subsidiaries’ investment portfolios, using holding company cash (if available), issuing commercial paper, or drawing funds from the Credit Facility.

Senior and Subordinated Notes

The following table shows the principal amount and carrying value of our outstanding debt, less unamortized discount and issuance costs as applicable, as of March 31, 2023 and December 31, 2022:

2026 Senior Notes: In February 2023, we issued senior notes with an aggregate principal amount of $175.0 million, which bear interest at a rate of 6.1% per year, mature in February 2026 and were issued at a 0.035% discount to the public (the “2026 Senior Notes”). Interest on the 2026 Senior Notes is payable semi-annually in arrears on February 27 and August 27 of each year, beginning on August 27, 2023. Prior to January 27, 2026, we may redeem all or part of the 2026 Senior Notes at any time at a redemption price equal to 100% of the outstanding principal amount of the 2026 Senior Notes to be redeemed, plus a make-whole premium as described in the 2026 Senior Notes and accrued and unpaid interest up to the redemption date. On or after that date, we may redeem all or part of the 2026 Senior Notes at any time at a redemption price equal to 100% of the outstanding principal amount of the 2026 Senior Notes to be redeemed, plus accrued and unpaid interest up to the redemption date.

In anticipation of the issuance of the 2026 Senior Notes, we entered into a derivative transaction to hedge the risk associated with changes in interest rates up to the date the 2026 Senior Notes were issued. We determined that the derivative

qualified for cash flow hedge accounting and recognized a deferred gain of $1.4 million upon settlement which was reported through other comprehensive income. The deferred gain will be recognized as a reduction in interest expense related to the 2026 Senior Notes on an effective yield basis.

In March 2023, we used the net proceeds from the sale of the 2026 Senior Notes (and available cash on hand) to redeem $175.0 million of the $225.0 million then outstanding aggregate principal amount of our 4.20% Senior Notes due September 2023 plus accrued and unpaid interest up to the redemption date. In connection with the redemption, we recognized a net gain on extinguishment of debt of $0.1 million. The net gain resulted from the recognition of a previously deferred gain from the termination of a hedge of the interest rate risk associated with the redeemed notes, partially offset by the immediate recognition of the remaining deferred debt issuance costs relating to the redeemed notes.

In the next five years, we have three debt maturities in September 2023, February 2026 and March 2028 when the remaining 2023 Senior Notes, the 2026 Senior Notes and the 2028 Senior Notes become due and payable.

Credit Facility and Commercial Paper Program

We have a $500.0 million five-year senior unsecured revolving credit facility (the “Credit Facility”) with a syndicate of banks arranged by JPMorgan Chase Bank, N.A. and Wells Fargo Bank, National Association. The Credit Facility provides for revolving loans and the issuance of multi-bank, syndicated letters of credit and letters of credit from a sole issuing bank in an aggregate amount of $500.0 million, which may be increased up to $700.0 million. The Credit Facility is available until December 2026, provided we are in compliance with all covenants. The Credit Facility has a sublimit for letters of credit issued thereunder of $50.0 million. The proceeds from these loans may be used for our commercial paper program or for general corporate purposes.

We made no borrowings using the Credit Facility during Three Months 2023 and no loans were outstanding as of March 31, 2023.

Our commercial paper program requires us to maintain liquidity facilities either in an available amount equal to any outstanding notes from the program or in an amount sufficient to maintain the ratings assigned to the notes issued from the program. Our commercial paper is rated AMB-1 by A.M. Best, P-2 by Moody’s and A-2 by S&P. This program is currently backed up by the Credit Facility, of which $499.8 million out of the $500.0 million was available as of March 31, 2023, due to $0.2 million of letters of credit outstanding.

We did not use the commercial paper program during Three Months 2023 and there were no amounts relating to the commercial paper program outstanding as of March 31, 2023. Our subsidiaries do not maintain commercial paper or other borrowing facilities.

Cash Flows

We monitor cash flows at the consolidated and entity levels. Cash flow forecasts at the consolidated and entity 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 net cash flows for the periods indicated:

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 generally 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 $259.6 million for Three Months 2023 compared to net cash used in operating activities of $501.1 million for Three Months 2022. The change in net operating cash flows was largely attributable to

our mobile business operations that resulted primarily from higher collections of premiums and fees due to timing and a decrease in payments to vendors for the acquisition of mobile devices used to meet insurance claims or generate profits through sales to third parties.

Net cash used in investing activities was $229.4 million for Three Months 2023 compared to net cash used in investing activities of $13.3 million for Three Months 2022. The increase in net cash used in investing activities was primarily driven by the investment of net cash provided by operating activities and the reinvestment of proceeds from sales and maturities of investments in higher yielding fixed maturities during the period.

Net cash used in financing activities was $43.0 million for Three Months 2023 compared to net cash used in financing activities of $277.5 million for Three Months 2022. The decrease in net cash used in financing activities was primarily due to the absence of share repurchases during the quarter.

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

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 $2.7 million of letters of credit outstanding as of March 31, 2023 and December 31, 2022.

For the Company’s market risk disclosures, please refer to “Item 7A—Quantitative and Qualitative Disclosures About Market Risk” in our 2022 Annual Report and “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Investments” in this Report.

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 March 31, 2023. Based on such evaluation, management, including our CEO and CFO, has concluded that as of March 31, 2023, 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 March 31, 2023, 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 March 31, 2023 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 15 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 2022 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

None.

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: May 4, 2023