Assurant Reports Fourth Quarter and Full-Year 2018 Financial Results
4Q 2018 Net Income of $20.3 million, $0.32 per diluted share
Full-Year
2018 Net Income of $236.8 million, $3.98 per diluted share
4Q 2018 Net Operating Income of $48.9 million, $0.77 per diluted share
Full-Year
2018 Net Operating Income of $345.4 million, $5.80 per diluted share
• Key Financial Full-Year 2018 Highlights
– $515.1 million of net operating income, excluding reportable
catastrophes1, up 25 percent; $8.65 per diluted share, up 16
percent2
– 5.1 percent GAAP ROE; 11.2 percent operating ROE, excluding AOCI and
reportable catastrophes3
– $266 million returned to shareholders in share repurchases and common
dividends
– $473 million of corporate capital available at year-end 2018
Note: On May 31, 2018, Assurant closed its acquisition of The Warranty
Group (TWG). Beginning June 1, 2018, Assurant net operating income and
net operating income per diluted share include TWG results and related
financing obtained in March 2018. On August 1, 2018, Assurant closed the
sale of Global Housing’s mortgage solutions business. Results for
mortgage solutions are included in Assurant’s net operating income and
net operating income per diluted share through July 2018. References to
net income refer to net income attributable to common stockholders.
NEW YORK–(BUSINESS WIRE)–Assurant,
Inc. (NYSE: AIZ), a global provider of risk management solutions,
today reported results for the fourth quarter and full-year ended
December 31, 2018.
“In 2018, we successfully executed on our financial commitments,
achieving solid earnings growth, while further expanding our offerings
across Connected Living, Global Automotive and multifamily housing,”
said Assurant President and Chief Executive Officer Alan Colberg.
“By building on our momentum, we expect to realize incremental value
from our acquisition of TWG, while strengthening our Lifestyle and
Housing offerings to continue our outperformance over the long-term,”
Colberg added.
|
Reconciliation of Net Operating Income to GAAP Net Income |
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| (UNAUDITED) | 4Q | 4Q | 12 Months | 12 Months | ||||||||||||
| ($ in millions, net of tax) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Global Housing | $ | (12.4 | ) | $ | 89.6 | $ | 150.8 | $ | 97.4 | |||||||
| Global Lifestyle | 97.9 | 42.8 | 297.7 | 178.0 | ||||||||||||
| Global Preneed | 16.4 | 4.6 | 57.7 | 39.6 | ||||||||||||
| Corporate and other | (27.5 | ) | (29.1 | ) | (84.0 | ) | (62.8 | ) | ||||||||
| Interest expense | (20.8 | ) | (8.0 | ) | (65.8 | ) | (32.2 | ) | ||||||||
| Preferred stock dividends | (4.7 | ) | — | (11.0 | ) | — | ||||||||||
| Net operating income | 48.9 | 99.9 | 345.4 | 220.0 | ||||||||||||
| Adjustments: | ||||||||||||||||
| Assurant Health runoff operations | 0.2 | (0.9 | ) | 2.6 | 10.6 | |||||||||||
| Net realized (losses) gains on investments | (36.2 | ) | 3.3 | (49.4 | ) | 19.6 | ||||||||||
| Amortization of deferred gains on disposal of businesses | 8.4 | 13.2 | 44.9 | 67.5 | ||||||||||||
| Impact of TCJA at enactment | — | 177.0 | (1.5 | ) | 177.0 | |||||||||||
| Net TWG acquisition related charges(1) | (5.9 | ) | (5.7 | ) | (66.9 | ) | (8.1 | ) | ||||||||
| Change in tax liabilities | — | 27.1 | — | 27.1 | ||||||||||||
| Loss on sale of Mortgage Solutions | 0.5 | — | (31.9 | ) | — | |||||||||||
| Foreign exchange related losses | (0.2 | ) | — | (14.7 | ) | — | ||||||||||
| Other adjustments(2) | 4.6 | (1.0 | ) | 8.3 | 5.9 | |||||||||||
| GAAP net income attributable to common stockholders | $ | 20.3 | $ | 312.9 | $ | 236.8 | $ | 519.6 | ||||||||
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Note: 2018 net operating income includes TWG earnings beginning June 1, 2018 and mortgage solutions results prior to the sale on August 1, 2018. |
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| (1) |
Details about the components of net TWG acquisition related |
|
| (2) |
Other adjustments for 4Q 2018 include a net gain of $14.5 million on the sale of the Time Insurance Company, a legal entity associated with the previously exited Assurant Health business, and a net $11.6 million charge related to the Green Tree Insurance Agency acquisition. |
|
Fourth Quarter 2018 Consolidated Results
-
Net income was $20.3 million, or $0.32 per
diluted share, compared to fourth quarter 2017 net income of $312.9
million, or $5.76 per diluted share. The decrease was primarily driven
by the absence of a $177 million one-time benefit related to the
reduction of net deferred tax liabilities following the enactment of
the U.S. Tax Cuts and Jobs Act (TCJA) in 2017 and $95.5 million of
higher reportable catastrophe losses in fourth quarter 2018.
Additionally, net realized losses on investments and the absence of a
benefit from a change in tax liabilities recorded in 2017 contributed
to the decrease. The decline was partially offset by contributions
from TWG and a lower effective tax rate. -
Net operating income4 decreased to $48.9 million,
compared to fourth quarter 2017 net operating income of $99.9 million.
The decrease was mainly driven by $95.5 million of higher reportable
catastrophes losses.Excluding reportable catastrophes, net
operating income for fourth quarter 2018 totaled $144.5 million,
compared to $100.0 million in the fourth quarter 2017. The increase
reflected contributions from TWG, the lower effective tax rate and
organic growth within Connected Living. Results also benefitted
from higher investment income, including real estate joint venture
partnership income and other related fund investments. This was
partially offset by lower contributions from lender-placed insurance
and higher financing costs related to the TWG acquisition.
-
Net operating income per diluted share5 decreased to
$0.77, compared to fourth quarter 2017 net operating income of $1.84
per diluted share. The calculation excludes the effect of 2.9 million
shares of dilutive securities from the mandatory convertible preferred
stock, which were anti-dilutive for the period. -
Net earned premiums, fees and other income from the Global
Housing, Global Lifestyle and Global Preneed segments totaled $2.17
billion, compared to $1.52 billion in fourth quarter 2017, driven by
$645 million of revenue from TWG. Excluding TWG and the sale of
mortgage solutions, revenue increased 4 percent, primarily from
organic growth in mobile and Global Automotive within Global Lifestyle.
Full-Year 2018 Consolidated Results
-
Net income decreased to $236.8 million, or $3.98 per diluted
share, compared to full-year 2017 net income of $519.6 million, or
$9.39 per diluted share. The decrease was driven by the absence of a
one-time benefit related to the reduction of net deferred tax
liabilities, net charges related to TWG acquisition and net realized
losses on investments. This was partially offset by a lower effective
tax rate and TWG contributions. -
Net operating income4 increased to $345.4 million,
compared to full-year 2017 net operating income of $220.0 million,
primarily due to contributions from TWG, a lower effective tax rate
and $22.8 million of lower reportable catastrophes. Organic growth in
Connected Living and multifamily housing were partially offset by
declines in lender-placed insurance and higher financing costs related
to the acquisition of TWG.Excluding reportable
catastrophes, net operating income for full-year 2018 increased to
$515.1 million, compared to $412.5 million in 2017, due to the factors
noted above.
-
Net operating income per diluted share5 increased to
$5.80, compared to 2017 net operating income of $3.98 per diluted
share driven by growth in net operating income and share repurchases.
The calculation excludes the effect of 1.7 million shares of dilutive
securities from the mandatory convertible preferred stock, which were
anti-dilutive for the period. Excluding reportable catastrophes, net
operating income increased to $8.65 per diluted share, compared to
$7.46 per diluted share in 2017. -
Net earned premiums, fees and other income from the Global
Housing, Global Lifestyle and Global Preneed segments totaled $7.5
billion, compared to $5.8 billion in 2017, driven by $1.5 billion of
revenue from TWG. Excluding TWG and the sale of mortgage solutions,
revenue increased 7 percent due to organic growth in mobile, Global
Automotive, various specialty property products and multifamily
housing. This was partially offset by lender-placed declines.
Reportable Segments
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Global Housing |
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| ($ in millions) | 4Q18 | 4Q17 | % Change | 12M18 | 12M17 | % Change | |||||||||||||
| Net operating (loss) income | $ | (12.4 | ) | $ | 89.6 | (114 | )% | $ | 150.8 | $ | 97.4 | 55 | % | ||||||
| Net earned premiums, fees and other | $ | 502.0 | $ | 562.8 | (11 | )% | $ | 2,089.2 | $ | 2,175.0 | (4 | )% | |||||||
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Note: On August 1, 2018, Assurant closed the sale of Global Housing’s mortgage solutions business. Results for this business are included in Global Housing’s revenue and net operating income through July 2018 and full-year 2017. |
-
Net operating loss in the fourth quarter 2018 was primarily
attributable to $95.4 million of reportable catastrophes from
Hurricane Michael and the California Wildfires. This compares to $3.1
million of catastrophe losses in the prior year period. Results
benefitted from a lower effective tax rate.Excluding
reportable catastrophes and the lower effective tax rate, fourth
quarter 2018 net operating income decreased due to less favorable
non-catastrophe loss experience, ongoing lender-placed declines and a
$6.2 million increase in 2018 reinsurance premiums to align with
full-year catastrophe exposure. Higher net investment income,
including real estate joint venture partnership income and other
related fund investments, and multifamily housing growth partially
offset the decline.Full-year 2018 net operating income
increased year-over-year, primarily reflecting a lower effective tax
rate and lower reportable catastrophes. Excluding these items, net
operating income decreased driven by less favorable non-catastrophe
loss experience, declining placement rates and lower real estate-owned
volumes within lender-placed insurance. This was partially offset by
profitable growth in multifamily housing.
-
Net earned premiums, fees and other income decreased in fourth
quarter 2018, mainly reflecting the sale of mortgage solutions.
Excluding mortgage solutions, revenue was flat as growth in specialty
property products, including commercial property and multifamily
housing, offset the declines in lender-placed premiums.For
full-year 2018, net earned premiums, fees and other income decreased,
reflecting the sale of mortgage solutions. Excluding mortgage
solutions, revenue increased 3 percent driven by the factors noted
above.
|
Global Lifestyle |
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| ($ in millions) | 4Q18 | 4Q17 | % Change | 12M18 | 12M17 | % Change | ||||||||||||
| Net operating income | $ | 97.9 | $ | 42.8 | 129 | % | $ | 297.7 | $ | 178.0 | 67 | % | ||||||
| Net earned premiums, fees and other | $ | 1,621.1 | $ | 913.6 | 77 | % | $ | 5,183.3 | $ | 3,396.2 | 53 | % | ||||||
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Note: Starting June 1, 2018, the results of TWG business operations is reflected within Global Lifestyle segment results. |
-
Net operating income increased in fourth quarter 2018,
benefitting from the TWG acquisition, a lower effective tax rate and
modest organic growth. Results in the quarter included a $9.3
million client recoverable, compared to $5.0 million in the prior year
period. Excluding the client recoverable, TWG contributed a total of
$35.4 million in the quarter, net of $2 million primarily related to
intangible amortization and inclusive of approximately $8 million of
realized operating synergies.Excluding these items,
results increased due to organic growth in Connected Living, driven by
the expansion of new and existing programs and higher trade-in volumes
in mobile, as well as additional investment income, including real
estate joint venture partnership income and other related fund
investments. This was partially offset by less favorable mobile loss
experience.Full-year 2018 net operating income increased
compared to 2017. This was driven by $74.7 million of contributions
from TWG, excluding the client recoverable and net of $5.3 million
primarily related to intangible amortization and inclusive of
approximately $14 million of realized operating synergies.
Additionally, organic growth in Connected Living and the benefit of a
lower effective tax rate contributed to the increase. This was
partially offset by continued declines in Global Financial Services
mainly driven by anticipated discontinued partnerships in the second
half of the year.
-
Net earned premiums, fees and other income increased primarily
due to the addition of $645 million of TWG revenue. Excluding TWG,
revenue increased 7 percent driven by organic growth in mobile from
new protection programs and higher trade-in volumes, as well as Global
Automotive. Unfavorable foreign exchange reduced revenue in service
contracts and Global Financial Services.For full-year
2018, net earned premiums, fees and other income increased driven by
$1.5 billion in revenue from TWG. Excluding TWG, revenue increased 9
percent due to growth in mobile, mainly from new protection programs
and ongoing subscriber growth, as well as growth in Global Automotive.
Unfavorable foreign exchange reduced revenue in service contracts and
Global Financial Services.
|
Global Preneed |
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| ($ in millions) | 4Q18 | 4Q17 | % Change | 12M18 | 12M17 | % Change | |||||||||||
| Net operating income | $ | 16.4 | $ | 4.6 | 257 | % | $ | 57.7 | $ | 39.6 | 46 | % | |||||
| Net earned premiums, fees and other | $ | 48.3 | $ | 45.9 | 5 | % | $ | 189.5 | $ | 181.0 | 5 | % | |||||
-
Net operating income increased in fourth quarter and full-year
2018 primarily due to the impact of a lower effective tax rate, higher
net investment income, including higher real estate joint venture
partnership income and yields, and the absence of a $5 million
software impairment in fourth quarter 2017. -
Net earned premiums, fees and other income increased in the
fourth quarter and full-year 2018, primarily driven by growth in
prefunded funeral policies in U.S. and Canada, as well as prior period
sales of the Final Need product.
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Corporate & Other |
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| ($ in millions) | 4Q18 | 4Q17 | % Change | 12M18 | 12M17 | % Change | |||||||||||||||
| Net (loss) income attributable to common stockholders | $ | (81.8 | ) | $ | 176.8 | (146 | )% | $ | (272.0 | ) | $ | 194.0 | (240 | )% | |||||||
| Net operating loss (6) | $ | (27.5 | ) | $ | (29.1 | ) | 5 | % | $ | (84.0 | ) | $ | (62.8 | ) | (34 | )% | |||||
|
Note: Net (loss) income attributable to common stockholders is the comparable GAAP measure to net operating loss for the Corporate & Other segment. |
-
Net operating loss6 decreased in
fourth quarter 2018, reflecting the absence of a workforce reduction
charge in fourth quarter 2017 and higher investment income, including
real estate joint venture partnership income, partially offset by the
adverse impact from the lower effective tax rate. For the full year,
net operating loss increased reflecting the adverse impact from the
lower effective tax rate and higher employee-related and technology
expenses.
Capital Position
-
Corporate capital was approximately $473 million as of Dec. 31,
2018. Deployable capital totaled approximately $223 million, net of
the company’s $250 million risk buffer.Dividends paid to
the holding company in the fourth quarter 2018 from Assurant’s Global
Housing, Global Lifestyle and Global Preneed operating segments
totaled $122 million, including $75 million in dividends from TWG. In
addition, Assurant received $31 million in cash following the sale of
Time Insurance Company, a legal entity associated with the previously
exited health business.For full-year 2018, dividends paid
to the holding company totaled $739 million. This included $342
million from the Global Housing, Global Lifestyle and Global Preneed
segments, $237 million related to the reduction in deferred tax
liabilities following enactment of TCJA, $148 million from TWG and $12
million from Assurant Employee Benefits and Assurant Health.
-
Share repurchases and dividends totaled $92 million in fourth
quarter 2018. Dividends to shareholders totaled $43 million, including
$38 million in common stock dividends and $5 million in preferred
stock dividends. Assurant repurchased 0.5 million shares of common
stock for $49 million. From January 1 through February 8, 2019, the
company repurchased an additional 237,000 shares for approximately $22
million, with $739 million remaining under the current repurchase
authorization.For full-year 2018, share repurchases and
dividends totaled $280 million. Assurant repurchased approximately 1.3
million shares of common stock for $132 million and paid dividends to
shareholders totaling $148 million, including $134 million in common
stock dividends and $14 million in preferred stock dividends.
Company Outlook
Based on current market conditions, for full-year 2019 the company
expects:
-
Assurant net operating income per diluted share, excluding catastrophe
losses to increase 6 percent to 10 percent from 2018, driven mainly by
profitable growth in Global Lifestyle and Global Housing as well
as share repurchases. This growth rate includes an expected negative
impact of approximately 2 percent resulting from incremental
reinsurance costs, implemented to further reduce the Company’s
catastrophe exposure and the full year impact of the 10.4 million
shares issued for the TWG acquisition. Assurant’s consolidated
effective tax rate to be between 23 percent to 25 percent. -
Double-digit earnings growth to reflect full-year contributions from
TWG including $25 million to $30 million after-tax of additional
synergy realization, modest organic growth across Connected Living,
Global Automotive and multifamily housing, as well as ongoing expense
management efforts. Lender-placed, excluding reportable catastrophe
losses and the incremental reinsurance costs, is expected to
approximate 2018 levels as revenue declines moderate. Earnings growth
will be partially offset by the continued declines in Global Financial
Services.Corporate & Other full-year net operating loss7
to approximate 2018 levels. Interest expense and preferred dividends
are expected to be between $83 million to $85 million and
approximately $20 million, respectively, reflecting a full year of
financing costs related to the acquisition of TWG.
-
Business segment dividends from Global Housing, Global
Lifestyle and Global Preneed to approximate segment net operating
income, including catastrophe losses. This is subject to the growth of
the businesses and rating agency and regulatory capital requirements. -
Capital to be deployed to support business growth, fund other
investments and return capital to shareholders in the form of share
repurchases and dividends, subject to Board approval and market
conditions.
Earnings Conference Call
The fourth quarter 2018 earnings conference call and webcast will be
held Wednesday, February 13, 2019 at 8:00 a.m. ET. The live and archived
webcast, along with supplemental information, will be available on
Assurant’s Investor Relations website http://ir.assurant.com/investor/default.aspx
About Assurant
Assurant, Inc. (NYSE: AIZ) is a global provider of risk management
solutions, protecting where consumers live and the goods they buy. A
Fortune 500 company, Assurant focuses on the housing and lifestyle
markets, and is among the market leaders in mobile device protection and
related services; extended service contracts; vehicle protection
products; pre-funded funeral insurance; renters insurance; and
lender-placed homeowners insurance. Assurant has a market presence in 21
countries, while its Assurant Foundation works to support and improve
communities. Learn more at assurant.com
or on Twitter @AssurantNews.
Safe Harbor Statement
Some of the statements included in this news release and its exhibits,
particularly those anticipating future financial performance, business
prospects, growth and operating strategies and similar matters,
including the benefits and synergies of The Warranty Group acquisition,
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 “outlook,” “will,” “may,” “can,”
“anticipates,” “expects,” “estimates,” “projects,” “intends,” “plans,”
“believes,” “targets,” “forecasts,” “potential,” “approximately,” or the
negative version of those words and other words and terms with a similar
meaning. Any forward-looking statements contained in this news release
or its exhibits 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 the future plans, estimates or expectations
contemplated by us will be achieved. Our actual results might differ
materially from those projected in the forward-looking statements. The
company undertakes no obligation to update or review any forward-looking
statements in this news release or the exhibits, whether as a result of
new information, future events or other developments. The following risk
factors could cause our actual results to differ materially from those
currently estimated by management, including those projected in the
company outlook:
| (i) |
the loss of significant clients, distributors and other parties or those parties facing financial, reputation and regulatory issues; |
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| (ii) |
significant competitive pressures, changes in customer preferences and disruption; |
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| (iii) |
the failure to find and integrate acquisitions, including The Warranty Group, or grow organically and risks associated with joint ventures; |
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| (iv) |
the impact of general economic, financial market and political conditions, including unfavorable conditions in the capital and credit markets, and conditions in the markets in which we operate; |
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| (v) |
risks related to our international operations and fluctuations in exchange rates; |
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| (vi) | the impact of catastrophic and non-catastrophe losses; | ||
| (vii) |
our inability to recover should we experience a business continuity event; |
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| (viii) |
our inability to develop and maintain distribution sources or attract and retain sales representatives; |
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| (ix) |
failure to manage vendors and other third parties who conduct business and provide services to our clients; |
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| (x) |
declines in the value of mobile devices and export compliance risk in our mobile business; |
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| (xi) |
negative publicity relating to our products and services or the markets in which we operate; |
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| (xii) |
failure to implement our strategy and to attract and retain key personnel, including senior management; |
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| (xiii) | employee misconduct; | ||
| (xiv) |
the adequacy of reserves established for claims and our inability to accurately predict and price for claims; |
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| (xv) |
a decline in financial strength ratings or corporate senior debt ratings; |
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| (xvi) | an impairment of goodwill or other intangible assets; | ||
| (xvii) |
failure to maintain effective internal control over financial reporting; |
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| (xviii) |
a decrease in the value of our investment portfolio including due to market, credit and liquidity risks; |
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| (xix) |
the impact of U.S. tax reform legislation and impairment of deferred tax assets; |
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| (xx) |
the unavailability or inadequacy of reinsurance coverage and credit risk of reinsurers, including those to whom we have sold business through reinsurance; |
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| (xxi) | the credit risk of some of our agents; | ||
| (xxii) |
the inability of our subsidiaries to pay sufficient dividends to the holding company and limitations on our ability to declare and pay dividends; |
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| (xxiii) | changes in the method for determining or replacement of LIBOR; | ||
| (xxiv) |
failure to effectively maintain and modernize our information technology systems and infrastructure and integrate those of acquired businesses; |
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| (xxv) |
breaches of our information systems or those of third parties or failure to protect data in such systems, including due to cyber-attacks; |
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| (xxvi) |
costs of complying with, or failure to comply with, extensive laws and regulations to which we are subject, including related to privacy, data security and data protection; |
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| (xxvii) | the impact from litigation and regulatory actions; | ||
| (xxviii) | reductions in the insurance premiums we charge; and | ||
| (xxix) | changes in insurance and other regulation. | ||
Contacts
Media Contact:
Linda Recupero
Senior Vice President,
Global Communication
Phone: 212.859.7005
linda.recupero@assurant.com
Investor Relations Contacts:
Suzanne Shepherd
Senior
Vice President, Investor Relations
Phone: 212.859.7062
suzanne.shepherd@assurant.com
Sean Moshier
Director, Investor Relations
212.859.5831
sean.moshier@assurant.com