2014 ANNUAL REPORT and FORM 10-K Financial Highlights 2014 2013 2012 2011 2010 Total Revenue $10,382 $9,048 $ 8,508 $8,273 $8,528
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2014 ANNUAL REPORT AND FORM 10-K Financial Highlights 2014 2013 2012 2011 2010 Total Revenue $10,382 $9,048 $ 8,508 $8,273 $8,528 Net Earned Premiums, Fees & Other 9,666 8,347 7,712 7,530 7,766 Net Investment Income 656 650 713 690 703 Net Operating Income1 439 467 449 438 560 Shareholders’ Equity2 4,626 4,407 4,355 4,316 4,346 (U.S. dollars in millions) 1 Please see footnote 1 on page 7 of this report for more information 2 Excluding accumulated other comprehensive income (AOCI). Please on this non-GAAP fi nancial measure and a reconciliation of net see footnote 4 on page 8 of this report for a reconciliation of this operating income to its most comparable GAAP measure. non-GAAP measure to its most comparable GAAP measure. Cash Flow Generation Book Value Per Diluted Share 2010–2014 (in millions) 2010–2014 $64.82 $59.48 $819 $53.87 $47.34 $607 $41.65 $558 $510 $538 20142013 2012 2011 2010 20142013 2012 2011 2010 Note: Primarily consists of gross dividends received Note: Excluding AOCI. Please see footnote from subsidiaries, less interest and other corporate 3 on page 8 for a reconciliation of this non-GAAP expenses. Excludes proceeds from 2013 debt fi nancial measure to its most comparable GAAP issuance. measure. A Message to Our Shareholders Alan B. Colberg President and CEO Assurant “ 2014 was a year of signifi cant progress at Assurant as we built and strengthened capabilities to drive long-term, profi table growth.” We accelerated change within our company as we adapted to the evolving markets we serve through our strategy to “Adapt, Strengthen and Grow.” I am proud of and inspired by our employees worldwide who are steadfast in living our purpose to help people protect what matters most to them. As 2015 began, I was honored to be appointed President and CEO and grateful for the outstanding leadership Rob Pollock provided in that role during our formative years as a public company. Rob, along with executive colleagues Mike Peninger, John Roberts and Sylvia Wagner, retired in 2014 and left an enduring imprint on our company and with so many of our employees. We thank them for their service and know that many of our accomplishments refl ect their contributions as well. With extensive industry expertise and deep knowledge of our specialty strategy, our new Management Committee is energized by the many opportunities ahead for Assurant. Together, and with the commitment of our 17,600 employees, we are focused on generating sustained outperformance for our customers, shareholders and employees as we build an even stronger company for the future. 2014 RESULTS: EXECUTING OUR ADAPT, STRENGTHEN AND GROW STRATEGY Assurant’s net earned premiums, fees and other income totaled $9.7 billion, a 15.8 percent increase that refl ected both organic growth and contributions from acquisitions. We generated $1.0 billion of fee income , a 76.2 percent year-over-year increase as we broadened our specialty insurance products with additional adjacent, fee-based services related to a variety of risk events. ANNUAL 2014 ASSURANT REPORT ▪ 1 Net operating income (1) was $439.0 million. Operating return on equity, excluding accumulated other comprehensive income (AOCI)(2), was 9. 7 percent. Our book value per diluted share, excluding AOCI(3), increased 9.0 percent compared to the previous year-end. In 2014, our operating segments generated signifi cant free cash fl ow. This allowed us to invest in the business to support organic growth and return $296 million to shareholders through share repurchases and common stock dividends. Last year, we increased our dividend again as we have every year since becoming a public company. We also deployed $162 million to complete four acquisitions to further strengthen our specialty capabilities. After taking these actions, we ended the year with $560 million of holding company capital. ADAPT During 2014, we continued to adapt our portfolio of specialty products and services in response to the evolving marketplace and to capitalize on macro trends. We invested in areas such as mobile, mortgage solutions, multi-family housing and voluntary benefi ts where we believe we can leverage our skills and deliver profi table long -term growth. In aggregate, these targeted growth areas now account for 25 percent of total revenue. Additionally, earnings from these product lines more than tripled year over year. There are many examples of our progress in aligning resources toward these targeted offerings. Protect ing consumers’ increasingly connected lives from disruption was the driving force behind the launch of Assurant Solutions’ Connected Living platform in 2014. With a comprehensive array of mobile and extended warranty programs for smart phones, appliances, consumer electronics and other devices, we see many opportunities to serve the rapidly expanding base of connected consumers. In 2014, Assurant Solutions delivered exceptional results by leveraging an integrated offering and our deep expertise. To build on our momentum, we completed the integration of Lifestyle Services Group and added the CWI Group to further expand our global footprint and distribution capabilities. Assurant Specialty Property also took many steps in 2014 to further diversify our sources of revenue and profi tability long term. We added StreetLinks and eMortgage Logic, which along with Field Asset Services, now constitute our Mortgage Solutions business and we are capturing market share. In addition, our Multi- F amily Housing business expanded its distribution and now protects more than one million policyholders. The Mortgage Solutions and Multi- Family Housing businesses are increasingly important as the broader U.S. housing market improves and our lender-placed insurance business continues to normalize. 2014 also marked substantial change for the health insurance market with the introduction of guaranteed issue and the public exchanges under the Affordable Care Act. Our colleagues at Assurant Health demonstrated agility in adapting to an evolving landscape. For the fi rst time, we offered consumers individual medical coverage through our participation on public exchanges in 16 states for 2015-effective policies. Sales were strong, yet net operating income was disappointing. We have accelerated actions to improve performance and achieve the specialty returns we require and our shareholders expect. ANNUAL 2014 ASSURANT REPORT ▪ 2 At Assurant Employee Benefi ts, voluntary premiums increased 12.1 percent last year, well in excess of the market rate. With our robust Assurant Works administrative platform we continue to simplify the benefi ts enrollment process to build upon our strengths. Looking ahead, the voluntary business will remain the growth engine at Assurant Employee Benefi ts as employers shift more of the selection process and benefi t costs to their employees. Across Assurant we will build on the momentum and focus our efforts on specialty products and services that require limited capital investment, generate attractive free cash fl ow and command market leadership positions. STRENGTHEN As part of our ongoing efforts to strengthen our enterprise, we will continue to reallocate resources toward targeted areas we believe will drive growth in earnings and free cash fl ow longer term. Our decision last year to divest American Reliable Insurance Company is an example of our actions to realign capital to support our long-term profi tability objectives. In 2014, we continued to build capabilities in key areas such as digital and by investing in other consumer- centric initiatives. We are commited to operational excellence throughout our enterprise. We have reduced our corporate expenses largely due to lower benefi t and acquisition-related expenses . Results for the year at Assurant Solutions refl ected restructuring actions that began in 2013. Assurant Specialty Property invested in various initiatives to standardize our lender-placed platform, which will generate net savings beginning later this year while allowing us to continue delivering high -quality customer service. At Assurant Health, we maintained strict focus on operational discipline. Further expense actions at Assurant Employee Benefi ts will help offset lower investment income and achieve specialty returns. GROW In 2015 and looking ahead, we will focus on three strategic priorities throughout Assurant : • innovate faster around the end-consumer to generate organic growth; • drive operational excellence to become more effi cient and deliver outstanding customer experiences; and, • maintain our commitment to disciplined capital management. We see great opportunities ahead as we pursue sustained outperformance for our customers, shareholders and employees. From a solid and profi table foundation, we are building an even stronger Assurant for the future. Thank you for your investment in Assurant. Alan B. Colberg President & CEO Assurant ANNUAL 2014 ASSURANT REPORT ▪ 3 Our Corporate Social Responsibility Commitment Our core values — Common Sense, Common Decency, Uncommon Thinking and Uncommon Results — guide our every action. Embedded in our Assurant culture and refl ected in our values is a passion to serve our communities that is at the heart of our sustainability practices. As a provider of specialty insurance and related products to safeguard against risks, we understand the importance of protecting what matters most. Being a responsible corporate citizen is common sense -- for our customers, business partners, shareholders, employees and our neighbors. Our employees reach out in many ways to enhance the quality of life in the communities where we operate and serve. Through the Assurant Foundation, we focus on a variety of health and wellness, homes and property and other hometown help initiatives. From supporting United Way’s health and education programs, or the fi nancial literacy efforts of Junior Achievement, to our employees volunteering to build affordable homes through Habitat for Humanity, Assurant is creating opportunities for a better, brighter future. We also are supporting a more sustainable future by investing time and resources to reduce our carbon footprint.