2005 Annual Report Attaining Disciplined Growth [A growth story with a twist] Assurant is a premier provider of specialized insurance products and related services in North America and selected other markets. The key businesses—Assurant Employee Benefits; Assurant Health; Assurant Solutions (including Assurant Preneed); and Assurant Specialty Property—have partnered with clients who are leaders in their industries and have built leadership positions in a number of specialty insurance market segments in the U.S. and selected international markets. The Assurant businesses provide creditor-placed homeowners insurance; manufactured housing homeowners insurance; debt protection administration; credit-related insurance; warranties and extended service contracts; individual health and small employer group health insurance; group dental insurance; group disability insurance; group life insurance; and pre-funded funeral insurance. The company, which is traded on the New York Stock Exchange under the symbol AIZ, has over $25 billion in assets and $7 billion in annual revenue. Assurant has more than 12,000 employees and is headquartered in New York's financial district. www.assurant.com Attaining Disciplined Growth In 2005, Assurant had strong growth in earnings per share and profits, and paved the way for future profitable growth by targeting investments in specific business areas offering the greatest opportunities. Decisions about where we invest and where we prune or redirect our efforts are consistent with our diversified specialty insurance strategy. We are disciplined in our ongoing investment in leadership development and management succession. We are disciplined in leveraging our core capabilities to build our leading positions in specialty markets. We are disciplined in providing distinctive value that differentiates our offerings and helps us compete successfully. Guided by these disciplines and by our distinctive business model, we are shaping our future growth and building shareholder value. Financial Highlights (Dollars in Millions) 2005 2004 % Change Total Revenues $7,498 $7,411 1.2 Net Earned Premiums 6,521 6,483 0.6 Net Investment Income 687 635 8.3 Net Operating Income1 513 345 48.8 Total Assets 25,365 24,548 3.3 Shareholders’ Equity 2 3,480 3,297 5.5 1 Assurant uses net operating income (which is a non-GAAP financial measure) as an important measure of the company's operating performance. Net operating income equals net income excluding net realized gains (losses) on investments and other unusual and/or infrequent items. Net realized gains (losses) were $7.4 million and $15.8 million in 2005 and 2004, respectively. Other unusual and/or infrequent items in 2005 included a $40.3 million charge for the 1995-1997 excess of loss reinsurance program and $1.0 million of expenses directly related to our secondary public offering. Other unusual and/or infrequent items in 2004 included a $6.3 million loss on the disposal of business and $3.9 million of expenses directly related to our secondary public offering. The company believes net operating income provides investors with a valuable measure of the performance of the company's ongoing business, because it excludes both the effect of realized gains (losses) on investments that tend to be highly variable from period to period, and those events that are unusual and/or unlikely to recur. 2 Excluding Accumulated Other Comprehensive Income. To Our Shareholders As we review our second year as a U.S. public company, we are pleased to report strong growth in net operating income, up 49% to $513 million or $3.75 per diluted share in 2005; a 54% increase in earnings per share; and an operating ROE that at 15.1% is among the leaders in the insurance industry. Each of our specialty insurance businesses delivered increased year-over-year earnings, led by Assurant Solutions and Assurant Specialty Property, which reported a 91% increase in net operating income over 2004. These results were accomplished in spite of another major hurricane season during which five hurricanes caused gross catastrophic losses almost three times greater than those of 2004, yet cost us half as much in 2005—$49 million—in part because our risk management program allowed for 86% recovery of costs. In short, we had a successful 2005 in which we grew Assurant Solutions and our profits and substantially increased shareholder Assurant Specialty Property value. These accomplishments continue to prove the Assurant Solutions targeted growth opportunities by success of our diversified specialty insurance strategy, separating into two distinct businesses, Assurant the guiding discipline that gives our growth story its Solutions and Assurant Specialty Property, both with distinctive “twist.” Nevertheless, there is work to do. increased ability to grow in their respective markets. Ensuring long-term profitable growth means growth Our strategic discipline: For Assurant Solutions, invest on the top line as well as on the bottom line, and in in international expansion in countries where increased this report, we focus on how we are evolving our use of consumer credit creates growth potential for specialty strategy to achieve both kinds of growth our credit products, extended service contracts and for our enterprise. successful integrated service model. For Assurant Specialty Property, continue to apply highly disciplined 2005: Ensuring Long-Term risk management and invest in adapting our leading Profitable Growth creditor-placed model and proprietary systems to In 2005, we acted to ensure our long-term growth by gain entry to adjacent market segments. focusing on specific products with the most potential Our actions to ensure profitable growth have in each of our specialty insurance businesses, and shown strong results in our Assurant Solutions and already we are seeing results. Assurant Specialty Property businesses, which The products that we focus on are those where together reported a 91% increase in net operating we can best leverage the strength of our core capabili- income to $241 million in 2005. Assurant Solutions ties—managing risk, developing relationships with achieved strong top-line growth, as gross premiums large distribution partners, and integrating complex grew 17% in domestic extended service contracts, administrative systems—to respond to our known 239% in international extended service contracts, and and emerging customer needs. The actions we take 9% in international credit insurance. Assurant reflect our diversified specialty strategy, which Specialty Property increased net earned premiums focuses our efforts on product areas where we can and gross written premiums by 12%, to $859 million achieve a leading position. Often, this discipline and $1.4 billion respectively—despite a reduction of requires an up-front investment in systems, skills, $26 million in net earned premiums resulting from research and product development to create a propri- additional reinsurance related to the hurricane etary advantage in our targeted markets—and we season. The decision to separate Assurant Solutions have been successful in doing this. Sometimes, into two businesses was the logical evolution of our achieving profitable growth requires pruning or specialty strategy, as we recognized that increased redirecting our efforts—and we have been disciplined focus and innovation in the two distinctive markets about that, as well. would open broader paths to growth. 2 Annual Report 2005 At Assurant Solutions, we are pursuing our Our top-line growth reflects increases in our net disciplined international expansion strategy and earned premiums, fueled by growth from within our leveraging our core domestic business platform in existing client base and by the addition of several credit insurance and extended service contracts. new clients. We are also exploring new growth Rising consumer spending and an increasing use of opportunities by developing products that utilize the credit cards and revolving credit loans in Europe and proprietary SmartFlowTM systems technology with Latin America are creating a need for protection from which we track 23 million mortgage loans for our debt risk, and we have products that address these creditor-placed homeowners insurance clients. In 2005, problems. Adding to our already successful operations we also launched a product for automobile loans, a in Canada, the United Kingdom, Argentina, Brazil, story described on page 13 of this report. Leveraging Denmark, Ireland and Puerto Rico, we expanded our SmartFlow’s scanning and “rules processor” systems business into Mexico and Germany, and have plans is a key growth strategy for Assurant Specialty underway for Italy and Spain in the next two years. Property. It is also an enterprise growth discipline as In addition to our geographic expansion initiative, we investigate ways to tap these rich proprietary we are building upon the success of our unique systems for new opportunities in all of our businesses. “integrated” service model—which combines admin- istrative, underwriting and marketing services—with Assurant Preneed product innovations that we offer in collaboration with Assurant Preneed focused on growth by realigning as retailers. What is more, we are constantly looking for a product line of Assurant Solutions and by pruning ways to add the next link in the value chain for our back unprofitable distribution channels. The strategic retail partners. In 2005, we developed a private label discipline: invest in profitable distribution partnerships Virus Protection