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Press release from Business Wire

A.M. Best Revises Issuer Credit Rating Outlook to Positive for Assurant, Inc. and Its Property/Casualty Subsidiaries

Monday, November 18, 2013

A.M. Best Revises Issuer Credit Rating Outlook to Positive for Assurant, Inc. and Its Property/Casualty Subsidiaries

15:28 EST Monday, November 18, 2013

OLDWICK, N.J. (Business Wire) -- A.M. Best Co. has revised the outlook to positive from stable for the issuer credit ratings (ICR) of “a” and affirmed the financial strength rating (FSR) of A (Excellent) and ICRs of the property/casualty subsidiaries of Assurant, Inc. (Assurant) (headquartered in New York, NY) (NYSE:AIZ). The outlook for the FSR is stable. Additionally, A.M. Best has affirmed the FSRs of A- (Excellent) and ICRs of “a-”of Assurant's life/health subsidiaries with a stable outlook. Concurrently, A.M. Best has revised the outlook to positive from stable and affirmed the ICR of “bbb” and debt ratings of Assurant. (See link below for a detailed listing of the companies and ratings.)

Assurant's ratings recognize its diverse business mix, established presence in numerous niche markets, strong operating results and capitalization. As of September 30, 2013, Assurant's unadjusted debt-to-capital and adjusted debt-to-tangible capital ratios were 27.3% and 25.3%, respectively, with a fixed charge coverage ratio that is well supportive of the ratings. Assurant also maintains a $350 million commercial paper program, which is secured by a back-up credit facility of $350 million.

The ratings for the property/casualty subsidiaries of Assurant reflect the organization's established presence in various specialty markets, its continued strong underwriting and operating performance along with a sound risk-adjusted capitalization.

These positive rating attributes are derived from the organization's leadership position in the delivery of credit-related insurance products, lender-placed homeowners' insurance, manufactured housing insurance, vehicle service contracts and extended service contracts, as well as a vast customer base through its large number of distribution sources in North America. As a result of its diversified product and distribution platforms and technology focus, the group has delivered strong underwriting and operating earnings over the last five-year period, despite periods of significant catastrophe losses and the adverse impact of weak macroeconomic conditions on revenue in the past five years, particularly for the service contract business.

Somewhat offsetting these positive ratings factors are the property/casualty group's natural catastrophe exposure, which has increased significantly over the past five years, primarily due to growth in its specialty property (both organically and through acquisitions), and its continued dependence on third-party reinsurance. These factors, in conjunction with an increase in net retentions associated with its property catastrophe treaty, expose the property/casualty group's earnings to a degree of variability. These concerns are somewhat mitigated by its geographic spread of risk, management's use of risk management tools (including tracking aggregation of risks) and product design.

Also offsetting these positive rating factors is the usage of consumer credit that is driving the many property/casualty products. The property/casualty group may be challenged to maintain current premium levels and may experience deteriorating loss performance through higher utilization, given current economic pressures. A.M. Best will continue to monitor the effect of macroeconomic conditions, in particular conditions in the housings and mortgage markets on the property/casualty group's underwriting and operating profitability.

The affirmation of the ratings of Assurant's life/health operations, which include four distinct business units—employee benefits, health, preneed and credit life—reflects each segment's continued good operating results and sound reported capitalization as well as each ones recognized presence in its specific target markets.

The ratings for Assurant's employee benefits companies (known as AEB) acknowledge their established position as a major writer of group dental, disability and group life insurance in the smaller case market (i.e., under 500 lives). AEB has marketed products on a traditional (“true group”) and voluntary basis for many years, with increasing focus on the expansion of its voluntary product portfolio. Favorable sales results were reported during the first nine months of 2013, driven by the rising popularity of the group's diverse voluntary product suite and leading dental network. Premiums growth in the segment's voluntary business partially offset a decline in the employer-paid business, primarily related to contractions in its long-term disability block reflecting continued pricing discipline on new business and renewals. A.M. Best views favorably AEB's nimble and innovative marketing and product design strategies, its dedicated approach to underwriting and continued focus on expense efficiencies and management. However, macroeconomic pressures continue to moderately impact both top and bottom line results across the majority of the domestic employee benefits market. Additionally, A.M. Best believes AEB will experience continued and increasing competitive pressures in voluntary benefits going forward, as companies take advantage of employer's need to offer value-added benefits packages to their employees.

Assurant's health companies continue to have a recognized presence in the individual and small group major medical market. The health segment's ratings reflect its adequate risk-adjusted capitalization, generally good operating income reported and innovative approach to product design as well as its core product focus. Over the past few years, Assurant's health segment has successfully implemented a revised business strategy by offering new and innovative health care solutions to its individual and small group customer targeted market while maintaining strong partnerships with existing distribution channels. Additionally, Assurant's health operations continue to focus on business simplification programs and expense reductions to offset the impact of the imposed 80% minimum medical loss ratio (MLR). However, operating results in 2013 were materially impacted by less favorable experience, driven by pricing actions in response to minimum MLR requirements on its major medical block of business, as well as a significant increase in the segment's effective tax rate, as a result of nondeductible expenses related to health care reform.

The ratings for Assurant's domestic and Canadian preneed companies acknowledge their consistent statutory premium growth trends, favorable operating earnings and adequate risk-adjusted capital positions. These operations encompass one of the largest writers of preneed life insurance in the United States as well as the market leading writer in the Canadian preneed market. Assurant's domestic preneed business sales are primarily tied to Service Corporation International, the world's largest funeral organization, in North America; thus, exposing it to significant concentration risk. However, A.M. Best notes that distribution is much more diverse in the Canadian operations. Additionally, the extended low interest rate environment continues to present challenges for companies marketing preneed and final expense products. Nevertheless, Assurant's preneed companies have nimbly implemented innovative distribution tactics and product options and continues to explore opportunistic partnerships. As such, sales and operating earnings continue to be favorable despite current unfavorable macroeconomic factors.

The ratings of Assurant's credit life companies (a contracting part of Assurant's Solutions segment) recognize their stable earnings and solid capitalization, despite historically sizeable dividends paid to the holding company, which have moderated more recently. The companies continue to report contracting premiums due to economic pressures in the United States and Puerto Rico and their focus efforts on diversification into international markets as industry changes have led to less emphasis on those products in the domestic space. However, A.M. Best recognizes that Assurant remains a recognizable name in the North American (including Puerto Rico) credit insurance and related markets.

Future positive rating actions may result from Assurant's continued strong operating performance, along with its strengthened risk-adjusted capitalization. However, negative rating actions could result if risk-adjusted capitalization deteriorates to a level that does not support the ratings or operating performance falls markedly short of A.M. Best's expectations. This includes the impact that the poor macroeconomic environment may have on Assurant's revenue, profitability and distribution partners.

For a complete listing of Assurant, Inc. and its subsidiaries' FSRs, ICRs and debt ratings, please visit

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit

Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

A.M. Best Co.
Brian O?Larte?P/C, 908-439-2200, ext. 5138
Senior Financial Analyst
Kate Steffanelli?L/H, 908-439-2200, ext. 5063
Senior Financial Analyst
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations

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