One-off gains mask plummeting operating profits at Assurant

Profits at US insurer Assurant soared in 2016 thanks to one-off gains despite high levels of catastrophe losses that caused its combined ratio to hit 105 percent in the fourth quarter of 2016 alone and its operating profits to plummet.

The company made a net profit of $565.4 million in 2016, a big jump on $141.6 million it made in 2015. The majority of the increase was due to lower losses and exit-related charges from Assurant Health runoff operations, and higher amortization of deferred gains and net realized gains on the disposal of businesses primarily from the sale of Assurant Employee Benefits.

It said this was partially offset by higher reportable catastrophe losses and the ongoing normalization of lender-placed insurance business in Global Housing. Its net operating income last year showed a different story, dropping to $276.9 million compared with $398.6 million in 2015. This decline was primarily due to $83.1 million of additional reportable catastrophe losses and the ongoing normalization of lender-placed insurance.

The company’s combined ratio risk-based businesses increased to 91.1 percent in 2016 from 83.4 percent in 2015, driven by greater reportable catastrophe losses. In the fourth quarter alone, the combined ratio soared to 105.0 percent from 90.2 percent in fourth quarter 2015.

Declines in lender-placed insurance was blamed for its net earned premiums, fees and other income from the Global Housing, Global Lifestyle and Global Preneed segments dropping slightly to $6.17 billion, compared with $6.25 billion in 2015.

“Progress on our multi-year transformation defined 2016 for us, as we completed the realignment of our portfolio to focus on the Housing and Lifestyle markets, and established our new global operating model,” said Alan Colberg, Assurant’s chief executive.

“While operating earnings for the year were lower, primarily due to catastrophe losses and the anticipated lender-placed normalization, we continued positioning Assurant for long-term, profitable growth. Importantly, we returned nearly $1 billion to shareholders last year through dividends and share repurchases, which represents substantial progress toward our two-year, $1.5 billion commitment.”

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