Assurant 2007 Annual Report Download - page 20

answered the call over the past year. Their responsiveness
and achievements amidst difcult circumstances are a
testament to the strength and leadership we have
throughout the organization—from the management
committee to the business segment leadership to the
sales and service professionals all around the world. With
sincere gratitude and great pride, I thank all of you for
everything you do for Assurant. As we approach 2008 and
the years to come, I have no doubt that the people of
Assurant will continue to be a vital strategic asset—adding
value, applying expertise and building relationships every
step of the way.
Staying on Strategy. Executing on Opportunities.
Closer examination of our results reveals some of the key
reasons for our success. We always are looking for areas
where we can apply and leverage our core capabilities
to achieve competitive advantage: our risk management
expertise, strategic relationships with market leaders and
the integration of complex administrative systems. As
such, our diverse specialty businesses continue to identify
and focus on long-term, protable growth opportunities
within each business unit. In Assurant Specialty Property,
creditor-placed homeowners insurance was a primary
driver in the business’s $379.2 million contribution toward
Assurant’s net operating income in 2007. We anticipate
this product, along with logical extensions in markets
such as creditor-placed auto insurance and renters,
will continue to offer attractive growth potential. For
Assurant Solutions, which produced $143.9 million of
net operating income, extended service contracts,
international expansion and preneed insurance continue
to be compelling growth opportunities. Assurant Health
delivered $151.7 million of net operating income in
2007, fueled by our concentration on individual medical,
while Assurant Employee Benets posted $87.0 million
in net operating income, driven by increased traction
in the small case (fewer than 500 lives) employee
benets market. Moving forward, Assurant will need to
continue executing on these opportunities and identifying
additional, protable growth platforms that t within
our specialty strategy. Each business can point to
signicant accomplishments, progress and potential in
2007—in spite of some challenging market conditions.
Assurant Specialty Property
Assurant Specialty Property had a phenomenal year
on both the top and bottom lines, delivering record
net earned premiums and excellent protability.
As previously mentioned, net operating income was
$379.2 million—up a remarkable 57%. Investment
income for the business also increased 35% year over
year. These results were driven primarily by continued
organic growth in creditor-placed homeowners
insurance. Overall, the business experienced a 39%
increase in net earned premiums to $1.68 billion for
the year. In addition to excellent growth in creditor-
placed homeowners insurance, Specialty Property also
beneted from exceptionally mild weather, excellent
combined ratios and our ability to leverage the benets
of scale—enhanced by the acquisition of Safeco FIS,
which we completed in 2006. We also saw an increase
in the average insured value per property and improved
penetration rates in our subprime loan portfolios. By
winning new subprime loan business over the course of
the year, we helped to offset 630,000 loans lost through
industry consolidation. Our catastrophe losses from
the California wildres totaled $22.2 million after tax,
net of reinsurance.
For Assurant Specialty Property, the challenge in 2008 will
be maintaining momentum. We have reason to believe we
will continue to be successful. We have built a leadership
position in the creditor-placed homeowners market and
have grown our portfolio of loans tracked from 22 million
in 2004 to over 30 million in 2007. We are aligned with
market leaders, which should enable us to benet from
potential future consolidations in the industry. Moreover,
our geographic spread of risk has remained favorable, and
we will continue to manage our position actively.
The mix of our businesses and their contributions toward net operating income
will change over time—it is an expected characteristic and a unique strength
of our diversified strategy. The effectiveness of our model is reflected in the
year-over-year growth of Assurant as a whole, which has experienced 26%
compound annual growth rate in net operating income since 2004.