Assurant 2014 Annual Report Download - page 19

ASSURANT, INC. – 2014 Form 10-K 5
PART I
ITEM 1 Business
Products and Services
Assurant Solutions targets profi table growth in three key
product areas: domestic and international extended service
contracts (“ESCs”) and warranties, including mobile device
protection; preneed life insurance; and international credit
insurance.
ESC and Warranties
Through partnerships with leading retailers, mobile carriers,
original equipment manufacturers (“OEMs”) and direct
to consumer distribution, we underwrite and provide
administrative services for ESCs and warranties. These
contracts provide consumers with coverage on mobile devices,
personal computers, consumer electronics, appliances,
automobiles and recreational vehicles, protecting them
from certain covered losses. We pay the cost of repairing
or replacing customers’ property in the event of mechanical
breakdown, accidental damage, and casualty losses such as
theft, fi re, and water damage. Our strategy is to provide
service to our clients that addresses all aspects of the
ESC or warranty, including program design and marketing
strategy. We also provide administration, claims handling,
logistics, and customer service. We believe that we maintain
a differentiated position in this marketplace as a provider of
both the required administrative infrastructure and insurance
underwriting capabilities.
Preneed Life Insurance
Preneed life insurance allows individuals to prepay for a
funeral in a single payment or in multiple payments over a
fi xed number of years. The insurance policy proceeds are
used to address funeral costs at death. These products are
only sold in the U.S. and Canada and are generally structured
as whole life insurance policies in the U.S. and annuity
products in Canada.
Credit Insurance
Our credit insurance products offer protection from life events
and uncertainties that arise in purchasing and borrowing
transactions. Credit insurance programs generally offer
consumers the option to protect a credit card or installment
loan balance or payments in the event of death, involuntary
unemployment or disability, and are generally available to all
consumers without the underwriting restrictions that apply
to term life insurance.
Regulatory changes have reduced the demand for credit
insurance sold through banks in the U.S. Consequently, we
continue to experience a reduction in credit insurance domestic
gross written premiums, a trend we expect to continue.
Marketing and Distribution
Assurant Solutions focuses on establishing strong, long-term
relationships with leading distributors of its products and
services. We partner with some of the largest consumer
electronics and appliance retailers and OEMs to market
our ESC and warranty products. In our mobile business, we
partner with leading mobile service providers, retailers
and banks and market our mobile protection insurance and
related services through them. In our preneed life insurance
business, we have an exclusive relationship with Services
Corporation International (“SCI”), the largest funeral provider
in North America.
Several of our distribution agreements are exclusive. Typically
these agreements have terms of one to 10 years and allow
us to integrate our administrative systems with those of
our clients.
In addition to the domestic market, we operate in Canada,
the United Kingdom (“U.K.”), Ireland, Argentina, Brazil,
Puerto Rico, Chile, Germany, Spain, Italy, France, Mexico,
China, Colombia, Peru, Ecuador and South Korea. In these
markets, we primarily sell consumer service contracts,
including mobile device protection, and credit insurance
products through agreements with fi nancial institutions,
retailers and mobile service providers. Systems, training,
computer hardware and our overall market development
approach are customized to fi t the particular needs of each
targeted international market.
In October 2014, we acquired CWI Group (“CWI”), a market-
leading mobile administrator in France. We believe this
acquisition will strengthen Assurant Solutions’ market-
leading capabilities in mobile device protection and expand
its distribution into independent retailers and the fi nancial
services affi nity market in Europe.
In 2013, we acquired Lifestyle Services Group (“LSG”), a mobile
phone insurance provider based in the U.K. This acquisition
has allowed us to develop and expand our European mobile
business platform. In addition, we made an investment in
Iké Asistencia (“Iké”), a services assistance business with
signifi cant business in Mexico and other countries in Latin
America. Iké primarily provides roadside assistance, home
assistance, travel, mobile and other protection products. We
expect this investment to allow us to expand our customer
base and strengthen our presence in Latin America.
Underwriting and Risk Management
We write a significant portion of our contracts on a
retrospective commission basis. This allows us to adjust
commissions based on claims experience. Under these
commission arrangements, the compensation of our clients
is based upon the actual losses incurred compared to premiums
earned after a specifi ed net allowance to us. We believe that
these arrangements better align our clients’ interests with
ours and help us to better manage risk exposure.
Profi ts from our preneed life insurance programs are generally
earned from interest rate spreads – the difference between
the death benefi t growth rates on underlying policies and the
investment returns generated on the assets we hold related
to those policies. To manage these spreads, we regularly
adjust pricing to refl ect changes in new money yields.