Assurant 2014 Annual Report Download - page 20

ASSURANT, INC. – 2014 Form 10-K6
PART I
ITEM 1 Business
Assurant Specialty Property
For the Years Ended
December 31, 2014
December 31, 2013
Net earned premiums by major product grouping:
Homeowners (lender-placed and voluntary) $ 1,743,965 $ 1,678,172
Manufactured housing (lender-placed and voluntary) 237,576 226,058
Other(1) 524,556 475,814
TOTAL $ 2,506,097 $ 2,380,044
Fees and other income $ 301,048 $ 133,135
Segment net income $ 341,757 $ 423,586
Loss ratio(2) 43.3% 37.4%
Expense ratio(3) 46.5% 42.5%
Combined ratio(4) 85.2% 77.9%
Equity(5) $ 1,264,216 $ 1,303,579
(1) Other primarily includes multi-family housing, lender-placed flood, and miscellaneous insurance products.
(2) The loss ratio is equal to policyholder benefits divided by net earned premiums.
(3) The expense ratio is equal to selling, underwriting and general expenses divided by net earned premiums and fees and other income.
(4) The combined ratio is equal to total benefits, losses and expenses divided by net earned premiums and fees and other income.
(5) Equity excludes accumulated other comprehensive income.
Products and Services
Assurant Specialty Property targets profi table growth in
lender-placed homeowners insurance, and adjacent niches
with similar characteristics, such as multi-family housing
insurance, lender-placed fl ood insurance and other property
risk management services.
Lender-placed and voluntary homeowners
insurance
The largest product line within Assurant Specialty Property
is homeowners insurance, consisting principally of fi re and
dwelling hazard insurance offered through our lender-placed
program. The lender-placed program provides collateral
protection to lenders, mortgage servicers and investors in
mortgaged properties in the event that a homeowner does not
maintain insurance on a mortgaged dwelling. Lender-placed
insurance coverage is not limited to the outstanding loan
balance; it provides structural coverage, similar to that of a
standard homeowners policy. The amount of coverage is based
on the last known insurance coverage under the prior policy
for the property, and provides replacement cost coverage on
the property and thus ensures that a home can be repaired or
rebuilt in the event of damage. It protects both the lender’s
interest and the borrower’s interest and equity. We also
provide insurance on foreclosed properties managed by our
clients. This type of insurance is Real Estate Owned (“REO”)
insurance. This market experienced signifi cant growth in prior
years as a result of the housing crisis, but has stabilized in
recent years and is expected to decline.
In the majority of cases, we use a proprietary insurance-tracking
administration system linked with the administrative systems
of our clients to monitor clients’ mortgage portfolios to verify
the existence of insurance on each mortgaged property and
identify those that are uninsured. If there is a potential lapse
in insurance coverage, we begin a process of notifi cation
and outreach to both the homeowner and the last-known
insurance carrier or agent through phone calls and written
correspondence. This process takes up to 90 days to complete.
If coverage cannot be verifi ed at the end of this process,
the lender procures a lender-placed policy for which the
homeowner is responsible for paying the related premiums.
The percentage of insurance policies placed to loans tracked
represents our placement rates. The homeowner is still
encouraged, and always maintains the option, to obtain or
renew the insurance of his or her choice.
To meet the changing needs of the lending and housing
industries, Assurant Specialty Property has worked with
regulators to introduce a next generation lender-placed
homeowners product to address some of the unanticipated
issues that developed during the housing crisis. This product
combines fl exibility and best practices to address the concerns
of various parties. The product contains expanded geographic
ratings within each state to further differentiate rates for
properties more exposed to catastrophes from those where
the risk is lower, added premium rating fl exibility from
deductible options that can be modifi ed based on factors such
as coverage amount and delinquency status, and continued
enhancements to our already extensive customer notifi cation
process to make it more clear to borrowers when they have
lender-placed insurance.
Lender-placed and voluntary manufactured
housing insurance
Manufactured housing insurance is offered on a lender-placed
and voluntary basis. Lender-placed insurance is issued after an
insurance tracking process similar to that described above. The
tracking is performed by Assurant Specialty Property using a
proprietary insurance tracking administration system, or by the
lenders themselves. A number of manufactured housing retailers
in the U.S. use our proprietary premium rating technology to
assist them in selling property coverage at the point of sale.