Assurant 2014 Annual Report Download - page 64

50 ASSURANT, INC. – 2014 Form 10-K
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
the main driver primarily due to newly added loan portfolios
and the discontinuation of a client quota share reinsurance
agreement.
Total Benefi ts, Losses and Expenses
Total benefi ts, losses and expenses increased $165,237 or
9%, to $1,958,682 for Twelve Months 2013 from $1,793,445
for Twelve Months 2012. The loss ratio decreased 880 basis
points primarily due to lower reportable catastrophe losses
of $29,503 in Twelve Months 2013 compared to $250,206
of reportable catastrophe losses in Twelve Months 2012.
Reportable catastrophe losses include only individual
catastrophic events that generated losses in excess of $5,000,
pre-tax and net of reinsurance. The expense ratio increased
330 basis points in Twelve Months 2013 primarily due to higher
legal and regulatory expenses described above and higher
operating costs to support business growth, including costs
for the newly acquired FAS business.
Assurant Health
Overview
The table below presents information regarding Assurant Health’s segment results of operations:
For the Years Ended December 31,
2014
2013 2012
Revenues:
Net earned premiums $ 1,945,452 $ 1,581,407 $ 1,589,459
Net investment income 35,369 36,664 64,308
Fees and other income 40,016 29,132 30,518
Total revenues 2,020,837 1,647,203 1,684,285
Benefi ts, losses and expenses:
Policyholder benefi ts 1,575,633 1,169,075 1,174,108
Selling, underwriting and general expenses 495,818 435,550 421,070
Total benefi ts, losses and expenses 2,071,451 1,604,625 1,595,178
Segment income before provision for income taxes (50,614) 42,578 89,107
Provision for income taxes 13,134 36,721 37,107
SEGMENT NET (LOSS) INCOME $ (63,748) $ 5,857 $ 52,000
Net earned premiums:
Individual $ 1,544,968 $ 1,174,141 $ 1,178,878
Small employer group 400,484 407,266 410,581
TOTAL $ 1,945,452 $ 1,581,407 $ 1,589,459
Insured lives by product line:
Individual 829 780 663
Small employer group 138 127 109
TOTAL 967 907 772
Ratios:
Loss ratio(1) 81.0% 73.9% 73.9%
Expense ratio(2) 25.0% 27.0% 26.0%
Combined ratio(3) 104.3% 99.6% 98.5%
(1) The loss ratio is equal to policyholder benefits divided by net earned premiums.
(2) The expense ratio is equal to selling, underwriting and general expenses divided by net earned premiums and fees and other income.
(3) The combined ratio is equal to total benefits, losses and expenses divided by net earned premiums and fees and other income.
The Affordable Care Act
Most provisions of the Affordable Care Act have now taken
effect. Given the sweeping nature of the changes represented
by the Affordable Care Act, our results of operations and
fi nancial position could be materially adversely affected.
For more information, see Item 1A, “Risk Factors — Risk
related to our industry — Reform of the health insurance
industry could materially reduce the profi tability of certain
of our businesses or render them unprofi table” in this report.
Because all individuals now have a guaranteed right to
purchase health insurance policies, the Affordable Care
Act introduced new and signifi cant premium stabilization
programs in 2014: reinsurance, risk adjustment, and risk
corridor (together, the “3 Rs”). These programs, discussed
in further detail below, are meant to mitigate the potential
adverse impact to individual health insurers as a result
of Affordable Care Act provisions that became effective
January 1, 2014.