Assurant 2010 Annual Report Download - page 47

41ASSURANT, INC.  2010 Form 10K
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Year Ended December 31, 2010 Compared to the Year
Ended December 31, 2009
Net Income
Segment net income decreased $16,846, or 14%, to $103,206 for
Twelve Months 2010 from $120,052 for Twelve Months 2009 primarily
due to an intangible asset impairment charge of $30,948 (after-tax)
related to a fourth quarter 2010 client notifi cation of non-renewal of
a block of domestic service contract business eff ective June 1, 2011.
Absent this item, net income increased $14,102, or 12%, as a result
of improved underwriting results in our international and preneed
businesses. International results improved primarily due to favorable loss
experience in our U.K. credit insurance business and growth in Latin
America.  ese items were partially off set by decreased underwriting
results primarily attributable to the run-off of certain lines of business,
and a $6,048 (after-tax) change in the value of our consumer price
index caps (derivative instruments that protect against infl ation risk in
our preneed products). Additionally, Twelve Months 2009 net income
included a $10,800 (after-tax) restructuring charge.
Total Revenues
Total revenues decreased $169,172, or 5%, to $3,109,648 for Twelve
Months 2010 from $3,278,820 for Twelve Months 2009.  e decrease
was the result of lower net earned premiums of $186,742, which was
primarily attributable to the continued run-off of: certain domestic
extended service contract business as earnings from former clients that
are no longer in business; preneed policies sold before January 1, 2009;
and domestic credit insurance business.
Partially off setting these decreases was the addition of new domestic
service contract business clients and growth in both our international
credit and service contracts businesses, which also benefi ted from
the favorable impact of foreign exchange rates. We expect net earned
premiums in 2011 to decline $170,000 due to the run-off of domestic
credit insurance business and former large extended services contract
clients that are no longer in business.
Fees and other income improved as a result of increases in preneed
business, partially off set by mark-to-market losses associated with our
consumer price index caps. Net investment income primarily increased
due to the favorable impact of foreign exchange rates.
Gross written premiums increased $232,578, or 8%, to $3,196,647
for Twelve Months 2010 from $2,964,069 for Twelve Months 2009.
Gross written premiums from our domestic service contract business
increased $180,753 due to the addition of new clients and an increase
in automobile vehicle service contracts as automobile sales increased
and from premiums reported by certain clients in a timelier manner
than in the past.  is had no eff ect on net earned premiums. In
addition, consistent with our international expansion strategy, our
international credit business increased $125,653 due to growth across
several countries from both new and existing clients and from the
favorable impact of foreign exchange rates. Gross written premiums
from our international service contract business increased $60,418,
primarily due to favorable foreign exchange rates and growth from
existing clients, partially off set by lower premiums in Denmark due
to our decision to exit that market in 2009. Gross written premiums
from our domestic credit insurance business decreased $103,707,
due to the continued runoff of this product line. Other domestic
gross written premiums decreased $26,379 mainly due to a one-time
campaign with Ford Motor Company conducted and completed in
Second Quarter 2009.
Preneed face sales increased $222,518 primarily due to increased
consumer buying in advance of a less favorable tax rate change in certain
Canadian provinces, as well as growth from our exclusive distribution
partnership with Services Corporation International (“SCI”) the largest
funeral provider in North America, and increased sales initiatives.
Total Benefi ts, Losses and Expenses
Total benefi ts, losses and expenses decreased $142,484, or 5%, to
$2,942,015 for Twelve Months 2010 from $3,084,499 for Twelve
Months 2009. Policyholder benefi ts decreased $139,764 primarily
due to improved loss experience in our U.K. credit business and in our
domestic service contract business from existing and run-off clients,
the run-off of preneed policies sold before January 1, 2009, and the
continued run-off of our domestic credit business.
Selling, underwriting and general expenses decreased $2,720.
Commissions, taxes, licenses and fees, of which amortization of DAC
is a component, decreased $42,585 as commission expense related to
our domestic service contract business declined due to lower net earned
premiums, partially off set by increased commission expense in our
international business due to higher net earned premiums in that business
coupled with the unfavorable impact of foreign exchange rates. General
expenses increased $39,865 primarily due to the above-mentioned
$47,612 (pre-tax) intangible asset impairment charge, the amortization
of previously capitalized upfront client commission payments, as we
continue to grow our international business and distribution channels,
and the unfavorable impact of foreign exchange rates. Partially off setting
these increases was cost savings realized in Twelve Months 2010 as a
result of a restructuring in Twelve Months 2009.  is restructuring
added $16,500 to expenses in Twelve Months 2009.
Year Ended December 31, 2009 Compared to the Year
Ended December 31, 2008
Net Income
Segment net income increased $7,869, or 7%, to $120,052 for Twelve
Months 2009 from $112,183 for Twelve Months 2008.  e increase
was primarily the result of favorable underwriting results in our
domestic service contract business from existing and run-off clients.
Partially off setting this increase was unfavorable loss experience in
our U.K. credit insurance business primarily resulting from higher
unemployment rates in the U.K. compared with the prior year, a
$19,101 (after-tax) decrease in net investment income and $10,800
(after-tax) of restructuring charges in our domestic and international
businesses. Twelve Months 2008 included charges of $24,700
(after-tax) related to our exit from the Denmark market, client
bankruptcies, and a loss on a discontinued product in Brazil which
were partially off set by $9,900 (after-tax) of income from client related
settlements.
Total Revenues
Total revenues decreased $137,710, or 4%, to $3,278,820 for Twelve
Months 2009 from $3,416,530 for Twelve Months 2008.  e decrease
is mainly attributable to reduced net earned premiums and other
considerations of $142,366, primarily resulting from the application of
universal life insurance accounting guidance, in our Preneed business.
Absent this item, net earned premiums increased $35,000, or 1%,
due to our domestic and international service contract business from