Assurant 2012 Annual Report Download - page 3

1ASSURANT - 2012 Annual Report
Robert B. Pollock
President and Chief Executive Offi cer, Assurant
A Message to O ur Shareholders
Assurant’s net earned premiums, fees and other income were
$7.7 billion in 2012, a two percent increase from the previous
year. Net operating income(1) increased to $449.3 million
despite signifi cant catastrophe losses. Operating return on
equity, excluding Accumulated Other Comprehensive Income
(AOCI)(2) was 10.4 percent. Our book value per diluted
share, excluding AOCI(3), was up 13.8 percent year-over-year
refl ecting strong earnings and continued share repurchases.
Our strong capital position, risk management expertise and
ability to generate free cash fl ow added to our solid fi nancial
foundation. We returned $472 million to shareholders
through stock repurchases and common dividends. In fact,
we have increased our dividend for nine consecutive years —
every year since our initial public offering in 2004.
Overall, we made great progress in 2012. Looking ahead, we
see many opportunities to grow profi tability. In doing so, we
will search for ways to compete differently – a cornerstone
of our specialty strategy.
Consumer markets are changing quickly. Our profi table
growth strategy outlines both opportunities we will consider
as well as the ways we will approach new, attractive
markets. Five trends are driving our actions and investments
for the future:
• Dramatic expansion of mobile devices in everything the
consumer does
• Shifts in consumer behavior toward rental versus ownership
of housing in the United States
• Expectations of affordable access to health care insurance
that can be customized to meet consumers’ needs
• Small businesses offering more voluntary benefi ts so that
their employees can choose coverage best suited for their
circumstances
• Growth beyond the U.S. in an emerging consumer middle-
class, especially in Latin America.
We will build on our momentum of 2012 and strive to achieve
steady improvements in all of our Assurant businesses in the
year to come.
ADAPTING TO AN EVOLVING LANDSCAPE
During 2012, regulators and policymakers continued to
evolve rules affecting the insurance and fi nancial services
sectors. At both the state and federal levels, we expanded
our outreach and engagement to help shape better outcomes
for our customers and clients, as well as our company and
shareholders.
Many aspects of the Patient Protection and Affordable Care
Act are still being defi ned, even as the industry responds to
shifting consumer needs and prepares for health insurance
exchanges in January 2014. Several reforms have been
enacted to improve the housing and mortgage markets
in the U.S. We have taken the opportunity to refi ne and
improve our processes and to offer new, more fl exible
products for the future. Economic pressures, especially in
Europe, mandate operational rigor and restraint as markets
fi nd their footing and stabilize. All of these factors and
more reinforce the importance of innovation and agility as
we further reduce operating costs, realign resources and
leverage shared effi ciencies across the Assurant enterprise.
2012 RESULTS FROM OPERATIONS
Assurant Solutions
Achieving a 14 percent operating return on equity by 2014
is the focus at Assurant Solutions, where we took many
steps in 2012 towards achievement of that goal. For the
year, net operating income was down signifi cantly due to
the impairment of certain intangible assets and charges
for workforce restructuring to address challenges primarily
affecting our domestic credit and European operations.
Net earned premiums, fees and other income improved
year-over-year in several areas targeted for growth. Our
pre-funded funeral insurance business remains an important
contributor to Assurant Solutions’ overall results with
sizable increases both in fee income and sales. In 2012,
service contract premiums in the U.S. improved as we
benefi ted from the continuing rebound in the automotive
sector. International credit and service contract premiums
also increased during the year, predominantly in Latin
America. We now service mobile customers in 16 countries,
a refl ection of our expanded capabilities, global footprint
and phased rollout of our partnership with Telefónica.
By focusing on expense management and profi table growth,
both in the U.S. and internationally, we expect modest
earnings improvements in the year ahead and achievement
of our longer-term ROE target in 2014.
In 2012, our Assurant team accelerated action in key specialty areas
critical to long-term, pro table growth. We did so while prudently
managing our capital for shareholders and serving our customers
withcompassion and responsiveness.
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