Assurant 2012 Annual Report Download - page 51

ASSURANT, INC.2012 Form10-K 43
PARTII
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Year Ended December 31, 2012 Compared to the Year
Ended December 31, 2011
Net Income
Segment net income decreased $12,297, or 9%, to $123,753 for Twelve
Months 2012 from $136,050 for Twelve Months 2011, primarily due
to an other intangible asset impairment charge in our U.K. business
of $20,373 (after-tax) and a workforce restructuring charge of $7,724
(after-tax). Both of these items occurred in the fourth quarter of
2012. In mid-2012, persistency rates of U.K. mortgage insurance
brokers acquired in 2007 declined signi cantly following actions by an
independent underwriter of the business, resulting in the impairment
charge.  e workforce restructuring charge primarily related to our
domestic credit and European operations. Twelve Months 2012 includes
$6,362 (after-tax) of income from client related settlements. Absent
these items, net income increased $9,438 primarily due to improved
results in our International business.  e improved International
business results were mainly due to growth and improved underwriting
experience primarily in our Latin American region. Partially o setting
the improved International results was less favorable domestic service
contract underwriting experience as well as lower earnings from certain
domestic blocks of credit insurance business that are in run-o .
Total Revenues
Total revenues increased $192,787, or 6%, to $3,289,973 for Twelve
Months 2012 from $3,097,186 for Twelve Months 2011 mainly as
a result of higher net earned premiums and other considerations of
$140,813. Domestic net earned premiums increased primarily attributable
to service contract growth in the automotive and retail markets from
both new and existing clients including $17,123 related to a new
block of business assumed during Twelve Months 2012. International
service contract and credit businesses net earned premiums increased
primarily in our Latin America and European regions from both new
and existing clients. Fees and other income increased $48,868, mostly
driven by growth in our preneed business and growth in our domestic
retail and mobile service contract business, including a favorable one-
time client settlement.
Gross written premiums increased $434,467, or 12%, to $4,072,611
for Twelve Months 2012 from $3,638,144 for Twelve Months 2011.
Gross written premiums from our domestic service contract business
increased $328,972 from both new and existing clients, including
$41,117 related to a new assumed block of business and a one-time
bene t of $33,200 resulting from the correction of a client reporting
error.  is correction had no impact on net income since an o setting
deferred commission amount was recorded. Gross written premiums
from our international service contract business increased $99,577
due to growth in Europe and Latin America from new and existing
clients and products.
Preneed face sales increased $104,042, to $863,734 for Twelve Months
2012 from $759,692 for Twelve Months 2011.  is increase was mostly
attributable to growth from our exclusive distribution partnership with
Service Corporation International (“SCI”), the largest funeral provider
in North America.  is exclusive distribution partnership is e ective
through September29, 2014.
Total Benefi ts, Losses and Expenses
Total bene ts, losses and expenses increased $223,185, or 8%, to
$3,108,119 for Twelve Months 2012 from $2,884,934 for Twelve
Months 2011. Policyholder bene ts declined $7,121 primarily from
improved loss experience in our international business and from a decrease
associated with run-o lines in our preneed and domestic businesses,
partially o set by higher policyholder bene ts in our domestic service
contract business related to business growth and $14,617 related to
a new assumed block of business. Selling, underwriting and general
expenses increased $230,306. Commissions, taxes, licenses and fees, of
which amortization of DAC is a component, increased $159,623 due
to higher earnings in our domestic service contract and international
businesses. General expenses increased $70,683 primarily due to an
other intangible asset impairment charge of $26,458 and severance
expenses of $11,731. Additionally, costs also increased as a result of
supporting the growth of our international businesses, primarily in
Latin America.
Year Ended December 31, 2011 Compared to the Year
Ended December 31, 2010
Net Income
Segment net income increased $34,517, or 34%, to $136,050 for
Twelve Months 2011 from $101,533 for Twelve Months 2010. Twelve
Months 2010 included an intangible asset impairment charge of
$30,948 (after-tax) related to a client noti cation of non-renewal of
a block of domestic service contract business. Absent this item, net
income increased $3,569, or 3%, as a result of improved underwriting
experience across our international and domestic service contract
businesses. Partially o setting the improvement was a $4,875 (after-tax)
increase to policyholder bene ts for unreported claims in our preneed
business during fourth quarter 2011 as well as continued reduced
earnings from certain domestic blocks of business that are in run-o .
Total Revenues
Total revenues decreased $12,462, or less than 1%, to $3,097,186
for Twelve Months 2011 from $3,109,648 for Twelve Months 2010.
 e decrease was mainly the result of lower net earned premiums of
$45,892, which was primarily attributable to the continued run-o of
certain domestic service contract business from former clients that are
no longer in business (mainly Circuit City) and the continued run-
o of our domestic credit insurance business. Net earned premiums
for full year 2011 declined approximately $160,000 from these two
sources compared with 2010.
Partially o setting these decreases were new domestic service contract
business growth and increases in both our international credit and service
contract businesses, which also bene ted from the favorable impact
of foreign exchange rates. Fees and other income increased $37,152
mainly as a result of increases in our preneed business.
Gross written premiums increased $441,497, or 14%, to $3,638,144
for Twelve Months 2011 from $3,196,647 for Twelve Months 2010.
Gross written premiums from our domestic service contract business
increased $277,182 primarily due to the 2010 addition of a large new
client and an increase in automobile vehicle service contract sales.
Our international service contract business increased $99,292 and
our international credit business increased $44,608, primarily due to