Assurant 2013 Annual Report Download - page 64

ASSURANT, INC. – 2013 Form 10-K52
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Affordable Care Act
Some provisions of the Affordable Care Act have taken
effect already, and other provisions will become effective
at various dates before the end of 2014. 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 care industry could materially reduce the
profi tability of certain of our businesses or render them
unprofi table” in this report.
Year Ended December 31, 2013 Compared
to the Year Ended December 31, 2012
Net Income
Segment net income decreased $46,143, or 89%, to $5,857
for Twelve Months 2013 from $52,000 for Twelve Months 2012.
The decrease was primarily attributable to a higher provision
for income taxes in connection with the Affordable Care Act
due to a change in estimated non-deductible compensation
expenses, including a $10,205 tax liability increase, and a
decrease in net earned premiums. In addition, Twelve Months
2012 results included an additional $14,337 (after-tax) of
investment income from real estate joint venture partnerships.
Total Revenues
Total revenues decreased $37,082, or 2%, to $1,647,203
for Twelve Months 2013 from $1,684,285 for Twelve Months
2012. Net earned premiums from our individual medical
business decreased $4,737, or less than 1%, due to a decline
in individual major medical premiums, partially offset by
growth in supplemental and affordable choice products
and premium rate increases. Net earned premiums from
our small employer group business decreased $3,315, or
1%, due to a decline in renewal business, partially offset
by new sales and premium rate increases. Net investment
income decreased $27,644, primarily due to less investment
income from real estate joint venture partnerships.
Total Benefi ts, Losses and Expenses
Total benefi ts, losses and expenses increased $9,447, or
less than 1%, to $1,604,625 for Twelve Months 2013 from
$1,595,178 for Twelve Months 2012. Policyholder benefi ts
decreased $5,033, or less than 1%, while the benefi t loss
ratio stayed level at 73.9%. The decrease in policyholder
benefi ts was primarily attributable to a decline in renewal
business, partially offset by less favorable loss experience
and increasing fi rst year business. Selling, underwriting and
general expenses increased $14,480, or 3%, primarily due to
higher expenses associated with increased fi rst year sales of
individual and small employer group major medical policies.
Twelve Months 2013 also includes $4,589 of restructuring
costs primarily due to the elimination of the underwriting
functions for major medical products effective January 2014
as required by the Affordable Care Act.
Year Ended December 31, 2012 Compared
to the Year Ended December 31, 2011
Net Income
Segment net income increased $11,114 or 27% to $52,000 for
Twelve Months 2012 from $40,886 for Twelve Months 2011.
The increase was primarily attributable to $13,856 (after-
tax) of additional investment income from a real estate joint
venture partnership and lower expenses associated with
organizational and operational expense reduction initiatives.
Partially offsetting these items were policy lapses and lower
sales of new policies. Twelve Months 2011 results included a
$4,780 (after-tax) reimbursement from a pharmacy services
provider.
Total Revenues
Total revenues decreased $114,561, or 6%, to $1,684,285
for Twelve Months 2012 from $1,798,846 for Twelve Months
2011. Net earned premiums from our individual medical
business decreased $72,569, or 6%, due to a decline in
traditional major medical policies, partially offset by
increased sales of lower priced supplemental and affordable
choice products and premium rate increases. Net earned
premiums from our small employer group business decreased
$56,272, or 12%, due to lower sales, partially offset by
premium rate increases. Partially offsetting these declines
was increased net investment income of $18,397, due to
income from a real estate joint venture partnership.
Total Benefi ts, Losses and Expenses
Total benefi ts, losses and expenses decreased $136,528, or
8%, to $1,595,178 for Twelve Months 2012 from $1,731,706
for Twelve Months 2011. Policyholder benefi ts decreased
$96,952, or 8%, and the benefi t loss ratio decreased to
73.9% from 74.0%. The decrease in policyholder benefi ts
was primarily attributable to a decline in business volume,
partially offset by higher loss experience. The slight decrease
in the benefi t loss ratio refl ects a growing proportion of
business with lower loss ratios, partially offset by higher
loss experience on traditional major medical policies.
Selling, underwriting and general expenses decreased
$39,576, or 9%, primarily due to reduced employee-related
expenses, lower technology and service provider costs,
and reduced commissions due to lower sales of traditional
major medical policies.