New York-based specialty insurer Assurant, Inc. said it is exploring strategic alternatives for its employee benefits and health business segments, including the sale of each business.
If it can’t sell its health business segment before too long, the company said it plans to substantially complete its exit from the health insurance market in 2016.
Instead the company will focus its resources on its niche housing and lifestyle protection offerings. The company said it will broaden the products and services from its Assurant Specialty Property and Assurant Solutions business segments including offerings such as mobile and other extended service contracts, lender-placed insurance, multi-family housing, mortgage solutions, vehicle service contracts and pre-funded funeral plans.
“We have established significant momentum in our specialty housing and lifestyle protection businesses where we have developed strong competitive positions in the U.S. and select international markets. Recognizing the wide array of additional growth opportunities in these areas, we will concentrate resources where we can generate sustainable specialty returns as we pursue our aspirations of out-performance,” said Assurant President and CEO Alan B. Colberg. “The health and employee benefits business segments possess differentiated capabilities in their respective markets, but we do not believe they can meet our return targets at the pace we require. While this is a difficult decision, we believe they would be strong assets for new owners that are focused more exclusively on health care and employee benefits. During this process, Assurant remains dedicated to upholding our commitments to customers and policyholders.”
One of the companies it is looking to divest, Assurant Employee Benefits, serves more than 30,000 small and mid-sized employers, providing voluntary and employer-paid products including dental, long-term and short-term disability and life insurance. The other, Assurant Health, provides insurance coverage to nearly one million individuals, families and small employers including major medical, short-term and supplemental plans.
Proceeds from any transaction will allow Assurant to invest in areas targeted for growth and return capital to shareholders, the company said.
Assurant also announced preliminary 2015 first quarter consolidated net operating income in the range of $40 million to $50 million.
The company expects Assurant Health to report a net operating loss for the quarter in the range of $80 million to $90 million. Approximately half of the loss is attributable to a reduction in 2014 estimated recoveries from the Affordable Care Act (ACA) risk mitigation programs. The remainder reflects elevated claims on 2015 ACA policies. Absent a sale of Assurant Health, the company will begin the process this year to exit the health insurance market and will not participate in the next ACA open enrollment period beginning in November. The company’s exit will be substantially complete in 2016.
As of March 31, 2015, corporate capital stood at approximately $570 million. Excluding the company’s $250 million risk buffer, deployable capital was approximately $320 million, including proceeds from the sale of American Reliable Insurance Co.
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