Assurant Inc. has officially decided it will exit the health insurance market to focus instead on its housing and lifestyle specialty protection products. The firm has reached an agreement to sell its Assurant Health supplemental and small group health lines and the related sales channel to National General Holdings Corp.
Assurant said in April it was exploring strategic alternatives for its employee benefits and health businesses, including the possible sale of both.
Assurant said it expects to substantially complete its exit of the health insurance market by the end of 2016.
“Our decision to exit the health insurance market enables us to sharpen our focus on the housing and lifestyle markets, where we see the greatest opportunity for profitable growth. After a thorough review of alternatives for our health business, we believe the actions announced today allow us to uphold our commitments to policyholders while freeing up resources in 2016 to support our capital management strategy,” said Assurant President and CEO Alan B. Colberg in a statement.
Assurant said it is pursuing a sale of its employee benefits segment and expects that deal to conclude in the next several months. Assurant Employee Benefits provides voluntary and employer-paid products including dental, long-term and short-term disability and life insurance for 30,000 small and mid-sized employers.
Terms of the sale to National General were not disclosed.
National General Holdings Corp., a specialty personal lines insurance holding company, will acquire Assurant Health’s supplemental and small group self-funded product lines and certain other assets including a proprietary small group sales channel. Assurant Health, which has about one million customers, will continue sales of its supplemental and small group self-funded products as it finalizes the terms of the transaction with National General Holdings Corp.
At the same time, as part of the wind-down process, Assurant Health will cease sales of its individual major medical, small group fully-insured and short-term medical health insurance policies on June 15, 2015 and will not participate in open enrollment under the Affordable Care Act for 2016, according to eh announcement.
The company said it will meet all claims, benefits, provider payments and agent commission responsibilities during these transitions. There will be no changes to Assurant Health policies or benefits currently in effect. Assurant Health will be sending affected customers letters beginning the week of June 15.
Assurant said affected employees will be considered for open positions within Assurant, based on qualifications. Those unable to find another position will be offered severance, outplacement and job readiness support. The first phase of job reductions will occur this summer and affect an estimated 300 out of approximately 1,700 positions at Assurant Health.
The company estimates that total costs associated with its exit from the health insurance market will amount to $175 million to $250 million.
Proceeds from any transaction will allow Assurant to invest in areas targeted for growth and return capital to shareholders, the company has said.
Assurant reported preliminary 2015 first quarter consolidated net operating income in the range of $40 million to $50 million.
Assurant Health was expected to show a net operating loss for the quarter in the range of $80 million to $90 million..
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.
Going forward, Assurant’s focus will be on underwriting and administering specialty insurance including mobile device protection and extended service contracts through relationships with mobile carriers, electronic goods and household appliance manufacturers, retailers, financial institutions, automobile dealers, funeral homes and other entities.
Last October, Assurant bought French mobile insurance broker, CWI Group, for $71 million.
Assurant, a Fortune 500 company and a member of the S&P 500, is traded on the New York Stock Exchange under the symbol AIZ. Assurant has approximately $31 billion in assets and $10 billion in annual revenue.