Assurant, Inc. · NYSE:AIZ
Assurant — Investor Day (March 2014)
55 slides from Assurant's investor day presentation, Mar 11, 2014
Slide 1: Investor Day 2014
March 11, 2014 Francesca L. Luthi SVP, Investor Relations • Assurant, Inc. Investor Day 2014 1
Slide 2: Agenda and Safe Harbor Statement
Agenda 8:30 am Registration & Breakfast 9:00 am Welcome & Introduction FRANCESCA L. LUTHI SVP, Investor Relations • Assurant, Inc. Presentations by Assurant Management ROBERT B. POLLOCK President & CEO • Assurant, Inc. ALAN B. COLBERG EVP, Marketing & Business Development • Assurant, Inc. MICHAEL J.
Slide 3: Our Aspirations
Robert B. Pollock President & CEO • Assurant, Inc. Investor Day 2014 Our Aspirations • For Shareholders: Top-quartile total shareholder returns • For Customers: Protect what matters most to them • For Employees: Best place to learn and work Investor Day 2014 6 3
Slide 4: Shareholders: How We've Done
Shareholders: How We’ve Done 3-Year 5-Year Assurant IPO-2013 Total Shareholder Total Shareholder Total Shareholder Return Return Return (12/31/10 – 12/31/13) (12/31/08 – 12/31/13) (2/4/04 – 12/31/13) Assurant 83% 145% 251% A.M. Best 59% 118% 103% Insurance Index (1) S&P 500 Index 57% 128% 101% Sourc
Slide 5: Our Strategy: Why It Works; Strategic Priorities
Our Strategy: Why It Works • Operate in attractive niche markets • Intentionally different than our competitors • Solutions = All value chain elements • Specialty Property = Leverage partnerships + technology • Employee Benefits = Enrollment + distribution • Health = Distribution + risk management +
Slide 6: Aligning Portfolio With Best Opportunities
Aligning Portfolio With Best Opportunities Our Current View Operating Non-Growth Core Businesses Targeted Growth Segment Businesses Solutions Service Contracts Mobile Domestic & European Credit Insurance Preneed Latin America Run-Off Domestic Retail Specialty Property Lender-Placed Insurance Multi-F
Slide 7: Maintaining Our Specialty Economics
Alan B. Colberg EVP, Marketing & Business Development • Assurant, Inc. Investor Day 2014 Maintaining Our Specialty Economics Requires Proactive Adaptation to Changing External Environment Shorter New Product Life Distribution Cycles Channels Different More Competitors Regulation Investor Day 2014 14
Slide 8: Macro-Trends Shaping Our Strategy
Macro-Trends Shaping Our Strategy Mobile Consumer Demand for Employers Greater devices preference to more health sponsoring consumer transforming share goods coverage more purchasing consumer and rent choice and employee- power in Latin behavior housing affordability choice American globally volunta
Slide 9: Understanding the Assurant Consumer
Understanding the Assurant Consumer Profile of Typical Purchasing Assurant Consumer Insights Product Middle income adoption rates vary widely Uses products Certain to manage products monthly naturally go expenses together Know Wants to avoid consumers who “surprises” are best prospects Investor Day
Slide 10: Disciplined Innovation Process; Multi-Family Housing
Disciplined Innovation Process Understanding Consumer Behavior Determine Distribution Alternatives Identify Potential Business Opportunities Disciplined Evaluation Multi-Phase Development Investor Day 2014 19 Innovation in Action: Multi-Family Housing Assurant Renters Insurance Top National Property
Slide 11: Achieve Top-Quartile Total Shareholder Returns
Achieve Top-Quartile Total Shareholder Returns Adapt Strengthen Grow Investor Day 2014 21 Michael J. Peninger EVP & CFO • Assurant, Inc. Investor Day 2014 11
Slide 12: Executing Assurant's Strategy; Key Metrics
Executing Assurant’s Strategy Adapt Strengthen Grow • Meet expanding • Enhance specialty • Grow revenue in consumer needs by advantage in each excess of U.S. GDP evolving our niche business portfolio • Generate more • Develop or acquire earnings over time • Provide more new capabilities to with dive
Slide 13: Generating Strong Operating Cash Flows
Generating Strong Operating Cash Flows $5.3B(1) in Cash Generated from 2004-2013 (In Millions) $1,000 900 $819 800 700 $656 600 $548 $558 $513 $520 $538 $510 500 400 $394 300 $242 200 100 $0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (1) Net of $776M used for interest and other corporate expe
Slide 14: Average Operating ROE; Revenue Growth Lagging Peers
Average Operating ROE Near Top-Quartile Average Operating ROE ex. AOCI(1) 16.0% 14.0% 13.5% 12.0% 13.0% 11.9% 10.9% 11.3% 10.0% 10.6% 10.3% 9.9% 8.0% 9.1% 6.0% 4.0% 2.0% 0.0% 3 Years 5 Years 10 Years A.M. Best Insurance A.M. Best Insurance Index AIZ Index Median(2) Top-Quartile Threshold (2) Note: F
Slide 15: Value Creation for Shareholders
Value Creation for Shareholders Annualized Total Shareholder Return (CAGR)(1) 30.0% 25.0% 23.9% 22.3% 22.6% 20.0% 19.6% 15.0% 16.7% 16.9% 13.4% 10.0% 10.3% 7.4% 5.0% 0.0% 3 Years 5 Years 10 Years A.M. Best Insurance A.M. Best Insurance Index AIZ Index Median (2) Top-Quartile Threshold (2) Note: For
Slide 16: Business Units Focused on Profitable Growth
Business Units Focused on Profitable Growth Segment Operating ROE Long-Term Sensitivity Benchmark Profitability Goals (3-5 Years) Solutions 14%+ 10%+ average annual growth in Product and client mix net operating income Investment return Maintain returns in preneed Specialty 20% Insurance combined ra
Slide 17: The Result; Drivers of Shareholder Value
The Result • More diversified mix of earnings • 10-12% Operating ROE • Book Value per Share increases driven by capital management and Net Operating Income growth Investor Day 2014 33 Drivers of Shareholder Value Portfolio alignment to focus on best opportunities + Innovation to maintain competitive
Slide 18: Employee Benefits' Purpose
John S. Roberts President & CEO • Assurant Employee Benefits Investor Day 2014 Employee Benefits’ Purpose • Provide choice to employees and predictable costs for employers • Spectrum of employer- funded to employee- funded options • Benefits communication To Help Employers Enhance and administration
Slide 19: Specialty Approach to Voluntary; Core Capabilities
Specialty Approach to Voluntary Assurant Employee Benefits’ Voluntary Sales Grew 3X Market Rate(1) 2009-2012 Market appears crowded on surface with many players Even fewer group A select few carriers have the offer ability to meet voluntary customer needs Group Ancillary Marketplace Voluntary Focus
Slide 20: Employee Benefits' Strategic Priorities
Employee Benefits’ Strategic Priorities Long-Term Goal: 12-15% Operating ROE Adapt Strengthen Grow • Make voluntary • Lower expense • Voluntary premium benefits an easy structure to grow 10%+ choice for employers • Shift to shorter • Pre-tax margin of • Build infrastructure duration products 8-9% to
Slide 21: Assurant Dental PPO Network; Broker Engagement
Assurant Dental Is #1 National PPO Network #1 Dental Network Feeds AEB’s Lead Voluntary Product Line The largest national PPO network Unique Network Providers combined with the strength of Assurant (In Thousands) 100 108K+ Dental translates into sales growth. Unique Providers 80 60 More consumers us
Slide 22: Private Exchanges Create Opportunity
Private Exchanges Create Opportunity Employee Benefits’ Exchange Participation New Distribution Through Private 2014 2015+ Exchanges Public Strategic decision to not • Decision support Exchanges participate in 2014/2015 (FFE or State) • Enrollment and Yes Yes administration Private technology 4+ 4+
Slide 23: Reducing Expenses for Stronger Returns
Reducing Expenses to Help Produce Stronger Returns Growing Premiums and Fee Income while Bending the Cost Curve • e-Delivery and (In Millions; Not Drawn to Scale) procurement $1,300 $300 Net Earned Premiums & Fee Income $1,200 • Streamline workforce $275 General Expenses $1,100 • Retire legacy syste
Slide 24: Growth with Specialty Returns
Growth with Specialty Returns Long-Term Goal: 12-15% Operating ROE • Invest in targeted and core growth areas • Leverage deeper, richer consumer insights for stronger customer and consumer connections • Establish position in key private exchanges for long- term diversification and growth • Intensify
Slide 25: Health's Purpose and Core Capabilities
Health’s Purpose • Provide affordable health insurance options for individuals and small groups • Help customers better manage their health care dollars • Offer traditional major medical and flexible To Serve Evolving Needs of coverage options Consumers Investor Day 2014 49 Health’s Core Capabilitie
Slide 26: Health's Product Mix and Strategic Priorities
Evolving Product Mix to Serve Targeted Consumers Traditional Major Assurant Health Supplemental Small Group Medical Plans Access® Self-Funded • Essential health • Affordable • Additional • Tailored major and other access; network protection not medical small benefits for discounts covered by group c
Slide 27: Insights from First ACA Open Enrollment
Insights from First Open Enrollment under Affordable Care Act $319 Million in 2013 Q4 Sales 41% 32% 12% 15% Bronze Silver Gold Platinum Choice Matters: Broad Distribution Counts: • Consumers purchasing wide range • No one channel accounted for more than of plans 30% of sales • Broad network access i
Slide 28: Expanding Distribution; Premiums and Expense Discipline
Expanding Diverse Distribution to Accelerate Growth New Distribution Partners Total 2013 Annualized Issued • HealthMarkets Premium: $756 Million • 3,000 agents in 50 states Direct-to-Consumer Expansion • Second service center and additional agents • Digital lead generation investments Broad Support
Slide 29: ACA Downside Protection; Path to Attractive Returns
Affordable Care Act Downside Protection Industry-Funded Risk Mitigation Programs Programs Who Participates What Temporary (2014-2016) Reinsurance Non-grandfathered individual Plans reimbursed for high-cost medical plans enrollees Risk Corridors Qualified health plans sold on Risk sharing with HHS ex
Slide 30: Profitable Growth with Specialty Returns
Profitable Growth with Specialty Returns Long-Term Goal: 15-20% Operating ROE • Focus on traditional major medical near-term, address affordability needs long term • Capture share as market expands • Expand distribution to provide customer choice • Maintain expense discipline for profitable growth a
Slide 31: Specialty Property's Purpose and Core Capabilities
Specialty Property’s Purpose • Protect what matters most to them — homes and personal property • Provide quality service • Deliver convenient and effective risk management solutions To Help Clients and Customers Investor Day 2014 61 Specialty Property’s Core Capabilities Operational Excellence Trust
Slide 32: Specialty Property's Strategic Priorities; Lender-Placed Leadership
Specialty Property’s Strategic Priorities Long-Term Goal: 20% Operating ROE Adapt Strengthen Grow • New lender-placed • Ongoing expense • Expand market product addresses discipline share in multi-family market evolution housing • Build on leadership • Transform lender- capabilities to enhance • Fee
Slide 33: US Housing Market Changes; Placement Rates Normalizing
More Changes on US Housing Market Horizon Foreclosure Inventory Down 33% Since June 2012 Foreclosure Inventory vs. Long-Term Average(1) 5.0% 4.5% 4.0% 3.5% Foreclosure Inventory % Foreclosure 3.0% Inventory % of All Loans 2.5% Of All Loans 2.0% Foreclosure Inventory Avg. 1.5% Pre-Financial Crisis 1.
Slide 34: View of Lender-Placed Insurance Evolved Since 2011
View of Lender-Placed Insurance Evolved Since 2011 Key Metrics Forward View Forward View Presented March 2011 Presented March 2014 Lender-Placed Revenue Drivers Average Placement Rate ~1.6–1.8% ≈1.8–2.1% ~8-9% decrease Rate Changes(1) Modest decreases from 2013 Average Insured Value ≈$155-165K ≈$170
Slide 35: Operational Excellence; Targeted Growth Areas
Maintaining Operational Excellence in Lender-Placed Insurance • As mortgage servicing market evolves, opportunities exist to strengthen our competitive advantage • Launched multi-year strategic program to lower expenses while increasing superior quality and service • Key initiatives include: • Enhan
Slide 36: Multi-Family Housing Growth; Mortgage Value Chain
Continued Growth in Multi-Family Housing Net Earned Premiums & Fee Income Drivers of Multi-Family Growth: 2011-2013 • Favorable demographic and $200M household formation trends $190M • More property managers mandating GR coverage CA % 29 • Consumer-focused product enhancements: Mobile sales site, $1
Slide 37: Field Asset Services; International Growth
Field Asset Services Strategic Value of Transaction Expected Financial Performance • Acquisition of proven capabilities • $80 million of annual fee income and technological platforms in 2014 • High-quality vendor network in • Double-digit revenue growth place through increased market share • Opportu
Slide 38: Strong Financial Performance and Disciplined Growth
Strong Financial Performance and Disciplined Growth Long-Term Goal: 20% Operating ROE • Expand targeted growth areas • Optimize core lender-placed business • Efficiently manage capital • Deliver exceptional client and customer service Investor Day 2014 75 S. Craig Lemasters President & CEO • Assuran
Slide 39: Solutions' Purpose and Core Capabilities
Solutions’ Purpose • Offer affordable protection plans to keep life running smoothly and provide peace of mind To Help Customers Protect What Matters Most to Them Investor Day 2014 77 Solutions’ Core Capabilities Customer-Focused • Consumer-driven product development • Delivering superior customer e
Slide 40: Path Towards Improved Profitability
Path Towards Improved Profitability Long-Term Goal: 10%+ Average Annual Growth in Net Operating Income 2013 2014 Long-Term • Strengthened • $50 million of net operating income in • Expand profitable mobile position Q4 2014 growth in mobile and with new Latin America programs • Domestic: Improve mobi
Slide 41: Strengthening Core Businesses; Multi-Channel Distribution
Strengthening Our Core Businesses Preneed Service Contracts • Continue to grow through • Increase product attachment SCI relationship rates through product design and targeted marketing • Capitalize on baby boomers entering target market • Improve customer retention through tailored offerings • New
Slide 42: End-to-End Mobile Capabilities; Consumer Reliance on Mobile
End-to-End Mobile Capabilities Provide Competitive Advantage Integrated Structure Ensures Superior Experience for Customers and Multiple Profit Pools Proven History of Innovation Product Development Insurance Device Management • Consumer • Underwriting • Repair Insights • Reinsurance • Inventory • R
Slide 43: New Products and Programs; International Profitability
New Products and Programs to Drive Profitability Improvement Select 2013 Program Launches Investor Day 2014 85 Improve Profitability in International Businesses Driving International Combined Ratio Toward Long-Term Target of 95% International Combined Ratio (1) (1) International combined ratio exclu
Slide 44: Mobile Platform in Europe; Product Suite in Latin America
Create a Profitable Mobile Platform in Europe • #1 provider of mobile protection services in the U.K. • Capture expense synergies • Expand distribution: • Bank channel • Carriers Investor Day 2014 87 Expand Product Suite to Capture Market Share in Latin America Net Earned Premiums & Fee Income • Est
Slide 45: Sustainable Profitable Growth
Sustainable Profitable Growth Long-Term Goal: 10%+ Average Annual Growth in Net Operating Income Adapt Strengthen Grow • Consumer insights • Expand distribution • Expand mobile to tailor products channels in core device market share and services warranty business • Profitable growth in • Manage non-
Slide 46: Capital Management; Strong Operating Cash Flows
Capital Management Formula for Long-Term Value Creation Strong Operating Cash Flows + Disciplined Capital Management = Increase in Shareholder Value Investor Day 2014 91 Strong Operating Cash Flows Provides Financial Flexibility $5.3B(1) in Cash Generated from 2004-2013 (In Millions) $1,000 900 $819
Slide 47: Disciplined Capital Management; Deployment Decisions
Disciplined Capital Management Balancing Risk and Return Capitalize Fund Return Maintain Operating Profitable Capital to Risk Buffer Segments Growth Shareholders Organic Dividends Share Acquisitions Repurchases Investor Day 2014 93 Capital Deployment Decision Making A Consistent Evaluation Framework
Slide 48: Share Repurchase Activity 2010-2013
Share Repurchase Activity 2010-2013 Well Above Target Return 47.9 Million Shares at $38.96 Per Share – Annualized IRR(1) Over 28% $533 $533 15.2 14.1 $403 $398 10.9 7.7 Average Price $35.01 $37.83 $36.95 $51.66 2010 2011 2012 2013 n Amount Repurchased (M) n Total Shares Repurchased (M) (1) Annuali
Slide 49: Assurant M&A Strategy
Assurant M&A Strategy Key Driver of Long-Term Shareholder Value Focused and Disciplined Approach for Profitable Growth • Established list of businesses and capabilities in targeted growth areas • Focus on small to mid-sized companies (<$300 million purchase price) • Disciplined process using pre-def
Slide 50: Disciplined Acquisition Methodology
Disciplined Acquisition Methodology Intangible Amortization Reduces Net Operating Income (In Millions) Total Purchase Price $45 $172 $55 $272 Amortizing $25 $73 $21 $119 Intangibles Goodwill $20 $114 $29 $163 Average Annual Pre-Tax Intangible ($2.6) ($11.5) ($3.5) ($17.6) Charge 2014-2018 Investor D
Slide 51: Disciplined Capital Management Supports Growth Strategy
Disciplined Capital Management Supports Profitable Growth Strategy • Operating companies to continue to generate significant amounts of cash flow • Considerable financial flexibility to make appropriate investments and return excess capital to shareholders • Disciplined strategy balances risk and re
Slide 52: Focus on Profitable Growth
Focus on Profitable Growth Non-Growth Characteristics Core Businesses Targeted Growth Areas Businesses Assurant Position Leadership Emerging Mature Growth Potential Growth in line with U.S. Growth above U.S. GDP Limited growth or GDP declining opportunity Profitability/Returns Specialty economics Sp
Slide 53: Appendix
Doing What We Do Best • Adapt to meet consumers’ needs • Transform to meet market and regulatory change • Leverage our proven track record • Strengthen our advantage • Innovation • Operational excellence • M&A • Grow our earnings over time • Diverse mix of businesses • Strong cash flows Investor Day
Slide 54: Non-GAAP Financial Measures
Exhibit 1 Non-GAAP Financial Measures Assurant uses the following non-GAAP financial measures to analyze the Company’s operating performance for the periods presented in this presentation. Because Assurant’s calculation of these measures may differ from similar measures used by other companies, inve
Slide 55: For more information please visit Assurant.com
For more information please visit: Assurant.com Investor Day 2014 109 55