Assurant exits health insurance; focus shifts to housing

Plans expansion of lender-placed insurance and other programs

Assurant (AIZ) is planning to exit the health insurance and employee benefits business and will shift its focus instead to its housing insurance programs, which include renters/apartment insurance, flood insurance, manufactured housing and force-placed insurance.

The company made the announcement Tuesday, disclosing that the company expects to lose between $80 million and $90 million from its health insurance business in the first quarter. Assurant attributed approximately half of the loss to a reduction in 2014 estimated recoveries from the Affordable Care Act risk mitigation programs.

The company said that it is exploring strategic alternatives for its employee benefits and health business segments, including the sale of each business. Absent an earlier sale of the health business segment, the company said plans to substantially complete its exit from the health insurance market in 2016.

Assurant President CEO Alan Colberg said that company has established “significant momentum in our specialty housing and lifestyle protection businesses,” and plans to focus on those business lines moving forward.

“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 outperformance,” Colberg said.

“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,” Colberg added.

“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,” Colberg said. “During this process, Assurant remains dedicated to upholding our commitments to customers and policyholders.” 

Assurant’s said that its new “sharper focus” will enable the it to build upon its core capabilities to further capitalize on global consumer and market trends in the housing and lifestyle protection markets.

The company said that it plans to broaden the integrated protection products and services from its Assurant Specialty Property and Assurant Solutions business segments to help customers protect against risk, including offerings such as mobile and other extended service contracts, force-placed insurance, multi-family housing, mortgage solutions, vehicle service contracts and pre-funded funeral plans.  

Assurant’s force-placed insurance business made headlines earlier Wednesday, when HousingWire reported that Ocwen Financial (OCN) and Assurant agreed to pay $140 million to settle a massive class-action lawsuit, which accused Ocwen of artificially inflating the cost of force-placed insurance in exchange for kickbacks from Assurant.

The settlement agreement, which is awaiting final approval from federal court in Florida, resolves claims of 399,843 homeowners who took part in the class-action suit.

“As indicated in the court filings, we are working toward a settlement of this case, although we cannot comment further on the details at this time,” Assurant Senior Director of Communications Robert Byrd said in a statement.  “We do not acknowledge any wrongdoing in this case, but feel it's in the best interest of our company to attempt to resolve the matter.”

Assurant said that any proceeds from the sale of its health insurance or employee benefits programs will provide the company with “additional financial flexibility” to invest in areas targeted for growth and return capital to shareholders.

The company also said that Barclays Capital (BCS) is serving as its financial advisor to assist in the exploration of strategic alternatives for its health and employee benefits businesses.

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