Company Analysis: Assurant Europe FY2024
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Key Findings: Assurant's European operations generated approximately £490m in external revenue during FY2024, representing 6-7% of Global Lifestyle. The Netherlands entity, not the UK, is now the larger underwriter at €236m gross written premium versus £166m, and materially more profitable with a 19% loss ratio compared to the UK's 74%. UK underwriting turned loss-making for the first time in recent years, with management attributing the deterioration to fraud and claim inflation in unusually specific language for a statutory report. Despite the profit pressure, approximately £80m was extracted upstream from European entities during the year, a pattern consistent with a parent treating the region as a cash cow rather than a growth engine. The Asurion-D&G transaction has reset the competitive landscape; whether Assurant responds with a counter-move or continues to harvest European cashflows will define the next chapter.
I read somewhere last week that Assurant was the world’s largest secondary device processor. I don’t think that’s quite right, but they’re certainly a very different company from the heady days of insuring UK mortgages, loan and credit card repayments when market forces were still pushing 100% commission rates and the 2008 financial crisis was but a glint in Michael Burry’s good eye. A number of analysts already cover Assurant (AIZ)1, so I’ll focus on the most recent international filings that can give us a picture of local performance, something not covered in any detail by the bods at Morgan Stanley, Piper Sandler and UBS et al.
Recap
In the UK, Assurant began life in 1989 as Bankers Insurance Company Limited, a subsidiary of American Bankers Insurance Company of Florida. From initially writing livestock and bloodstock policies, additional niche lines were added which included country properties, classic cars and personal accident with a pivot around 1996 to focus on creditor insurance and extended warranties. Despite some hairy encounters with personal accident losses in 1997 the subsidiary remained well supported by their US parent and widened the product offer by establishing an associated life undertaking in 1998. In 1999 Fortis, the Belgo-Dutch giant acquired American Bankers for approximately $2.6bn and merged it with their American Security Group to form a major player in US credit insurance.
Setting the future in motion, in 2001 Assurant began to provide underwriting and marketing support for the Signal Holdings LLC who handled the servicing of extended warranties and protection programs for mobile protection products distributed via US carriers including US Cellular and Cricket. At the same time Fortis began unloading its US insurance operations, selling their life business to Hartford and in 2004, listing “Assurant” via IPO and selling an initial 56% stake in the company. In 2006 the UK insurance business began expanding into Europe by establishing branches in Germany, Italy and Spain and began creeping along the mortgage payment protection insurance value chain by acquiring a number of distribution partners.
Then, as the PPI scandal gathered pace and Michael Burry’s bet came good, payment protection became way too hot to handle and the subprime mortgage market promptly disappeared. Fortunately, a bright spark in Assurant’s old South Dade Campus decided that spending $250m on the Signal Holdings2 was not only the best way to protect the mobile insurance revenue stream, but also to kickstart the pivot towards protecting the gadget that was about to revolutionise global personal communications, the smartphone and thus Assurant’s Global Connected Living strategy was set.
Assurant’s European business got in on the act and acquired Crewe-based Lifestyle Services Group from PE firm Providence Equity (Phones4U) for $160m in 20133, giving access to the (almost) uniquely British packaged bank account distribution of mobile insurance, as well as some much needed capability through what was essentially a reverse integration. Consolidating their extended warranty leadership position further, particularly in the US automotive business, Assurant then acquired The Warranty Group from TPG Capital for approximately $2.5bn which closed in 2018, and brought along additional insurance infrastructure in Europe and Asia. As with many UK insurance undertakings, Brexit prompted the quiet repatriation of European premiums, in Assurant’s case, to an entity in the Netherlands and that, to coin a phrase, was that.
Continue reading for:
Detailed FY2024 performance analysis including the intercompany revenue breakdown that reveals external growth was effectively flat
UK insurance profitability: why AGIL’s first underwriting loss and management’s unusually specific fraud commentary signals a material problem
EU versus UK comparison: how the Netherlands entity’s 19% loss ratio exposes the UK’s vulnerability to consumer fraud
Balance sheet analysis: the £80m upstream extraction during a year of profit pressure, and what it reveals about parent company intentions
Strategic outlook: Asurion’s D&G acquisition, SquareTrade’s sub-scale position, and Assurant’s options
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