A long-standing Assurant Inc. business is on the block at what the company hopes will prove to be an advantageous time.
Assurant retained Goldman Sachs to evaluate strategic alternatives for its global preneed segment, a business that includes pre-funded funeral insurance, final need insurance and related services in the U.S. and Canada.
CEO Alan Colberg, speaking during a Nov. 3 conference call, declined to speculate on what the business might fetch in a sale, but expressed optimism that it would generate an "attractive valuation" for shareholders, particularly relative to the value that had been assigned to it in the context of Assurant's stock price.
Fortis Inc., the company Assurant succeeded by way of a series of transactions in 2003 and 2004, entered the preneed business through an acquisition in 1980. It later expanded its presence by paying $210.4 million in October 2000 to acquire American Memorial Life Insurance Co.
The preneed business had total assets of $7.51 billion and total GAAP equity of $312.2 million as of Sept. 30, according to an Assurant statistical supplement. GAAP-based net premiums earned of $155.6 million for the first nine months of this year marked an increase of 4.1% from the year-earlier period.
American Memorial Life and Union Security Insurance Co., the distinct U.S. subsidiaries of Assurant's Interfinancial Inc. that reported significant writings of preneed business in 2019, had combined statutory capital and surplus of $304.6 million and net admitted assets of $6.26 billion as of June 30. Statutory basis net premiums for the two companies in 2019 were $553.4 million.
"We know from other life insurance transactions recently there is a wide range of interest in assets like our preneed business," Colberg said.
A review of disclosures in 2019 annual statutory statements and U.S. product filings provides some sense of the broader preneed market.
Assurant ranked as the No. 1 writer of net preneed premiums, according to entries made on the footnotes to the newly expanded analysis of operations by lines of business pages in 2019 annual statements. Preneed, as defined by the National Association of Insurance Commissioners, represents an arrangement related to the purchase or provision of specific funeral or cemetery merchandise or services. It also incorporates final expense plans that may cover medical bills in addition to funeral costs.
Other leading writers, limited to those that populated the relevant footnotes, were the groups headed by National Guardian Life Insurance Co. Inc. and Funeral Directors Life Insurance Co. with premiums of $445.4 million and $91.4 million, respectively. Six groups or standalone entities reported between $20.6 million and $44 million in net preneed premiums: Pekin Life Insurance Co., Unity Financial Life Insurance Co., Security National Financial Corp., Investors Heritage Life Insurance Co., United Heritage Life Insurance Co. and First Trinity Financial Corp.
The are several other carriers with significant preneed businesses that did not populate the footnote. Homesteaders Life Co., which is primarily engaged in underwriting preneed funeral arrangements, reported individual and group whole life net premiums of $477.1 million in 2019. Physicians Life Insurance Co. disclosed $60.9 million in premiums from preneed operations in the management's discussion and analysis section of its annual statement.
A collection of other carriers have submitted product filings in recent years referencing funeral expense-related whole life policies, including Transamerica Life Insurance Co. and Global Atlantic Financial Group Ltd.'s Forethought Life Insurance Co. The latter entity cedes a portion of its preneed business to a Bermuda affiliate.
Global Atlantic acquired Forethought Life as part of a $650 million deal in 2014.
Executives at KKR & Co. Inc., which is in the process of acquiring Global Atlantic, reiterated during an Oct. 30 call that potential acquisitions are among the insurer's multiple paths to future growth. The company is also actively engaged in block reinsurance transactions; KKR disclosed that Global Atlantic added $8 billion in incremental assets through two such deals in recent months.
Colberg, meanwhile, cautioned that Assurant is "very early" in the strategic review process and said the company is "looking at a range of alternatives." He pointed to Assurant's 2016 sale of its former employee benefits business to Sun Life Financial Inc., where it took "something like four or five months to get an offer" after initiating an auction process, as a "good guide" for the potential timeline.