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Assurant issuing $250 million of subordinated notes
New York , November 16, 2020 – Moody's Investors Service has assigned a Ba1(hyb) rating to Assurant, Inc.'s (Assurant; NYSE: AIZ, Baa3 stable) $250 million of subordinated notes due 2061. The company is issuing the notes off its existing multi-purpose shelf registration. Assurant expects to use net proceeds from the offering along with cash on hand to finance the HYLA Mobile acquisition, with any remainder for general corporate purposes. The rating outlook for Assurant remains stable.
RATINGS RATIONALE
According to Moody's, Assurant's ratings are based on the group's strong market position in a number of niche specialty P&C insurance products including lender-placed homeowner insurance, extended service contracts/ warranties, mobile handset protection, credit insurance/protection and multifamily housing. These lines of business generally have limited market competition and the company maintains very good relationships with various distributors which leads to enhanced profitability. These strengths are offset by the company's catastrophe exposures from its lender-placed homeowner business, particularly in Florida and Texas, and exposure to adverse changes in the legal and regulatory environment given its niche products.
In October 2020, Assurant announced the acquisition of HYLA Mobile, a leading provider of smartphone software, trade-in and upgrade services, in a transaction valued at $325 million. The transaction is expected to close by the end of 2020, subject to regulatory and other customary closing approvals. The rating agency said that pro forma financial leverage as of September 30, 2020 is expected to remain below 30%.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The following factors could lead to an upgrade of Assurant's ratings: (i) significant reduction in gross and net catastrophe exposures over multiple years, (ii) consolidated financial leverage meaningfully below 25%, (iii) improved capitalization and strong profitability, and (iv) holding company liquid resources (cash & short-term assets) around $500 million.
The following factors could lead to a downgrade of Assurant's ratings: (i) significant increase in catastrophe exposure (on gross or net basis) as a percentage of shareholder equity, or a 10% or more decline in shareholder equity, (ii) consolidated adjusted financial leverage above 35%, (iii) earnings coverage of interest less than 4x for an extended period, or (iv) holding company liquid resources (cash and short-term assets) significantly below $250 million.
Moody's has assigned the following rating to Assurant:
$250 million of subordinated notes due 2061 at Ba1(hyb).
The rating outlook for Assurant is stable.
The principal methodology used in these ratings was Property and Casualty Insurers Methodology published in November 2019 and available at
https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187352 . Alternatively, please see the Rating Methodologies page on
www.moodys.com for a copy of this methodology.
Assurant, Inc. is a New York based holding company whose subsidiaries write a broad range of P&C insurance products. For the first nine months of 2020, the company reported revenues of about $7.5 billion and net income of $289 million. Stockholders' equity was $5.9 billion as of September 30, 2020.
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