TEXT-S&P revises AMLIC and ABLAC outlooks to positive

Tue Dec 11, 2012 11:49am EST

Overview
     -- AMLIC and ABLAC are integral components of Assurant Solutions, and 
Assurant Solutions is core to the Assurant group, so we now consider AMLIC and 
ABLAC core as well.
     -- We are revising our outlooks on AMLIC and ABLAC to positive from 
stable.
     -- We expect Assurant's consolidated earnings to remain strong despite 
the slow economic recovery.

Rating Action
On Dec. 11, 2012, Standard & Poor's Ratings Services revised its outlooks on 
American Memorial Life Insurance Co. (AMLIC) and American Bankers Life 
Assurance Co. of FL (ABLAC) to positive from stable. At the same time, we 
affirmed our 'A-' long-term counterparty credit ratings on both entities.

Rationale
Because we consider AMLIC and ABLAC to be core components of Assurant 
Solutions, which in turn is core to the Assurant group, we now consider AMLIC 
and ABLAC to be core to the group as well. AMLIC is the primary legal entity 
through which Assurant sells its pre-need insurance products in the U.S., and 
the pre-need segment accounts for more than 30% of Assurant Solutions' 
earnings. Assurant sells life and health credit insurance through ABLAC, which 
is the primary entity for selling these products in Canada. Assurant is 
targeting both the pre-need and Canadian credit insurance markets for growth.

Besides Assurant Solutions, we consider the Assurant Specialty Property 
segment to be core to the group. Specialty Property is the most profitable 
unit within the company, with pretax net income of $460 million (65% of 
consolidated pretax net income) and return on revenues (ROR) of 22% for 2011 
and has grown considerably in the past five years, mainly in its lender-placed 
homeowners' book as a result of record-setting placement rate on delinquent 
loans and foreclosures during the height of the financial crisis. However, the 
lender-placed homeowners' market is highly exposed to litigation and insurance 
regulatory risks. This risk has intensified recently, leading to discussions 
and proceedings with regulators, which we believe will have an impact on 
Specialty Property's financial performance.

Outlook
The positive outlook on AMLIC and ABLAC reflects our expectations that 
Assurant's consolidated earnings will remain strong despite the slow economic 
recovery. We could raise the ratings by one notch during the next 12 months if 
the company maintains its diversified earnings profile and strong relationship 
with its distribution partners, and further enhances its international 
presence while continuing to generate overall strong operating results. This 
would include generally accepted accounting principles EBIT--excluding 
realized gains and losses--in excess of $650 million and an ROR of at least 8% 
in 2013 for Assurant Inc. At the same time, we expect the consolidated group 
to maintain EBIT fixed-charge coverage of more than 5x. Financial leverage 
likely will remain moderate at less than 30%, and consolidated capitalization 
will likely stay strong and redundant at the 'A' rating level.

Within Assurant Solutions (including pre-need), we expect a pretax return on 
revenue of about 6.5%-7.5% in 2012 and 2013. We expect Assurant Special 
Property's combined ratio to remain very strong at about 85-88% with ROR of 
16-18% in 2012, which is mostly driven by growth in tracked loans and 
partially offset by losses from Super Storm Sandy. We expect Specialty 
Property's healthy margins to contract beginning in 2013 due to regulatory 
changes that will likely lead to rate reductions in its lender-placed 
business. As a result, we expect a combined ratio of 80%-85% and ROR of 
18%-22% in 2013, absent any significant catastrophes. This level of 
performance is not inconsistent with a higher rating for the group. The 
ratings on Assurant would come under pressure if the company materially 
underperforms our operating performance expectations, if consolidated 
capitalization falls short of the rating level, or if the company experiences 
legal or regulatory issues that could materially impair its competitive 
positions and operating performance.

Related Criteria And Research
Group Methodology, April 22, 2009

Ratings List
Ratings Affirmed; Outlook Action
                                        To                 From
American Memorial Life Insurance Co.
American Bankers Life Assurance Co. of FL
 Counterparty Credit Rating
  Local Currency                        A-/Positive/--     A-/Stable/--
 Financial Strength Rating
  Local Currency                        A-/Positive/--     A-/Stable/--

Ratings Affirmed

American Bankers Insurance Co. of FL
American Security Insurance Co.
 Counterparty Credit Rating
  Local Currency                        A-/Positive/--     
 Financial Strength Rating
  Local Currency                        A-/Positive/--     

Assurant Inc.
 Counterparty Credit Rating
  Local Currency                        BBB/Positive/A-2   
 Senior Unsecured                       BBB                
 Commercial Paper                       A-2                

John Alden Life Insurance Co.
Time Insurance Co.
 Counterparty Credit Rating
  Local Currency                        BBB/Stable/--      
 Financial Strength Rating
  Local Currency                        BBB/Stable/--      

Union Security Insurance Co.
 Counterparty Credit Rating
  Local Currency                        A-/Stable/--       
 Financial Strength Rating
  Local Currency                        A-/Stable/--       



Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.
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