We own six properties, including three buildings whose locations serve as headquarters for our operating segments and two buildings that serve as operations centers for Global Housing. Global Lifestyle and Global Housing share headquarters buildings located in Miami, Florida and Atlanta, Georgia. Global Housing has operations centers located in Florence, South Carolina and Springfield, Ohio. Global Preneed has a headquarters building in Rapid City, South Dakota. We also own a building in Milwaukee, Wisconsin that served as the headquarters of a business placed into runoff. We lease office space for various offices and service centers located throughout the U.S. and internationally, including our New York, New York corporate office and our data center in Woodbury, Minnesota. Our leases have terms ranging from month-to-month to fifteen years. We believe that our owned and leased properties are adequate for our current business operations.
Included in net realized (losses) gains on investments are other-than-temporary impairment losses of $0.6 million, $0.9 million, $6.9 million, $5.0 million, and less than $0.1 million for the years ended December 31, 2018, 2017, 2016, 2015, and 2014, respectively.
The year ended December 31, 2015 includes higher loss experience and adverse claim development on 2015 individual major medical policies associated with Assurant Health.
The year ended December 31, 2018 includes $214.8 million of reportable catastrophes (reportable catastrophe losses, net of reinsurance and client profit sharing adjustments, and including reinstatement and other premiums), primarily related to Hurricanes Michael and Florence and fires in California. The comparable reportable catastrophes for the years ended December 31, 2017, 2016, 2015 and 2014 were $295.7 million, $157.4 million, $19.3 million and $18.5 million, respectively. Reportable catastrophe losses include only individual catastrophic events that generated losses to us in excess of $5.0 million, pre-tax.
Total Assurant Inc. stockholders’ equity divided by the basic common shares outstanding for total book value per basic common share calculation. At December 31, 2018, 2017, 2016, 2015 and 2014 there were 62,770,031, 53,078,396, 56,660,642, 66,606,258, and 70,276,896 common shares, respectively, outstanding.
We report our results through four segments: Global Housing, Global Lifestyle, Global Preneed and Total Corporate and Other. Total Corporate and Other includes activities of the holding company, financing and interest expenses, net realized gains (losses) on investments, interest income earned from short-term investments held and income (expenses) primarily related to our frozen benefit plans. Total Corporate and Other also includes the amortization of deferred gains and gains associated with the sales of Fortis Financial Group, Long-Term Care and Assurant Employee Benefits through reinsurance agreements, expenses related to the acquisition of TWG, foreign gains (losses) from remeasurement of monetary assets and liabilities, the loss on the sale of Mortgage Solutions, the gain on the sale of Time Insurance Company and other unusual or infrequent items. Additionally, the Total Corporate and Other segment includes amounts related to the runoff of the Assurant Health business. As Assurant Health was a reportable segment in prior years, these amounts are disclosed separately for comparability. In addition, Assurant Employee Benefits was a separate segment in 2016 and primarily includes the results of operations for the periods prior to its sale on March 1, 2016. See Note 4 to the Consolidated Financial Statements included elsewhere in this Report for more information.
The following discussion covers the year ended December 31, 2018 (“Twelve Months 2018”), year ended December 31, 2017 (“Twelve Months 2017”) and year ended December 31, 2016 (“Twelve Months 2016”). Please see the discussion that follows, for each of these segments, for a more detailed comparative analysis.
Consolidated net income attributable to common stockholders decreased $282.8 million, or 54%, to $236.8 million for Twelve Months 2018 from $519.6 million for Twelve Months 2017. The decrease was driven by the absence of a $177.0 million one-time benefit related to the reduction of net deferred tax liabilities following the enactment of the U.S. Tax Cuts and Jobs Act (the “TCJA”) in 2017, an increase in net realized losses on investments and higher expenses related to the TWG acquisition. These decreases were partially offset by the impact of a lower effective tax rate, net operating income from TWG and lower reportable catastrophes (reportable catastrophe losses, net of reinsurance and client profit sharing adjustments, and including reinstatement and other premiums).
Global Housing net income increased $53.4 million, or 55%, to $150.8 million for Twelve Months 2018 from $97.4 million for Twelve Months 2017, primarily due to a lower effective tax rate and lower reportable catastrophes. Segment net income for Twelve Months 2018 included $169.7 million of after-tax reportable catastrophes compared to $190.5 million of after-tax reportable catastrophes for Twelve Months 2017. Reportable catastrophes for Twelve Months 2018 reflect a corporate tax rate of 21% as compared to 35% in 2017 as a result of the enactment of the TCJA. Excluding the lower effective tax rate
and reportable catastrophes, segment net income decreased due to a lower contribution from our Lender-placed Insurance business primarily due to less favorable non-catastrophe loss experience, the ongoing declines in placement rates and lower REO volumes. This decrease was partially offset by growth in Multifamily Housing and a lower net loss from our Mortgage Solutions business, which was sold on August 1, 2018.
Global Lifestyle net earned premiums, fees and other income increased $1.79 billion to $5.18 billion for the Twelve Months 2018 compared with $3.40 billion for Twelve Months 2017, primarily due to the addition of $1.47 billion of net earned premiums and fee income from TWG. Excluding TWG, net earned premiums, fees and other income increased 9% due to increased revenue from our Connected Living business, due to growth from existing and recently launched mobile programs, as well as growth from our Global Automotive business. These increases were partially offset by lower earned premiums and fees from our international extended service contracts and Global Financial Services business due to unfavorable foreign exchange.
Global Preneed net earned premiums, fees and other income increased $8.5 million to $189.5 million for Twelve Months 2018 compared with $181.0 million for Twelve Months 2017 primarily due to growth in pre-funded funeral policies in the U.S. and Canada, as well as prior period sales of the Final Need product.
Our results depend on, among other things, the appropriateness of our product pricing, underwriting, the accuracy of our reserving methodology for future policyholder benefits and claims, the frequency and severity of reportable and non-reportable catastrophes, returns on and values of invested assets and our ability to manage our expenses and achieve expense savings. Our results will also depend on our ability to profitably grow our Connected Living, Multifamily Housing and Global Automotive businesses, and manage the pace of declines in placement rates in our Lender-placed Insurance business and the U.S. credit insurance business in Global Financial Services. In addition, our results will be impacted by our ability to integrate TWG and achieve benefits and synergies from the acquisition. Factors affecting these items, including, but not limited to, conditions in financial markets, the global economy and the markets in which we operate, fluctuations in exchange rates and inflation, may have a material adverse effect on our results of operations or financial condition. For more information on these and other factors that could affect our results, see “Item 1A - Risk Factors.”
Management believes that we will have sufficient liquidity to satisfy our needs over the next twelve months, including the ability to pay interest on our debt and dividends on our common and preferred stock.
For Twelve Months 2018, net cash provided by operating activities totaled $656.7 million; net cash used in investing activities totaled $2.20 billion and net cash provided by financing activities totaled $1.84 billion. We had $1.25 billion in cash and cash equivalents as of December 31, 2018. Please see “ - Liquidity and Capital Resources” below for further details.
Under the universal life insurance guidance, income earned on preneed life insurance policies sold after January 1, 2009 are presented within fee income net of policyholder benefits. Under the limited pay insurance guidance, the consideration
Our revenues may also be impacted by our ability to continue to grow in the markets in which we operate, including in our Connected Living, Multifamily Housing and Global Automotive businesses, and to manage our Lender-placed Insurance business. Our mobile business is subject to volatility in mobile device trade-in volumes based on the release of new devices and carrier promotional programs, as well as to changes in the mobile device market dynamics. Our Lender-placed Insurance revenues will also be impacted by changes in the housing market. In addition, across many of our businesses, we must respond to the threat of disruption. See “Item 2 - Risk Factors - Business and Competitive Risks - Significant competitive pressures, changes in customer preferences and disruption could adversely affect our results of operations.”
Because establishment of reserves is an inherently complex process involving significant judgment and estimates, there can be no certainty that future settlement amounts for claims incurred through the financial reporting date will not vary from reported claim reserves. Future loss development could require reserves to be increased or decreased, which could have a material effect on our earnings in the periods in which such increases or decreases are made. However, based on information currently available, we believe our reserve estimates are adequate. See “Item 1A - Risk Factors - Financial Risks - Our actual claims losses may exceed our reserves for claims, requiring us to establish additional reserves or to incur additional expense for settling unreserved liabilities, which could have a material adverse effect on our results of operations, profitability and capital” for more detail on this risk.
The following table provides reserve information for our reporting segment lines as of December 31, 2018 and 2017:
For additional information regarding our reserves, see Note 16 to the Consolidated Financial Statements included elsewhere in this Report.
Ultimate loss and loss adjustment expenses are estimated utilizing generally accepted actuarial loss reserving methods. Both paid claims development as well as case incurred development are typically analyzed at the product or product grouping level, considering product size and data credibility. The reserving methods widely employed by us include the Chain Ladder, Munich Chain Ladder and Bornhuetter-Ferguson methods. For Global Housing, reportable catastrophes are analyzed and reserved for separately using a frequency and severity approach.
the quality and applicability of historical data - whether internal or industry data;
consideration of the distribution of loss reserves, management’s selection of the best estimate that may exceed an estimate based on median values, suggesting that favorable development may be more likely than unfavorable development; and
If the actual level of loss frequency and severity are higher or lower than expected, the ultimate reserves required will be different than management’s estimate. The effect of higher and lower levels of loss frequency and severity on our ultimate costs for claims occurring in 2018 would be as follows:
Represents the sum of the case reserves and incurred but not reported reserves as of December 31, 2018 for Global Housing and Global Lifestyle.
Reserves for future policy benefits represent the present value of future benefits to policyholders and related expenses less the present value of future net premiums. Reserve assumptions reflect best estimates for expected investment yield, inflation, mortality, morbidity, expenses and withdrawal rates. These assumptions are based on our experience to the extent it is credible, modified where appropriate to reflect current trends, industry experience and provisions for possible unfavorable deviation. We also record an unearned revenue reserve which represents premiums received which have not yet been recognized in our consolidated statements of operations.
For preneed life insurance issued after 2008 with either no death benefit growth or death benefit growth linked to an inflation index, the long-duration accounting model is applied whereby reserve assumptions are made with provision for adverse deviation. Interest and discount rates are based upon investment returns of the assets acquired to support the business. Expected mortality rates and lapse rates are based upon pricing assumptions. For contracts with minimum benefit increases associated with an inflation index, the reserves assume expected benefit increases equal to a selected discount rate less a spread.
For preneed life insurance issued prior to 2009, the long-duration accounting model is applied whereby reserve assumptions are made with provision for adverse deviation. Interest and discount rates are based upon investment returns of the assets acquired to support the business. Expected mortality rates, lapse rates, and future death benefit increases are based upon pricing assumptions.
For preneed investment-type annuities, preneed life insurance policies with discretionary death benefit growth issued after January 1, 2009, universal life insurance policies and investment-type annuities no longer offered, DAC is amortized in proportion to the present value of estimated gross profits from investment, mortality, expense margins and surrender charges over the estimated life of the policy or contract. Estimated gross profits include the impact of unrealized gains or losses on investments as if these gains or losses had been realized, with corresponding credits or charges included in accumulated other comprehensive income (“AOCI”). The assumptions used for the estimates are consistent with those used in computing the policy or contract liabilities.
The impairment of a fixed maturity security that we have the intent to sell or that we will more likely than not be required to sell is deemed other-than-temporary and is written down to its market value at the balance sheet date with the amount of the impairment reported as a realized loss in that period. For all other-than-temporarily impaired fixed maturity securities that do not meet either of these two criteria, we are required to analyze our ability to recover the amortized cost of the security by calculating the net present value of projected future cash flows. For these other-than-temporarily impaired fixed maturity securities, the net amount recognized in earnings equals the difference between the amortized cost of the fixed maturity security and its net present value.
We have used reinsurance to exit certain businesses, including Assurant Employee Benefits business and blocks of individual life, annuity, and long-term care business. The reinsurance recoverables relating to these dispositions amounted to $4.41 billion and $6.49 billion at December 31, 2018 and 2017, respectively.