We own eight properties, including three buildings whose locations serve as headquarters for our operating segments, two buildings that serve as operation centers for Global Housing and one building that serves as a claims training center 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 buildings in Kansas City, Missouri and Milwaukee, Wisconsin that used to be the headquarters of businesses sold or 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 twenty years. We believe that our owned and leased properties are adequate for our current business operations.
The decline in 2016 primarily relates to the Assurant Health wind-down and the sale of our Assurant Employee Benefits segment.
Total stockholders’ equity divided by the basic shares outstanding for book value per basic share calculation. At December 31, 2016, 2015, 2014, 2013, and 2012 there were 56,660,642, 66,606,258, 70,276,896, 72,982,023 and 79,866,858 shares, respectively, outstanding.
The following discussion covers the twelve months ended December 31, 2016 (“Twelve Months 2016”), twelve months ended December 31, 2015 (“Twelve Months 2015”) and twelve months ended December 31, 2014 (“Twelve Months 2014”). Please see the discussion that follows, for each of these segments, for a more detailed analysis of the fluctuations.
The Company made significant progress in executing its multi-year transformation in 2016. As part of its portfolio realignment to focus on specialty housing and lifestyle protection products and services, the Company has substantially exited the health insurance market and completed the sale, mainly through a series of reinsurance transactions, of its Assurant Employee Benefits segment to Sun Life Assurance Company of Canada, a subsidiary of Sun Life Financial Inc. (“Sun Life”). For more information on the sale, see Note 5 to the Consolidated Financial Statements included elsewhere in this Report.
Consolidated net income increased $423,795, or 299%, to $565,350 for Twelve Months 2016 from $141,555 for Twelve Months 2015. The increase was primarily related to lower losses and exit-related charges from the wind down of the Assurant Health runoff operations, a $247,991 (after-tax) increase in amortization of deferred gains and gains on disposal of businesses and an additional $84,732 (after-tax) in net realized gains on investments. The increase in amortization of deferred gains and gains on disposal of businesses and net realized gains on investments both primarily relate to the sale of the Assurant Employee Benefits segment. These items were partially offset by higher reportable catastrophe losses and the ongoing declines in lender-placed insurance in our Global Housing segment.
Net earned premiums and fees decreased $161,445 to $2,288,801 for Twelve Months 2016 compared with Twelve Months 2015, primarily due to lower placement and premium rates in the lender-placed insurance business and the loss of client business mentioned above. The decrease was partially offset by growth in our multi-family housing and mortgage solutions businesses. The multi-family housing revenue increase was primarily due to a higher volume of renters’ policies sold through our affinity channels and increased penetration rates across our property management network, while the mortgage solutions businesses revenue increase was primarily due to the July 2016 acquisition of American Title, Inc., a leader in title and valuation services for home equity lenders.
Global Lifestyle net income increased $1,421, or 1%, to $154,425 for Twelve Months 2016 from $153,004 for Twelve Months 2015. The increase was primarily due to an increased net tax benefit related to a redemption of shares in our international structure and better mobile business performance globally. These items were partly offset by the loss of a domestic tablet program and lower contributions from legacy extended service contracts from North American retailers and our credit insurance business.
Twelve Months 2016 net earned premiums, fees and other income increased $72,151 to $3,706,167 compared with Twelve Months 2015 primarily due to an increase in mobile programs and subscribers partially offset by declines in business from certain North American retailers, the loss of a domestic tablet program and foreign currency exchange volatility.
In 2017, we expect Global Lifestyle net income to increase from 2016 driven primarily by improved mobile and vehicle protection business results and expense savings initiatives. These items will be partially offset by declines from credit insurance business and legacy North American retail clients. Net earned premiums, fees and other income are expected to decline in 2017 compared with 2016, primarily due to a change in program structure at a large service contract client. This program structure change will have no impact on net income. Excluding this program structure change, net earned premiums, fees and other income are expected to increase due to growth globally in our mobile and vehicle protection businesses. Foreign exchange volatility and variability in the mobile market will impact results.
Global Preneed net income decreased $1,875, or 4%, to $42,304 for Twelve Months 2016 from $44,179 for Twelve Months 2015. This decrease was primarily due to an adjustment related to the amortization of deferred acquisition costs and policyholder benefits for an older block of policies, partially offset by higher investment income from real estate joint venture partnerships. Twelve Months 2016 net earned premiums, fees and other income increased $3,838 to $171,279 compared with Twelve Months 2015 primarily due to premium from policies written in previous years.
In 2017, we expect Global Preneed net income and fees and other income to increase compared with 2016 due to sales growth across North America and operational efficiencies.
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 received on preneed policies sold prior to January 1, 2009 is presented separately as net earned premiums, with policyholder benefits expense shown separately.
conditions and other factors beyond our control. Fluctuations in interest rates affect our returns on, and the market value of, fixed maturity and short-term investments.
The fair market value of the fixed maturity securities in our investment portfolio and the investment income from these securities fluctuate depending on general economic and market conditions. The fair market value generally increases or decreases in an inverse relationship with fluctuations in interest rates, while net investment income realized by us from future investments in fixed maturity securities will generally increase or decrease with interest rates. We also have investments that carry pre-payment risk, such as mortgage-backed and asset-backed securities. Interest rate fluctuations may cause actual net investment income and/or cash flows from such investments to differ from estimates made at the time of investment. In periods of declining interest rates, mortgage prepayments generally increase and mortgage-backed securities, commercial mortgage obligations and bonds are more likely to be prepaid or redeemed as borrowers seek to borrow at lower interest rates. Therefore, in these circumstances we may be required to reinvest those funds in lower-interest earning investments.
Our revenues may also be impacted by our ability to continue to grow in the markets in which we operate, including the mobile device insurance market, the renters insurance market and the field services and valuation markets. For example, our business is subject to fluctuations 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 revenues will also be impacted by the lender-placed market.
Policyholder benefits are affected by our claims management programs, reinsurance coverage, contractual terms and conditions, regulatory requirements, economic conditions, and numerous other factors. Benefits paid or reserves required for future benefits could substantially exceed our expectations, causing a material adverse effect on our business, results of operations and financial condition.
Underwriting, general and administrative expenses consist primarily of commissions, premium taxes, licenses, fees, amortization of deferred costs, general operating expenses and income taxes. In connection with our transformation, we are undertaking various expense savings initiatives while also making investments in information technology, among other things, which will impact our expenses.
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 adverse or positive effect on our earnings in the periods in which such increases or decreases are made. See "Item 1A - Risk Factors - Risks related to our Company - 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 materially affect our results of operations, profitability and capital" for more detail on this risk.
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, giving consideration to product size and data credibility. The reserving methods widely employed within the Company include the Chain Ladder, Munich Chain Ladder and Bornhuetter-Ferguson. For Global Housing, reportable catastrophes are analyzed and reserved for separately using a frequency and severity approach.
consideration of the positive skew in the distribution of loss reserves, resulting in the best estimate likely exceeding an estimate based on median values, suggesting that favorable development may be more likely than unfavorable development; and
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, 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 the discount rate less a spread.
For life insurance and annuity contracts acquired in 2000 and prior, interest and discount rates as well as mortality assumptions are based on statutory valuation requirements, which approximate GAAP, with no explicit provision for lapses.
Risks related to the reserves recorded for certain discontinued individual life, annuity, and long-term care insurance policies have been 100% ceded via reinsurance. While the Company has not been released from the contractual obligation to the policyholders, changes in and deviations from economic, mortality, morbidity, and withdrawal assumptions used in the calculation of these reserves will not directly affect our results of operations unless there is a default by the assuming reinsurer.
Acquisition costs relating to group worksite insurance products no longer offered consist primarily of first year commissions to brokers, costs of issuing new certificates and compensation to sales representatives. These acquisition costs are front-end loaded, thus they are deferred and amortized over the estimated terms of the underlying contracts.
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 AOCI. The assumptions used for the estimates are consistent with those used in computing the policy or contract liabilities.
Inherently, there are risks and uncertainties involved in making these judgments. Changes in circumstances and critical assumptions such as a continued weak economy, or unforeseen events which affect one or more companies, industry sectors or countries could result in additional impairments in future periods for other-than-temporary declines in value. See also Note 6 to the Consolidated Financial Statements included elsewhere in this Report and “Item 1A - Risk Factors - Risks Related to our Company - The value of our investments could decline, affecting our profitability and financial strength” and “Investments” contained later in this item.