Assurant Ratings Hit After Wells Notices

Assurant Inc. has been hit with two negative rating actions since the company placed its five top officers on administrative leave after notices from the Securities Exchange Commission that it contemplates civil action against them.

The five who received Wells notices are being investigated by the SEC in connection with ongoing investigations of certain loss mitigation insurance products, according to Assurant.

A.M. Best and KeyBanc Capital Markets both said they have taken action against the insurer. KeyBanc said it has dropped the company from “buy” to “hold,” and Best said it has revised the outlook for Assurant ratings to negative from stable.

Best said it believes the SEC investigation will be a distraction to Assurant and could possibly affect Assurant's competitive position and have a negative impact on future revenue and earnings.

Assurant Chief Executive Officer Robert B. Pollock, Executive Vice President Philip Bruce Camacho and Chief Financial Officer Adam Lamnin each received a Wells notice that was announced yesterday. Their replacements are due to be announced today.

Michael Steinman, chief actuary of Assurant Solutions/Assurant Specialty Property, and Dan Folse, vice president, risk management of Assurant Solutions/Assurant Specialty Property, received Wells notices July 5.

In other action, Morgan Stanley property-casualty analyst William Wilt upgraded Assurant stock, asserting that the recent sell-off following the negative news “has taken the stock to a level where our fundamental concerns are adequately compensated, leaving us with the uncertainty of the SEC investigation.”

Best said the investigation may be a distraction that could possibly affect the company's competitive position.

Recipients of a Wells notice have the opportunity to respond to the SEC staff before the staff makes its formal recommendation to the commission on whether civil action by the SEC is warranted, Assurant noted in its announcement disclosing the action on the executives.

Loss mitigation products such as finite reinsurance have been the target of past SEC probes as to whether enough risk is transferred in them to warrant their accounting treatment. Among the more high-profile investigations was one concerning the transactions involving Brightpoint and American International Group.