Assurant Acquires U.K. Mobile Phone Insurer in Effort to Diversify

Specialty insurer Assurant, Inc. says it will purchase U.K. mobile phone insurance insurer Lifestyle Services Group for $160 million, a move Moody's Investors Service says should help diversify Assurant's sources of net operating income over time.

Assurant CEO Robert B. Pollock says in a statement, "Our acquisition of Lifestyle Services Group strengthens and expands our global mobile presence, which is an important strategic priority."

Moody's analyst Jasper Cooper notes in the ratings agency's "Weekly Credit Outlook" that the purchase price is equal to 8.5 times LSG's earnings before interest, taxes, depreciation and amortization (EBITDA). Moody's adds that Assurant plans to pay for the acquisition with cash at the holding company, "which appears to be manageable given that the holding company as of June 30 had significant liquidity totaling $890 million in cash and liquid securities, excluding $476 million set aside for a February 2014 debt maturity."

Regarding the impact on Assurant's business mix, Moody's points out that most of Assurant's net operating income in recent years has come from its Specialty Property segment, "which consists mainly of lender-placed homeowners and mobile home insurance."

Lender-placed, or force-placed, homeowners policies have come under regulatory scrutiny in New York and other states, leading to settlements with insurers, Assurant included, that include refunds to policyholders and reforms in how the coverage is sold.

This week, JP. Morgan Chase and lawyers for homeowners who paid for force-placed insurance settled a lawsuit in Miami requiring Assurant to make payments to homeowners equal to 12.5 percent of the insurance premium each affected homeowner was charged. The deal could be worth as much as $300 million and could include up to 1.3 million homeowners nationwide.

Moody's says it expects the LSG acquisition to "help the company diversify its sources of net operating income over time."

LSG will become a part of Assurant Solutions, which accounted for 38 percent of Assurant's 2012 net-earned premiums, but only 23 percent of its net operating income, according to Moody's.

Moody's also says, "About 31 percent of Assurant Solutions' revenue is from international markets, and on a pro forma basis, the LSG acquisition will boost the international share to about 37 percent."