Assurant SWOT and PESTLE Analysis

Strength

1. Capable to expand to upcoming 5G device purchases’ trade-in financing programs: The mobile insurance market which is a part of Assurant Global Lifestyle segment is a large and growing market. With a subscriber base of more than 300mil, it is likely that the upcoming 5G standard will create a surge in demand of new devices which supports it. 5G will also be the key in driving development of “Internet of Things” and mobile devices will be crucial to facilitate the same. Smartphone penetration in developed markets like Japan, USA and Europe is high while it is growing in developing markets like India and South East Asia. 5G technology is also being integrated into vehicles for GPS functionality in developed nations as with the increased data transfer speeds at affordable prices, it seems likely that consumers will shift to it gradually with 5G capable mobile devices pouring into the market. Thus, customer support, device financing, buyback trade-in programs will be extremely vital along with repair and logistics insurances. By acquiring HYLA Mobile, Assurant is able to double its device processing volumes, expands its customer base, increased the device diversity and employee talent to handle this trend. With HYLA and Assurant’s own capabilities, it can improve the customer experience when device owners opt for trade-in programs of their older phones for 5G enabled ones. The acquisition will help Assurant prepare for the anticipated increase in volume and demand for trade-in solutions in the upcoming 5G trade-in cycles. HYLA’s software capabilities and Assurant’s end-to-end mobile device lifecycle management capabilities will create a comprehensive solution for the trade-in program which will have increased trade-in attachment rates, better consumer experience, maximized disposition values and add new revenue streams while being sustainable to the environment as well.

2. Continuous growth in revenues (25.39% CAGR) and assets (17.94% CAGR) since 2017 makes financing easy: Assurant focuses on lifestyle and housing products while having a small preneed segment too. It competes with many insurance companies, financial services, mobile device repair and logistics companies and software companies too. To remain competitive, it is crucial for Assurant to have a robust financial backing in its core businesses. In FY2019, Assurant was improved its revenues to USD 9.3 bil (USD 10.08 bil in total) and has had a CAGR of more than 25% since 2017 while also improving upon its asset size which stood at USD 44.3 bil. These strong financials have allowed Assurant to have enough liquidity (USD 534 mil in 2019) go for strategic merger and acquisition deals which has facilitated the strong growth of the company. The revenues also have grown across its segments, Global Lifestyle and Global Preneed, since 2017 while Assurant increased its net income by nearly 1.72 times compared to last financial year in its Global Housing segment. Its credit ratings are stated to be stable with A.M. Best Company rating its domestic and international insurance subsidiaries from B++ to A, implying that the financial strength of the company is in good to excellent condition. This stability allows positive outlook towards the company’s future and helps Assurant to grow better compared to its competitors and keeps increasing its asset and customer base in the process.

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Weakness

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Opportunity

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Threat

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. Catastrophe and non-catastrophe losses reduce profitability: Insurance companies face the risk of losses from natural calamities and non-catastrophe events like weather, fire, water damage, theft and vandalism. This affects the profitability of the company. Assurant accounted losses in excess of USD 5mil owing to catastrophes. Natural catastrophe trends are changing due to climate change which is linked to rising global temperatures and changing weather patterns. Frequencies of hurricanes have increased in the US. Past 20 years account 75% of the total hurricane damages in the USA that have occurred over the last century. This ongoing trend is likely to pose a risk to the insurance business, especially to its profitability. Thus, insurance companies should be able to accurately forecast the chances of these increasing catastrophes and account it into their products so that they could mitigate the risks. Though the legal, regulatory and social responses to the concerns of climate change impacting the insurance business are unpredictable, the increasing frequencies of both natural and man-made catastrophes along with increase in value and geographical concentration of insured property increase the severity of claims from future catastrophes. Since accounting rules do not permit insurers to maintain reserves for catastrophic events, the ultimate cost of losses has an adverse effect on the operations, financial condition and capital of the insurance businesses. Assurant’s Global Housing segment needs to keep these trends under consideration given that they pose a threat to its business.