Assurant 10Q 2004 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

		[ x ]		QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2004

	[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-31978

Assurant, Inc.

(Exact name of registrant as specified in its charter)


Delaware		39-1126612
(State or Other Jurisdiction		(I.R.S. Employer of
of Incorporation or Organization)		Identification No.)

One Chase Manhattan Plaza, 41st Floor
New York, New York
(Address of Principal Executive Offices)

10005
(Zip Code)

(212) 859-7000
(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes [ ] No [X]

The number of shares of the registrant’s Common Stock outstanding at April 30, 2004 was 142,208,676.

ASSURANT, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004

TABLE OF CONTENTS


Item		Page
Number		Number
PART I
FINANCIAL INFORMATION
1. Financial Statements		1
Unaudited interim consolidated balance sheets of Assurant, Inc. at March 31, 2004 and December 31, 2003.		1
Unaudited interim consolidated statement of operations of Assurant, Inc. for the three months ended March 31, 2004 and 2003.		3
Unaudited interim consolidated statement of changes in stockholders’ equity of Assurant, Inc. for the three months ended March 31, 2004.		4
Unaudited interim consolidated statement of cash flows of Assurant, Inc. for the three months ended March 31, 2004 and 2003.		5
Notes to the unaudited consolidated financial statements of Assurant, Inc.		6
2.Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
3.Quantitative and Qualitative Disclosures About Market Risk		37
4.Controls and Procedures		40
PART II
OTHER INFORMATION
1.Legal Proceedings		40
2.Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities		40
3.Defaults Upon Senior Securities		40
4.Submission of Matters to a Vote of Security Holders		40
5.Other Information		40
6.Exhibits and Reports on Form 8-K		41
Signatures		42
CERTIFICATION
CERTIFICATION
CERTIFICATION
CERTIFICATION

Assurant, Inc. and Subsidiaries
Consolidated Balance Sheets
At March 31, 2004 (unaudited) and December 31, 2003


	March 31,		December 31,
	2004		2003
	(in thousands except number of shares
	and per share amounts)
Assets
Investments:
Fixed maturities available for sale, at fair value (amortized cost - $8,250,992 in 2004 and $8,229,861 in 2003)	$	8,884,270	$	8,728,838
Equity securities available for sale, at fair value (cost - $505,852 in 2004 and $436,823 in 2003)		531,200		456,440
Commercial mortgage loans on real estate at amortized cost		975,802		932,791
Policy loans		68,535		68,185
Short-term investments		404,969		275,878
Other investments		505,577		461,473

Total investments		11,370,353		10,923,605
Cash and cash equivalents		573,861		958,197
Premiums and accounts receivable		472,867		480,254
Reinsurance recoverables		4,352,318		4,445,265
Accrued investment income		139,567		135,267
Tax receivable		—		26,499
Deferred acquisition costs		1,486,173		1,393,681
Property and equipment, at cost less accumulated depreciation		284,294		283,762
Deferred income taxes, net		8,909		60,321
Goodwill		828,445		828,523
Value of business acquired		186,512		191,929
Other assets		206,172		195,958
Assets held in separate accounts		3,794,806		3,805,058

Total assets	$	23,704,277	$	23,728,319

See the accompanying notes to the consolidated financial statements

Assurant, Inc. and Subsidiaries
Consolidated Balance Sheets
At March 31, 2004 (unaudited) and December 31, 2003


	March 31,			December 31,
	2004			2003
	(in thousands except number
	of shares and per share amounts)
Liabilities
Future policy benefits and expenses	$	6,162,963		$	6,235,140
Unearned premiums		3,170,594			3,133,847
Claims and benefits payable		3,503,805			3,512,809
Commissions payable		269,416			371,074
Reinsurance balances payable		133,694			110,063
Funds held under reinsurance		263,874			200,384
Deferred gain on disposal of businesses		372,855			387,353
Accounts payable and other liabilities		1,396,161			1,370,104
Tax payable		90,916			—
Debt (note 4)		971,576			1,750,000
Mandatorily redeemable preferred securities of subsidiary trusts		—			196,224
Mandatorily redeemable preferred stock		24,160			24,160
Liabilities related to separate accounts		3,794,806			3,805,058

Total liabilities		20,154,820			21,096,216
Commitments and contingencies (note 9)		—			—
Stockholders’ equity
Common stock, par value $.01 per share, 800,000,000 shares authorized, 142,268,106 and 109,222,276 shares issued, 142,208,676 and 109,222,276 shares outstanding at March 31, 2004 and December 31, 2003, respectively		1,423			1,092
Additional paid-in capital		2,790,440			2,063,763
Retained earnings		343,099			248,721
Unamortized restricted stock compensation		(1,265	)		—
Accumulated other comprehensive income		415,760			318,527

Total stockholders’ equity		3,549,457			2,632,103

Total liabilities and stockholders’ equity	$	23,704,277		$	23,728,319

See the accompanying notes to the consolidated financial statements

Assurant, Inc. and Subsidiaries
Consolidated Statement of Operations (Unaudited)
Three Months Ended March 31, 2004 and 2003


	Three Months Ended March 31,
	2004		2003
	(in thousands except number of
	shares and per share amounts)
Revenues
Net earned premiums and other considerations	$	1,625,238	$	1,502,963
Net investment income		153,824		151,521
Net realized gain (loss) on investments		14,224		(4,978	)
Amortization of deferred gain on disposal of businesses		14,497		19,308
Fees and other income		49,777		62,926

Total revenues		1,857,560		1,731,740
Benefits, losses and expenses
Policyholder benefits		968,965		888,763
Amortization of deferred acquisition costs and value of business acquired		159,366		139,159
Underwriting, general and administrative expenses		574,142		563,820
Interest expense		10,163		—
Distributions on mandatorily redeemable preferred securities of subsidiary trusts		2,163		29,631

Total benefits, losses and expenses		1,714,799		1,621,373

Income before income taxes		142,761		110,367
Income taxes		48,383		37,130

Net income	$	94,378	$	73,237

Earnings per share:
Weighted average of basic and diluted shares of common stock outstanding		129,521,599		109,222,276
Net income per share:
Basic and Diluted
Net income	$	0.73	$	0.67

See the accompanying notes to the consolidated financial statements

Assurant, Inc. and Subsidiaries
Consolidated Statement of Changes in Stockholders’ Equity
From December 31, 2003 through March 31, 2004 (unaudited)


										Accumulated
			Additional				Unamortized			Other				Shares of
	Common		Paid-in		Retained		Restricted Stock			Comprehensive				Common
	Stock		Capital		Earnings		Compensation			Income		Total		Stock Issued
					(in thousands except number of shares)
Balance, December 31, 2003	$	1,092	$	2,063,763	$	248,721	$	—		$	318,527	$	2,632,103		109,222,276
Issuance of common stock		330		725,161		—		—			—		725,491		32,976,854
Issuance of restricted stock		1		1,516		—		(1,517	)		—		—		68,976
Amortization of restricted stock compensation		—		—		—		252			—		252		—
Comprehensive income:
Net income		—		—		94,378		—			—		94,378		—
Net change in unrealized gains on securities		—		—		—		—			93,840		93,840		—
Foreign currency translation		—		—		—		—			3,393		3,393		—

Total comprehensive income													191,611

Balance, March 31, 2004	$	1,423	$	2,790,440	$	343,099	$	(1,265	)	$	415,760	$	3,549,457		142,268,106

See the accompanying notes to the consolidated financial statements

Assurant, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
Three Months Ended March 31, 2004 and 2003 (unaudited)


	Three Months Ended
	March 31,
	2004			2003
	(in thousands except number of shares
	and per share amounts)
Net cash provided by operating activities	$	177,341		$	271,595
Investing activities
Sales of:
Fixed maturities available for sale		479,321			253,825
Equity securities available for sale		25,450			25,544
Property and equipment		4			3,440
Other invested assets		47,854			15,145
Maturities, prepayments, and scheduled redemption of:
Fixed maturities available for sale		160,510			315,629
Purchases of:
Fixed maturities available for sale		(654,188	)		(834,314	)
Equity securities available for sale		(93,690	)		(122,544	)
Property and equipment		(13,316	)		(16,546	)
Other invested assets		(91,958	)		(33,495	)
Change in commercial mortgage loans on real estate		(43,270	)		(15,539	)
Change in short term investments		(129,091	)		287,173
Change in policy loans		(360	)		(384	)

Net cash (used in) investing activities		(312,734	)		(122,066	)
Financing activities
Repayment of preferred securities of subsidiary trusts		(196,224	)		—
Redemption of mandatorily redeemable preferred stock		—			(500	)
Issuance of debt		971,538			—
Issuance of common stock		725,743			—
Repayment of debt		(1,750,000	)		—
Dividends paid		—			(20,823	)
Other		—			(263	)

Net cash (used in) financing activities		(248,943	)		(21,586	)
Change in cash and cash equivalents		(384,336	)		127,943
Cash and cash equivalents at beginning of period		958,197			610,694

Cash and cash equivalents at end of period	$	573,861		$	738,637

See the accompanying notes to the consolidated financial statements

Assurant, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2004 and 2003
(Unaudited)

Nature of Operations

Assurant, Inc., (formerly Fortis, Inc.) (the “Company”) is a holding company provider of specialized insurance products and related services in North America and selected other markets. At January 1, 2004, Fortis, Inc. was incorporated in Nevada and was indirectly wholly owned by Fortis N.V. of the Netherlands and Fortis SA/NV of Belgium (collectively, “Fortis”) through their affiliates, including their wholly owned subsidiary, Fortis Insurance N.V.

On February 5, 2004, Fortis sold approximately 65% of its ownership interest in Assurant, Inc. via an Initial Public Offering (IPO). In connection with the IPO, Fortis, Inc. was merged into Assurant, Inc., a Delaware corporation, which was formed solely for the purpose of the redomestication of Fortis, Inc. After the merger, Assurant, Inc. became the successor to the business, operations and obligations of Fortis, Inc. Assurant, Inc., is traded on the New York Stock Exchange under the symbol AIZ.

The following events occurred in connection with the merger: each share of the existing Class A Common Stock of Fortis, Inc. was exchanged for 10.75882039 shares of Common Stock of Assurant, Inc.; the automatic conversion of the shares of Class B Common Stock and Class C Common Stock into an aggregate of 25,841,418 shares of Common Stock of Assurant, Inc.; each share of the existing Series B Preferred Stock of Fortis, Inc. was exchanged for one share of Series B Preferred Stock of Assurant, Inc.; each share of the existing Series C Preferred Stock of Fortis, Inc. was exchanged for one share of Series C Preferred Stock of Assurant, Inc.

The following events occurred in connection with the Company’s IPO: (1) redeemed the outstanding $196,224 of mandatorily redeemable preferred securities of subsidiary trusts in January 2004, (2) issued 68,976 restricted shares of Common Stock of Assurant, Inc. to certain officers of the Company, and (3) issued 32,976,854 shares of Common Stock of Assurant, Inc. to Fortis Insurance N.V. simultaneously with the closing of the IPO in exchange for a $725,500 capital contribution based on the public offering price of the Company’s common stock. The Company used the proceeds of the capital contribution to repay the $650,000 of outstanding indebtedness under the $650,000 senior bridge credit facility and $75,500 of outstanding indebtedness under the $1,100,000 senior bridge credit facility. The Company repaid a portion of the $1,100,000 senior bridge credit facility with $49,500 in cash. On February 18, 2004, the Company refinanced $975,000 of the remaining $1,100,000 senior bridge credit facility with the proceeds of the issuance of two senior long-term notes (see Note 4).

Through its operating subsidiaries, the Company provides creditor-placed homeowners insurance, manufactured housing homeowners insurance, debt protection administration, credit insurance, warranties and extended service contracts, individual health and small employer group health insurance, group dental insurance, group disability insurance, group life insurance and prefunded funeral insurance.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, these statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

Assurant, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2004 and 2003
(Unaudited)

In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair statement have been included. Certain prior period amounts have been reclassified to conform to the 2004 presentation.

Dollar amounts are presented in U.S. dollars and all amounts are in thousands, except for number of shares and per share amounts.

The consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries. All significant inter-company transactions and balances are eliminated in consolidation.

Operating results for the three months ended March 31, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. The accompanying interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2003.

Recent Accounting Pronouncements

On July 7, 2003, the Accounting Standards Executive Committee (AcSEC) of the American Institute of Certified Public Accountants (AICPA) issued Statement of Position 03-1,Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long Duration Contracts and for Separate Accounts(“SOP 03-1”). SOP 03-1 provides guidance on a number of topics unique to insurance enterprises, including separate account presentation, interest in separate accounts, gains and losses on the transfer of assets from the general account to a separate account, liability valuation, returns based on a contractually referenced pool of assets or index, accounting for contracts that contain death or other insurance benefit features, accounting for reinsurance and other similar contracts, accounting for annuitization benefits and sales inducements to contract holders. SOP 03-1 was adopted by the Company on January 1, 2004. The adoption of this statement did not have a material impact on the Company’s financial position or the results of operations.

Debt

In February 2004, the Company issued two series of senior notes with an aggregate principal amount of $975,000. The Company received net proceeds from this transaction of $971,538, which represents the principal amount less the discount. The discount will be amortized over the life of the notes. The first series is $500,000 in principal amount, bears interest at 5.63% per year and is payable in a single installment due February 15, 2014 and was issued at a 0.11% discount. The second series is $475,000 in principal amount, bears interest at 6.75% per year and is payable in a single installment due February 15, 2034 and was issued at a 0.61% discount. Interest on the senior notes is payable semi-annually on February 15 and August 15 of each year, commencing August 15, 2004. The senior notes are unsecured obligations and rank equally with all of the Company’s other senior unsecured indebtedness. The senior notes are not redeemable prior to maturity. The Company filed a registration statement under the Securities Act of 1933 on May 4, 2004 to permit the exchange of the senior notes for registered notes having identical terms. This registration statement became effective on May 12, 2004.

Assurant, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2004 and 2003
(Unaudited)

The interest expense accrued at March 31, 2004 relating to the senior notes was $6,688.

In March 2004, the Company established a $500,000 commercial paper program, which is available for working capital and other general corporate purposes. The Company’s subsidiaries do not maintain commercial paper or other borrowing facilities at their level. This program is backed up by a $500,000 senior revolving credit facility with a syndicate of banks arranged by Banc One Capital Markets, Inc. and Citigroup Global Market, Inc., which was established on January 30, 2004. The revolving credit facility is unsecured and is available until February 2007, so long as the Company is in compliance with all the convenants. This facility is also available for general corporate purposes, but to the extent used thereto, would be unavailable to back up the commercial paper program. The Company did not use the commercial paper program or the revolving credit facility during the three months ended March 31, 2004 and no amounts are outstanding.

The revolving credit facility contains restrictive covenants. The terms of revolving credit facility also require that the Company maintain certain specified minimum ratio and thresholds. As of March 31, 2004 the Company is in compliance with all convenants and the Company maintained all specified minimum ratios and thresholds.

Stock Based Compensation

Stock Option Plan

In contemplation of the IPO, the Company’s Stock Option Plan was terminated effective September 22, 2003, and all stock options thereunder were cancelled in exchange for a payment of the fair value of such options, as determined by an independent third party. Payments totaling $2,237 were made in the fourth quarter of 2003. There is no further obligation associated with the Company’s Stock Option Plan.

The Company accounted for the Stock Option Plan as prescribed by APB Opinion No. 25,Accounting for Stock Issued to Employees, (“APB 25”) and related interpretations. Accordingly, compensation cost was charged to income over the service period (vesting period) and was adjusted for subsequent changes in the market value of the stock that were subsequently amortized over the vesting period.

Assurant, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2004 and 2003
(Unaudited)

The following pro forma information of net income and net income per share amounts were determined as if the Company had accounted for the Stock Option Plan under the fair value method of FAS 123:


	For the Three Months
	Ended March 31,
	2003
Net income as reported	$	73,237
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(158	)

Pro forma net income	$	73,079

Earning per share:
Basic and diluted net income per share as reported	$	0.67
Basic and diluted net income per share pro forma	$	0.67

2004 Long-Term Incentive Plan

The 2004 Long-Term Incentive Plan authorizes the granting of awards to employees, officers, and directors. Upon closing of the IPO, the Company issued 68,976 restricted shares of Common Stock of Assurant, Inc. to certain officers and directors of the Company. The Board of Directors received 9,546 of those shares, which are fully vested. The remaining 59,430 shares will vest and be expensed over a three-year period. The Company, in accounting for the restricted shares, set up a contra equity account called “Unamortized Restricted Stock Compensation” in the stockholders’ equity section of the balance sheet for $1,517. The $1,517 will be expensed over a three year period in line with the vesting of these shares. The expense recorded for the period ended March 31, 2004 was $252.

Assurant, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2004 and 2003
(Unaudited)

Retirement and Other Employee Benefits

The components of net periodic benefits cost for March 31, 2004 and 2003 were as follows:


	Pension Benefits						Retirement Health Benefits
	2004			2003			2004			2003
Service cost	$	4,412		$	3,817		$	570		$	578
Interest cost		4,835			4,486			788			786
Expected return on plan assets		(5,522	)		(4,858	)		(135	)		(36	)
Amortization of prior service cost		739			740			327			327
Amortization of net loss		711			552			—			—

Net periodic benefit cost	$	5,175		$	4,737		$	1,550		$	1,655

The Company previously disclosed in its financial statements for the year ended December 31, 2003, that it expected to contribute $11,000 to its pension plan and $1,200 to its retirement health benefit plan in 2004. As of March 31, 2004, the Company had not made any contributions to the pension plan and contributed $300 to the retirement health benefit plan. The Company expects to contribute $6,000 and $300 to its pension plan and retirement health benefit plan, respectively, in the second quarter of 2004.

Segment Information

The Company has five reportable segments, which are defined based on the nature of the products and services offered: Solutions, Health, Employee Benefits, Preneed, and Corporate and Other. Solutions provides credit insurance, including life, disability and unemployment, debt protection administration services, creditor-placed homeowners insurance and manufactured housing homeowners insurance. Health provides individual, short-term and small group health insurance. Employee Benefits provides employee-paid dental insurance and employer-paid dental insurance, disability and life insurance products and related services. Preneed provides life insurance policies and annuity products that provide benefits to fund pre-arranged funerals. Corporate and Other includes activities of the holding company, financing expenses, net realized gains (losses) on investments and interest income earned from short-term investments held. Corporate and Other also includes the amortization of deferred gains associated with the portions of sales of Fortis Financial Group (“FFG”) and Long-Term Care (“LTC”) through reinsurance agreements and interest income from surplus the Company is required to carry related to FFG & LTC.

The Company evaluates performance based on segment income after-tax excluding realized gains (losses) on investments. The Company determines reportable segments in a manner consistent with the way the Company organizes for purposes of making operating decisions and assessing performance.

Assurant, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2004 and 2003
(Unaudited)

As of January 1, 2004, the Company changed the invested assets allocation methodology. Previously, the Company allocated a notional amount of invested assets to the segments primarily based on future policy benefits, claims and unearned premiums, and capital allocated to each segment. As of January 1, 2004, the Company primarily allocates invested assets based on the actual investment portfolios supporting the segments. This change resulted in an increase in investment income of $1, $3,049, $44 and $1,764 in Assurant Solutions, Assurant Health, Assurant Employee Benefits and Assurant Preneed, respectively, with a decrease in investment income of $4,858 in Corporate and Other at March 31, 2004. The Company assigns net deferred acquisition costs, value of businesses acquired, reinsurance recoverables, and other assets and liabilities to the respective segments where those assets or liabilities originate.

On May 3, 2004, CORE, Inc., a subsidiary which is part of the Employee Benefits Segment, sold the assets of its WorkAbility Division to Broadspire Services, Inc. and Broadspire Management Services, Inc. The selling price is $3,536 in cash and the estimated net loss on the sale is $9,400 pre-tax.

Assurant, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2004 and 2003
(Unaudited)

The following tables summarize selected financial information by segment:


	Three months ended March 31, 2004
						Employee				Corporate &
	Solutions			Health		Benefits		Preneed		Other			Consolidated
Revenues
Net earned premiums and other considerations	$	623,065		$	550,947	$	318,044	$	133,182	$	—		$	1,625,238
Net investment income		44,759			16,947		35,722		50,177		6,219			153,824
Net realized gains on investments		—			—		—		—		14,224			14,224
Amortization of deferred gain on disposal of businesses		—			—		—		—		14,497			14,497
Fees and other income		26,859			9,355		10,384		2,041		1,138			49,777

Total revenues		694,683			577,249		364,150		185,400		36,078			1,857,560
Benefits, losses and expenses
Policyholder benefits		231,576			356,115		244,326		136,948		—			968,965
Amortization of deferred acquisition costs and value of business acquired		119,606			10,989		1,515		27,256		—			159,366
Underwriting, general and administrative expenses		284,596			154,412		97,830		11,257		26,047			574,142
Interest expense		—			—		—		—		10,163			10,163
Distributions on preferred securities of subsidiary trusts		—			—		—		—		2,163			2,163

Total benefits, losses and expenses		635,778			521,516		343,671		175,461		38,373			1,714,799
Segment income (loss) before income tax		58,905			55,733		20,479		9,939		(2,295	)		142,761
Income taxes		18,852			19,025		7,229		3,483		(206	)		48,383
									��
Segment income (loss) after tax	$	40,053		$	36,708	$	13,250	$	6,456	$	(2,089	)

Net income													$	94,378

Segment Assets:			As of March 31, 2004

Segment assets, excluding goodwill	$	7,098,829		$	1,513,434	$	2,636,917	$	3,971,693	$	7,654,959		$	22,875,832

Goodwill														828,445

Total assets													$	23,704,277

Assurant, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2004 and 2003
(Unaudited)


	Three months ended March 31, 2003
						Employee				Corporate &
	Solutions			Health		Benefits		Preneed		Other			Consolidated
Revenues
Net earned premiums and other considerations	$	571,531		$	477,145	$	320,279	$	134,008	$	—			$	1,502,963
Net investment income		50,490			12,594		34,520		45,110		8,807				151,521
Net realized losses on investments		—			—		—		—		(4,978	)			(4,978	)
Amortization of deferred gain on disposal of businesses		—			—		—		—		19,308				19,308
Fees and other income		37,399			7,237		16,773		1,245		272				62,926

Total revenues		659,420			496,976		371,572		180,363		23,409				1,731,740
Benefits , losses and expenses
Policyholder benefits		197,113			312,913		247,512		131,225		—				888,763
Amortization of deferred acquisition costs and value of business acquired		95,473			17,715		—		25,971		—				139,159
Underwriting, general and administrative expenses		315,550			118,340		111,539		9,098		9,293				563,820
Distributions on preferred securities of subsidiary trusts		—			—		—		—		29,631				29,631

Total benefits, losses and expenses		608,136			448,968		359,051		166,294		38,924				1,621,373
Segment income (loss) before income tax		51,284			48,008		12,521		14,069		(15,515	)			110,367
Income taxes		16,671			16,466		4,383		4,937		(5,327	)			37,130

Segment income (loss ) after tax	$	34,613		$	31,542	$	8,138	$	9,132	$	(10,188	)

Net Income														$	73,237

Segment Assets :			As of December 31, 2003

Segment assets, excluding goodwill	$	6,885,077		$	1,129,614	$	2,412,924	$	3,718,354	$	8,753,827			$	22,899,796

Goodwill															828,523

Total assets														$	23,728,319

Assurant, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2004 and 2003
(Unaudited)

8. Income Taxes

The effective tax rate for the three months ended March 31, 2004 was 33.9% as compared to 33.6% for the three months ended March 31, 2003.

9. Commitments and Contingencies

In the normal course of business, letters of credit are issued to support reinsurance arrangements and other corporate initiatives. These letters of credit are supported by commitments with financial institutions. The Company had approximately $60,069 of letters of credit outstanding as of March 31, 2004.

The Company is regularly involved in litigation in the ordinary course of business, both as a defendant and as a plaintiff. The Company may from time to time be subject to a variety of legal and regulatory actions relating to the Company’s current and past business operations. While the Company cannot predict the outcome of any pending or future litigation, examination or investigation, the Company does not believe that any pending matter will have a material adverse effect on the Company’s financial condition or results of operations.

The Solutions segment is subject to a number of pending actions, primarily in the State of Mississippi, many of which allege that the Company’s credit insurance products were packaged and sold with lenders’ products without buyer consent. The judicial climate in Mississippi is such that the outcome of these cases is extremely unpredictable. The Company has been advised by legal counsel that the Company has meritorious defenses to all claims being asserted against the Company. The Company believes, based on information currently available, that the amounts accrued are adequate.

On October 1, 2003, a grand jury in Mower County, Minnesota, issued an indictment of American Bankers Insurance Company (“ABIC”), part of the Solutions segment, and two of its officers. The indictment alleged that ABIC and its two named corporate officers each violated the Minnesota Fair Campaign Practices Act in connection with two contributions by ABIC to the Republican National State Election Committee totaling $15. On April 5, 2004, the prosecuting authorities voluntarily dismissed all charges against ABIC and the two officers. ABIC, in turn, agreed to reimburse Mower County for costs of investigation and prosecution, these costs are not material to the financial statements.

In addition, another part of the Solutions segment, American Reliable Insurance Company (“ARIC”), participated in certain excess of loss reinsurance programs in the London market and, as a result, reinsured certain personal accident, ransom and kidnap insurance risks from 1995 to 1997. ARIC and a foreign affiliate ceded a portion of these risks to other reinsurers (retrocessionaires). ARIC ceased reinsuring such business in 1997. However, certain risks continued beyond 1997 due to the nature of the reinsurance contracts written. ARIC and some of the other reinsurers involved in the programs are seeking to avoid certain treaties on various grounds, including material misrepresentation and non-disclosure by the ceding companies and intermediaries involved in the programs. Similarly, some of the retrocessionaires are seeking avoidance of certain treaties with ARIC and the other reinsurers and somereinsureds are seeking collection of disputed balances under some of the treaties. The disputes generally involve multiple layers of reinsurance, and allegations that the reinsurance programs involved

Assurant, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2004 and 2003
(Unaudited)

interrelated claims “spirals” devised to disproportionately pass claims losses to higher-level reinsurance layers. Many of the companies involved in these programs, including ARIC, are currently involved in negotiations, arbitration and/or litigation between multiple layers of retrocessionaires, reinsurers, ceding companies and intermediaries, including brokers, in an effort to resolve these disputes. Many of those disputes relating to the 1995 program year, including those involving ARIC, were settled on December 3, 2003. Loss accruals previously established relating to the 1995 program year were adequate. However, the Company’s exposure under the 1995 program year was less significant than the exposure remaining under the 1996 and 1997 program years. The Company believes, based on information currently available, that the amounts accrued for currently outstanding disputes are adequate. This loss accrual is management’s best estimate. However, the inherent uncertainty of arbitrations and lawsuits, including the uncertainty of estimating whether any settlements the Company may enter into in the future would be on favorable terms, makes it difficult to predict the outcomes with certainty.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) addresses the financial condition of Assurant, Inc. and its subsidiaries (collectively, Assurant or the Company) as of March 31, 2004, compared with December 31, 2003, and its results of operations for the three months ended March 31, 2004, compared with the equivalent 2003 period. This discussion should be read in conjunction with Assurant’s MD&A and annual audited financial statements as of December 31, 2003 included in the Company’s Form 10-K for the year ended December 31, 2003 filed with the U.S. Securities and Exchange Commission (hereafter referred to as the Company’s 2003 Form 10-K) and March 31, 2004 unaudited consolidated financial statements and related notes included elsewhere in this Form 10-Q.

Some of the statements in this MD&A and elsewhere in this report may contain forward-looking statements that reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this report are based upon our historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in this report. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any forward-looking statements you read in this report reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, financial condition, growth strategy and liquidity.

Company Profile

As detailed in our 2003 Form 10-K, we pursue a differentiated strategy of building leading positions in specialized market segments for insurance products and related services in North America and selected other markets. We provide: creditor-placed homeowners insurance; manufactured housing homeowners insurance; debt protection administration; credit insurance; warranties and extended service contracts; individual health and small employer group health insurance; group dental insurance; group disability insurance; group life insurance and pre-funded funeral insurance.

We report our results through five segments: Assurant Solutions, Assurant Health, Assurant Employee Benefits, Assurant Preneed and Corporate and Other.

Our reportable segments’ revenues as a percentage of total revenues, were as follows:


	Three Months Ended March 31
	2004			2003
Assurant Solutions		37	%		38	%
Assurant Health		31	%		29	%
Assurant Employee Benefits		20	%		22	%
Assurant Preneed		10	%		10	%
Corporate and Other		2	%		1	%

Critical Factors Affecting Results

Our profitability depends on the adequacy of our product pricing, underwriting and the accuracy of our methodology for the establishment of reserves for future policyholder benefits and claims, returns on invested assets and our ability to manage our expenses. As such, factors affecting these items may have a material adverse effect on our results of operations or financial condition.

Revenues

We derive our revenues primarily from the sale of our insurance policies and, to a lesser extent, fee income by providing administrative services to certain clients. Sales of insurance policies are recognized in revenue as earned premiums while sales of administrative services are recognized as fee income. In late 2000, the majority of our credit insurance clients began a transition from the purchase of our credit insurance products from which we earned premium revenue to debt protection administration programs, from which we earn fee income. Debt protection administration programs include services for non-insurance products that cancel or defer the required monthly payment on outstanding loans when covered events occur.

Our premium and fee income is supplemented by income earned from our investment portfolio. We recognize revenue from interest payments, dividends and sales of investments. Our investment portfolio is primarily invested in fixed maturity securities. Both investment income and realized capital gains on these investments can be significantly impacted by changes in interest rates.

In addition, Assurant Preneed generally writes whole life insurance policies with increasing death benefits and obtains much of its profits through interest rate spreads. Interest rate spreads refer to the difference between the death benefit growth rates on pre-funded funeral insurance policies and the investment returns generated on the assets we hold related to those policies.

Expenses

Our expenses primarily consist of policyholder benefits, selling, underwriting and general expenses, interest expense and distributions on preferred securities of subsidiary trusts.

Selling, underwriting and general expenses consist primarily of commissions, premium taxes, licenses, fees, amortization of deferred acquisition costs (DAC) and value of businesses acquired (VOBA) and general operating expenses.

Our profitability depends in large part on accurately predicting and pricing benefits, claims and other costs, including medical and dental costs. It also depends on our ability to manage future benefits and other costs through product design, underwriting criteria, utilization review or claims management, reinsurance protection and, in health and dental insurance, negotiation of favorable provider contracts. Changes in the composition of the kinds of work available in the economy, market conditions and numerous other factors may also materially adversely affect our ability to manage claim costs. As a result of one or more of these or other factors, claims could substantially exceed our expectations, which could have a material adverse effect on our business, results of operations and financial condition.

Regulation

Legislation or other regulatory reform that increases the regulatory requirements imposed on us or that changes the way we are able to do business may significantly harm our business or results of operations in the future. For example, some states have imposed new time limits for the payment of uncontested covered claims and require health care and dental service plans to pay interest on uncontested claims not paid promptly within the required time period. Some states have also granted their insurance regulatory agencies additional authority to impose monetary penalties and other sanctions on health and dental plans engaging in certain “unfair payment practices.” If we were to be unable for any reason to

comply with these requirements, it could result in substantial costs to us and may materially adversely affect our results of operations and financial condition.

Critical Accounting Policies

Our 2003 Form 10-K described our accounting policies that are critical to the understanding of our results of operations, financial condition and liquidity. The accounting policies described in the 2003 Form 10-K were consistently applied to the consolidated interim financial statements.

Recent Accounting Pronouncements

See – Financial Statement Footnote 3.

Results of Operations

Consolidated Overview

The table below presents information regarding our consolidated results of operations:


	For the Three Months
	Ended
	March 31,
	2004			2003
	(in millions)
Revenues:
Net earned premiums and other considerations	$	1,625		$	1,503
Net investment income		154			152
Net realized gains (losses) on investments		14			(5	)
Amortization of deferred gain on disposal of businesses		15			19
Fees and other income		49			63

Total revenues		1,857			1,732

Benefits, losses and expenses:
Policyholder benefits		(969	)		(889	)
Selling, underwriting and general expenses(1)		(734	)		(703	)
Interest expense		(10	)		—
Distributions on mandatorily redeemable preferred securities of subsidiary trusts		(2	)		(30	)

Total benefits, losses and expenses		(1,715	)		(1,622	)

Income before income taxes		142			110
Income taxes		(48	)		(37	)

Net income	$	94		$	73

(1)

Includes amortization of DAC and VOBA.

Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003

Total Revenues

Total revenues increased by $125 million, or 7%, from $1,732 million for the three months ended March 31, 2003, to $1,857 million for the three months ended March 31, 2004.

Net earned premiums and other considerations increased by $122 million, or 8%, from $1,503 million for the three months ended March 31, 2003, to $1,625 million for the three months ended March 31, 2004. The increase in net earned premiums and other considerations is primarily due to increases of $51 million and $74 million in Assurant Solutions and Assurant Health, respectively, with offsetting decreases of $2 million and $1 million in Assurant Employee Benefits and Assurant PreNeed, respectively. The increase in Assurant Solutions is primarily due to growth in specialty property and consumer protection products. The increase in Assurant Health is primarily due to growth in individual health insurance and small employer group health insurance businesses due to membership growth and premium rate increases.

Net investment income increased by $2 million, or 1%, from $152 million for the three months ended March 31, 2003, to $154 million for the three months ended March 31, 2004. The increase was primarily due to an increase in invested assets, partially offset by a decrease in investment yields driven by the lower interest rate environment. The yield on average invested assets was 5.43% for the three months ended March 31, 2004, as compared to 5.85% for the three months ended March 31, 2003. The average invested assets increased by approximately 9%.

Net realized gains (losses) on investments improved by $19 million from net realized losses of $5 million for the three months ended March 31, 2003, to net realized gains of $14 million for the three months ended March 31, 2004. Net realized gains (losses) on investments are comprised of both other-than-temporary impairments and realized capital gains (losses) on sales of securities. For the three months ended March 31, 2004, we had other-than-temporary impairments of $1 million as compared to $12 million for the three months ended March 31, 2003. There were no individual impairments in excess of $10 million for the three months ended March 31, 2004 and March 31, 2003.

Amortization of deferred gain on disposal of businesses decreased by $4 million, or 21%, from $19 million for the three months ended March 31, 2003, to $15 million for the three months ended March 31, 2004. The decrease was consistent with the run-off of the businesses ceded to The Hartford in 2001 and John Hancock in 2000.

Fees and other income decreased by $14 million, or 22%, from $63 million for the three months ended March 31, 2003, to $49 million for the three months ended March 31, 2004. The decrease was primarily due to decreases in Assurant Solutions and Assurant Employee Benefits. The decrease in Assurant Solutions was primarily from the discontinuance of certain unprofitable membership programs, lower fees generated from auto warranty and title administration products and $3 million of fees for a one time project recognized in 2003. The decrease in Assurant Employee Benefits was primarily from the loss of two customers by their CORE subsidiary, as well as the transition of a block of business from administrative fee only business to fully insured business.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased by $93 million, or 6%, from $1,622 million for the three months ended March 31, 2003, to $1,715 million for the three months ended March 31, 2004.

Policyholder benefits increased by $80 million, or 9%, from $889 million for the three months ended March 31, 2003, to $969 million for the three months ended March 31, 2004. The increase was primarily due to increases of $35 million, $43 million, and $6 million in Assurant Solutions, Assurant Health and Assurant PreNeed, respectively, with an offsetting decrease of $4 million in Assurant Employee Benefits. The increase in Assurant Solutions was primarily due to growth in consumer protection solution products, primarily warranty and extended service contracts businesses. The increase in Assurant Health was primarily due to growth in individual health insurance and small employer group health insurance businesses.

Selling, underwriting and general expenses increased by $31 million, or 4%, from $703 million for the three months ended March 31, 2003, to $734 million for the three months ended March 31, 2004. The increase was primarily due to increases of $29 million and $18 million in Assurant Health and Corporate and Other, respectively, with an offsetting decrease of $12 million in Assurant Employee Benefits. The increase in Assurant Health was primarily due to an increase in commissions caused by the increase in net earned premiums. The increase in Corporate and Other was primarily due to costs related to the initial public offering (IPO) in February and increased costs as a result of being a public company. The decrease in Assurant Employee Benefits was primarily due to increased capitalization of DAC in the first quarter of 2004, as well as non-recurring expenses incurred in the first quarter of 2003.

Interest expense increased by $10 million from zero for the three months ended March 31, 2003, to $10 million for the three months ended March 31, 2004. This increase is the result of the two senior bridge facilities we entered into in December 2003 and paid off in February 2004 and the two senior notes we issued in February 2004. See –Liquidity and Capital Resources.

Distributions on mandatorily redeemable preferred securities of subsidiary trusts decreased by $28 million, or 93%, from $30 million for the three months ended March 31, 2003, to $2 million for the three months ended March 31, 2004 due to the early redemption of the mandatorily redeemable preferred

securities of subsidiary trusts in mid-December 2003 of $1,250 million and in early January 2004 of $196 million.

Net Income

Net income increased by $21 million, or 29%, from $73 million for the three months ended March 31, 2003, to $94 million for the three months ended March 31, 2004.

Income taxes increased by $11 million, or 30%, from $37 million for the three months ended March 31, 2003, to $48 million for the three months ended March 31, 2004. The effective tax rate for the three months ended March 31, 2003 was 33.6% compared to 33.9% for the three months ended March 31, 2004.

Assurant Solutions

Overview

The table below presents information regarding Assurant Solutions’ segment results of operations:


	For the Three Months
	Ended
	March 31,
	2004			2003
	(in millions)
Revenues:
Net earned premiums and other considerations	$	623		$	572
Net investment income		45			50
Fees and other income		27			37

Total revenues		695			659

Benefits, losses and expenses:
Policyholder benefits		(232	)		(197	)
Selling, underwriting and general expenses		(404	)		(411	)

Total benefits, losses and expenses		(636	)		(608	)

Segment income before income tax		59			51
Income taxes		(19	)		(16	)

Segment income after tax	$	40		$	35

Net earned premiums and other considerations by major product groupings:
Specialty Property Solutions(1)	$	183		$	172
Consumer Protection Solutions(2)		440			400

Total	$	623		$	572

(1)		“Specialty Property Solutions” includes a variety of specialized property insurance programs that are coupled with differentiated administrative capabilities.

(2)		“Consumer Protection Solutions” includes an array of debt protection administration services, credit insurance programs and warranties and extended service contracts.

Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003

Total Revenues

Total revenues increased by $36 million, or 5%, from $659 million for the three months ended March 31, 2003, to $695 million for the three months ended March 31, 2004.

Net earned premiums and other considerations increased by $51 million, or 9%, from $572 million for the three months ended March 31, 2003, to $623 million for the three months ended March 31, 2004. This increase was primarily due to new clients and increased sales through growth in the existing clients. Consumer protection solutions products contributed $40 million in net earned premiums and other considerations primarily from growth in our warranty and extended service contracts business. Specialty property solutions products also contributed $11 million of additional net earned premiums and other considerations, primarily from growth in our creditor-placed and voluntary homeowners insurance products.

Net investment income decreased by $5 million, or 10%, from $50 million for the three months ended March 31, 2003, to $45 million for the three months ended March 31, 2004. The average portfolio yield dropped 101 basis points from 5.75% for the three months ended March 31, 2003, to 4.74% for the three months ended March 31, 2004 due to the lower interest rate environment. The average invested assets increased by approximately 8%.

Fees and other income decreased by $10 million, or 27%, from $37 million for the three months ended March 31, 2003, to $27 million for the three months ended March 31, 2004, primarily from the discontinuance in the latter part of 2003 of certain unprofitable membership programs and lower fees generated from our auto warranty and title administration products. Also, in the first quarter of 2003 we recognized $3 million of fees for a one time project.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased by $28 million, or 5%, from $608 million for the three months ended March 31, 2003, to $636 million for the three months ended March 31, 2004.

Policyholder benefits increased by $35 million, or 18%, from $197 million for the three months ended March 31, 2003, to $232 million for the three months ended March 31, 2004. Our consumer protection solutions products contributed approximately $31 million in additional costs and losses, primarily attributable to growth in our warranty and extended service contracts business. The increase was also due in part to growth in our specialty property solutions products, primarily our creditor-placed and voluntary homeowners insurance products.

Selling, underwriting and general expenses decreased by $7 million, or 2%, from $411 million for the three months ended March 31, 2003, to $404 million for the three months ended March 31, 2004. Commissions, taxes, licenses and fees decreased by $41 million primarily due to the change in business mix. General expenses increased by $10 million, primarily from increased business from our warranty and extended service contracts products and our creditor-placed homeowners insurance product. Amortization of DAC increased by $24 million. This increase was primarily due to the change in business mix from credit insurance business, of which a large portion has no commission deferral, to specialty property and warranty and extended service contract products which have deferral and subsequent amortization.

Segment Income After Tax

Segment income after tax increased by $5 million, or 14%, from $35 million for the three months ended March 31, 2003, to $40 million for the three months ended March 31, 2004.

Income taxes increased by $3 million, or 19%, from $16 million for the three months ended March 31, 2003, to $19 million for the three months ended March 31, 2004. This increase was primarily due to the increase in pre-tax income.

Assurant Health

Overview

The table below presents information regarding Assurant Health’s segment results of operations:


	For the Three Months
	Ended
	March 31,
	2004			2003
	(in millions except membership data)
Revenues:
Net earned premiums and other considerations	$	551		$	477
Net investment income		17			13
Fees and other income		9			7

Total revenues		577			497

Benefits, losses and expenses:
Policyholder benefits		(356	)		(313	)
Selling, underwriting and general expenses		(165	)		(136	)

Total benefits, losses and expenses		(521	)		(449	)

Segment income before income tax		56			48
Income taxes		(19	)		(16	)

Segment income after tax	$	37		$	32

Loss ratio(1)		64.6	%		65.6	%
Expense ratio(2)		29.5	%		28.1	%
Combined ratio(3)		93.1	%		92.7	%
Membership by product line (in thousands):
Individual		786			685
Small employer group		375			355

Total		1,161			1,040

(1)		The loss ratio is equal to policyholder benefits divided by net earned premiums and other considerations.

(2)		The expense ratio is equal to selling, underwriting and general expenses divided by net earned premiums and other considerations and fees and other income.

(3)		The combined ratio is equal to total benefits, losses and expenses divided by net earned premiums and other considerations and fees and other income.

Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003

Total Revenues

Total revenues increased by $80 million, or 16%, from $497 million for the three months ended March 31, 2003, to $577 million for the three months ended March 31, 2004.

Net earned premiums and other considerations increased by $74 million, or 16%, from $477 million for the three months ended March 31, 2003, to $551 million for the three months ended March 31, 2004. Net earned premiums attributable to our individual health insurance and small employer group health insurance businesses increased $50 million and $24 million, respectively, due to membership growth and premium rate increases.

Net investment income increased $4 million, or 31%, from $13 million for the three months ended March 31, 2003, to $17 million for the three months ended March 31, 2004. The average portfolio yield

decreased 42 basis points from 5.92% for the three months ended March 31, 2003, to 5.50% for the three months ended March 31, 2004, due to the lower interest rate environment. The average invested assets increased by approximately 45%.

Fees and other income increased by $2 million, or 29%, from $7 million for the three months ended March 31, 2003, to $9 million for the three months ended March 31, 2004, primarily due to additional insurance policy fees and higher fee-based product sales in individual markets, such as sales of our non-insurance health access discount cards.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased by $72 million, or 16%, from $449 million for the three months ended March 31, 2003, to $521 million for the three months ended March 31, 2004.

Policyholder benefits increased by $43 million, or 14%, from $313 million for the three months ended March 31, 2003, to $356 million for the three months ended March 31, 2004. This increase was consistent with the increase in net earned premiums. The loss ratio improved 100 basis points from 65.6% for the three months ended March 31, 2003, to 64.6% for the three months ended March 31, 2004, primarily due to a higher mix of individual health insurance business compared to small employer group health insurance business in 2004.

Selling, underwriting and general expenses increased by $29 million, or 21%, from $136 million for the three months ended March 31, 2003, to $165 million for the three months ended March 31, 2004. Commissions increased by $31 million corresponding to an increase in first year net earned premiums over the prior year. The expense ratio deteriorated by 140 basis points from 28.1% for the three months ended March 31, 2003, to 29.5% for the three months ended March 31, 2004, primarily related to increased commission expense due to growth in first year individual health insurance business.

Segment Income After Tax

Segment income after tax increased by $5 million, or 16%, from $32 million for the three months ended March 31, 2003, to $37 million for the three months ended March 31, 2004.

Income taxes increased by $3 million, or 19%, from $16 million for the three months ended March 31, 2003, to $19 million for the three months ended March 31, 2004. The increase was primarily due to the increase in pre-tax income.

Assurant Employee Benefits

Overview

The table below presents information regarding Assurant Employee Benefits’ segment results of operations:


	For the Three Months
	Ended
	March 31,
	2004			2003
	(in millions)
Revenues:
Net earned premiums and other considerations	$	318		$	320
Net investment income		36			35
Fees and other income		10			17

Total revenues		364			372

Benefits, losses and expenses:
Policyholder benefits		(244	)		(248	)
Selling, underwriting and general expenses		(100	)		(112	)

Total benefits, losses and expenses		(344	)		(360	)

Segment income before income tax		20			12
Income taxes		(7	)		(4	)

Segment income after tax	$	13		$	8

Loss ratio (1)		76.7	%		77.5	%
Expense ratio (2)		30.5	%		33.2	%
Net earned premiums and other considerations by major product groupings
Group dental	$	131		$	137
Group disability		124			118
Group life		63			65

Total	$	318		$	320

(1)		The loss ratio is equal to policyholder benefits divided by net earned premiums and other considerations.

(2)		The expense ratio is equal to selling, underwriting and general expenses divided by net earned premiums and other considerations and fees and other income.

Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003

Total Revenues

Total revenues decreased by $8 million, or 2%, from $372 million for the three months ended March 31, 2003, to $364 million for the three months ended March 31, 2004.

Net earned premiums decreased by $2 million, or 1%, from $320 million for the three months ended March 31, 2003, to $318 million for the three months ended March 31, 2004. Dental net earned premiums decreased by $6 million, primarily driven by slightly lower sales. Disability net earned premiums increased by $6 million, primarily driven by the transition of a block of business from administrative fee only business to fully insured business. Life net earned premiums decreased by $2 million, due to the non-renewal of certain unprofitable business and less new business due to continued pricing discipline.

Net investment income increased by $1 million, or 3%, from $35 million for the three months ended March 31, 2003, to $36 million for the three months ended March 31, 2004. The average portfolio

yield dropped 41 basis points from 6.42% for the three months ended March 31, 2003 to 6.01% for the three months ended March 31, 2004 due to the lower interest rate environment. The average invested assets increased by approximately 11%.

Fee income decreased by $7 million, or 41%, from $17 million for the three months ended March 31, 2003, to $10 million for the three months ended March 31, 2004. The decrease was driven by the loss of two customers by our CORE subsidiary, as well as the transition of a block of business from administrative fee only business to fully insured business.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses decreased by $16 million, or 4%, from $360 million for the three months ended March 31, 2003, to $344 million for the three months ended March 31, 2004.

Policyholder benefits decreased by $4 million, or 2%, from $248 million for the three months ended March 31, 2003, to $244 million for the three months ended March 31, 2004. The decrease was driven by favorable group life mortality experience, as well as lower group disability new claims incidence. The benefits loss ratio improved from 77.5% for the three months ended March 31, 2003, to 76.7% for the three months ended March 31, 2004.

Selling, underwriting, and general expenses decreased by $12 million, or 11%, from $112 million for the three months ended March 31, 2003, to $100 million for the three months ended March 31, 2004. The decrease was primarily due to the capitalization of additional categories of sales compensation in the first quarter of 2004, as well as non-recurring expenses that were incurred in the first quarter of 2003. The expense ratio decreased from 33.2% for the three months ended March 31, 2003, to 30.5% for the three months ended March 31, 2004.

Segment Income After Tax

Segment operating income after tax increased by $5 million, or 63%, from $8 million for the three months ended March 31, 2003, to $13 million for the three months ended March 31, 2004.

Income tax expense increased by $3 million, or 75%, from $4 million for the three months ended March 31, 2003, to $7 million for the three months ended March 31, 2004. The increase was primarily due to the increase in pre-tax income.

Assurant PreNeed

Overview

The table below presents information regarding Assurant PreNeed’s segment results of operations:


	For the Three Months
	Ended
	March 31,
	2004			2003
	(in millions)
Revenues:
Net earned premiums and other considerations	$	133		$	134
Net investment income		50			45
Fees and other income		2			1

Total revenues		185			180

Benefits, losses and expenses:
Policyholder benefits		(137	)		(131	)
Selling, underwriting and general expenses		(38	)		(35	)

Total benefits, losses and expenses		(175	)		(166	)

Segment income before income tax		10			14
Income taxes		(3	)		(5	)

Segment income after tax	$	7		$	9

Net earned premiums and other considerations by channel
AMLIC	$	72		$	72
Independent		61			62

Total	$	133		$	134

Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003

Total Revenues

Total revenues increased by $5 million, or 3%, from $180 million for the three months ended March 31, 2003, to $185 million for the three months ended March 31, 2004.

Net earned premiums and other considerations decreased by $1 million, or 1%, from $134 million for the three months ended March 31, 2003, to $133 million for the three months ended March 31, 2004.

Net investment income increased by $5 million, or 11%, from $45 million for the three months ended March 31, 2003, to $50 million for the three months ended March 31, 2004. The average portfolio yield decreased 24 basis points from 6.51% for the three months ended March 31, 2003 to 6.27% for the three months ended March 31, 2004, primarily due to the lower interest rate environment. The average invested assets increased by approximately 16%.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased by $9 million, or 5%, from $166 million for the three months ended March 31, 2003, to $175 million for the three months ended March 31, 2004.

Policyholder benefits increased by $6 million, or 5%, from $131 million for the three months ended March 31, 2003, to $137 million for the three months ended March 31, 2004. This increase was primarily due to a larger inforce block of business.

Selling, underwriting and general expenses increased by $3 million, or 9%, from $35 million for the three months ended March 31, 2003, to $38 million for the three months ended March 31, 2004. Amortization of DAC and VOBA expense increased by $3 million for the three months ended March 31, 2004, principally due to a larger in force block of business and increased sales of single pay policies versus plans paid over a three-, five- or ten-year period.

Segment Income After Tax

Segment income after tax decreased by $2 million, or 22%, from $9 million for the three months ended March 31, 2003, to $7 million for the three months ended March 31, 2004.

Income taxes decreased by $2 million, or 40%, from $5 million for the three months ended March 31, 2003, to $3 million for the three months ended March 31, 2004. This increase was primarily due to the increase in pre-tax income.

Corporate and Other

Overview

The Corporate and Other segment includes activities of the holding company, financing expenses, net realized gains (losses) on investments and interest income earned from short-term investments held. The Corporate and Other segment also includes the amortization of deferred gains associated with the sales of Fortis Financial Group (FFG) (a business we sold via reinsurance on April 2, 2001) and Long Term Care (LTC) (a business we sold via reinsurance on March 1, 2000), and interest income from surplus we are required to carry related to FFG and LTC.

The table below presents information regarding Corporate and Other’s segment results of operations:


	For the Three Months
	Ended
	March 31,
	2004			2003
	(in millions)
Revenues:
Net investment income	$	6		$	9
Net realized gains (losses) on investments		14			(5	)
Amortization of deferred gains on disposal of businesses		15			19
Fees and other income		1			1

Total revenues		36			24

Benefits, losses and expenses:
Selling, underwriting and general expenses		(27	)		(9	)
Interest expense		(10	)		—
Distributions on mandatorily redeemable preferred securities of subsidiary trusts		(2	)		(30	)

Total benefits, losses and expenses		(39	)		(39	)

Segment income (loss) before income tax		(3	)		(15	)
Income taxes		—			4

Segment income (loss) after tax	$	(3	)	$	(11	)

As of March 31, 2004, we had approximately $373 million (pre-tax) of deferred gains that had not yet been amortized. We expect to amortize deferred gains from dispositions through 2031. The deferred gains are being amortized in a pattern consistent with the expected future reduction of the in force blocks of

business ceded to The Hartford and John Hancock. This reduction is expected to be more rapid in the first few years after sale and to be slower as the liabilities in the blocks decrease.

Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003

Total Revenues

Total revenues increased by $12 million, or 50%, from $24 million for the three months ended March 31, 2003, to $36 million for the three months ended March 31, 2004.

Net investment income decreased by $3 million, or 33%, from $9 million for the three months ended March 31, 2003, to $6 million for the three months ended March 31, 2004. This decrease is primarily due to the lower interest rate environment and a decrease in average invested assets.

Net realized gains (losses) on investments improved by $19 million, from net realized losses of $5 million for the three months ended March 31, 2003, to net realized gains of $14 million for the three months ended March 31, 2004. Net realized gains (losses) on investments are comprised of both other-than-temporary impairments and realized capital gains (losses) on sales of securities. For the three months ended March 31, 2004, we had other-than-temporary impairments of $1 million as compared to $12 million for the three months ended March 31, 2003. There were no individual impairments in excess of $10 million for the three months ended March 31, 2004 and March 31, 2003.

Amortization of deferred gain on disposal of businesses decreased by $4 million, or 21%, from $19 million for the three months ended March 31, 2003, to $15 million for the three months ended March 31, 2004. This decrease was consistent with the run-off of the businesses ceded to The Hartford in 2001 and John Hancock in 2000.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses for the three months ended March 31, 2004 remained unchanged from the three months ended March 31, 2003 at $39 million.

Selling, underwriting and general expenses increased by $18 million, or 200%, from $9 million for the three months ended March 31, 2003, to $27 million for the three months ended March 31, 2004. This increase was primarily due to $7 million of costs related to being a public company and $4 million of costs related to the IPO in February.

Segment Loss After Tax

Segment loss after tax improved by $8 million, or 75%, from $11 million for the three months ended March 31, 2003, to $3 million for the three months ended March 31, 2004.

Income tax benefit decreased by $4 million, or 100%, from $4 million for the three months ended March 31, 2003, to zero for the three months ended March 31, 2004. This decrease was primarily due to the decrease in pre-tax loss.

Investments

The following table shows the carrying value of our investments by type of security as of the dates indicated:


	As of					As of
	March 31,					December 31,
	2004					2003
			(in millions)
Fixed maturities	$	8,884		78	%	$	8,729	80	%
Equity securities		531		5			456	4
Commercial mortgage loans on real estate		976		9			933	9
Policy loans		69		1			68	1
Short-term investments		405		3			276	2
Other investments		505		4			462	4

Total investments	$	11,370		100	%	$	10,924	100	%

Of our fixed maturity securities shown above, 68% and 70% (based on total fair value) were invested in securities rated “A” or better as of March 31, 2004 and December 31, 2003, respectively.

The following table provides the cumulative net unrealized gains (pre-tax) on fixed maturity securities and equity securities as of the dates indicated:


	As of		As of
	March 31,		December 31,
	2004		2003
	(in millions)
Fixed maturities:
Amortized cost	$	8,251	$	8,230
Net unrealized gains		633		499

Fair value	$	8,884	$	8,729

Equities:
Cost	$	505	$	437
Net unrealized gains		26		19

Fair value	$	531	$	456

Net unrealized gains on fixed maturity securities increased by $134 million, or 27%, from December 31, 2003 to March 31, 2004. The increase in net unrealized gains was primarily due to the decline in investment grade corporate security yield spreads combined with an increase in Treasury yields. Spreads on investment grade corporate securities increased by approximately 10 basis points while yields on 10-year Treasury securities decreased by 41 basis points between December 31, 2003 and March 31, 2004.

Net unrealized gains on equity securities increased by $7 million, or 37%, from December 31, 2003, to March 31, 2004.

Reserves

The following table presents reserve information as of the dates indicated:


	As of		As of
	March 31,		December 31,
	2004		2003
	(in millions)
Future policy benefits and expenses	$	6,163	$	6,235
Unearned premiums		3,171		3,134
Claims and benefits payable		3,504		3,513

Total policy liabilities	$	12,838	$	12,882

Future policy benefits and expenses decreased by $72 million, or 1%, from December 31, 2003 to March 31, 2004. This was primarily the result of decreases in future policy benefits in our universal life and annuities no longer offered and LTC disposed business, offset by growth in pre-funded funeral life insurance policies and investment-type annuity contracts.

Unearned premiums increased by $37 million, or 1%, from December 31, 2003 to March 31, 2004. Claims and benefits payable decreased by $9 million, less than 1%, from December 31, 2003 to March 31, 2004.

Long Duration

The following discusses the reserving process for our major long duration product line.

Pre-Funded Funeral Life Insurance

Reserves for future policy benefits are recorded as the present value of future benefits to policyholders and related expenses less the present value of future net premiums. Reserve assumptions are selected using best estimates for expected investment yield, inflation, mortality and withdrawal rates. These assumptions reflect current trends, are based on Company experience and include provision for possible unfavorable deviation. An unearned premium reserve is also recorded which represents the balance of the excess of gross premiums over net premiums that is still to be recognized in future years income in a constant relationship to insurance in force.

Loss recognition testing is performed annually. Such testing involves the use of best estimate assumptions to determine if the net liability position (all liabilities less DAC) exceeds the minimum liability needed. Any premium deficiency would first be addressed by removing the provision for unfavorable deviation. To the extent a premium deficiency still remains, it would be recognized immediately by a charge to the statement of operations and a corresponding reduction in DAC. Any deficiency in excess of DAC would be recognized as a premium deficiency reserve.

Short Duration

For short duration contracts, claims and benefits payable reserves are recorded when insured events occur. The liability is based on the expected ultimate cost of settling the claims. The claims and benefits payable reserves include (1) case reserves for known but unpaid claims as of the balance sheet date; (2) incurred but not reported (“IBNR”) reserves for claims where the insured event has occurred but has not been reported to us as of the balance sheet date; and (3) loss adjustment expense reserves for the expected handling costs of settling the claims. Periodically, we review emerging experience and make adjustments to our case reserves and assumptions where necessary. Below are further discussions on the reserving process for our major short duration products.

Group Disability and Group Term Life

Case or claim reserves are set for active individual claims on group disability policies and for disability waiver of premium benefits on group term life policies. Assumptions considered in setting such reserves include disabled life mortality and claim termination rates (the rates at which disabled claimants come off claim, either through recovery or death), claim management practices, awards for social security and other benefit offsets and yield rates earned on assets supporting the reserves.

Factors considered when setting IBNR reserves include patterns in elapsed time from claim incidence to claim reporting, and elapsed time from claim reporting to claim payment.

Medical

IBNR reserves represent the largest component of reserves estimated for claims and benefits payable in our Medical line of business, and we use a number of methods in their estimation, including the loss development method and the projected claim method for recent claim periods. We use several methods in our Medical line of business because of the limitations of relying exclusively on a single method. Loss development factors selected take into consideration claims processing levels, claims under case management, medical inflation, seasonal effects, medical provider discounts and product mix.

Property and Warranty

Our Property and Warranty line of business includes creditor-placed homeowners, manufactured housing homeowners, credit property, credit unemployment and warranty insurance and some longer-tail coverages which we no longer write (e.g. asbestos, environmental, other general liability and personal accident). Our Property and Warranty loss reserves consist of case reserves and bulk reserves. Bulk reserves consist of IBNR and development on case reserves. The method we most often use in setting our Property and Warranty bulk reserves is the loss development method. Under this method, we estimate ultimate losses for each accident period by multiplying the current cumulative losses by the appropriate loss development factor. We then calculate the bulk reserve as the difference between the estimate of ultimate losses and the current case-incurred losses (paid losses plus case reserves). We select loss development factors based on a review of historical averages, and we consider recent trends and business specific matters such as current claims payment practices.

We may use other methods depending on data credibility and product line. We use the estimates generated by the various methods to establish a range of reasonable estimates. The best estimate of reserves is selected from the middle to upper end of third quartile of the range of reasonable estimates.

Reinsurance

The following table sets forth our reinsurance recoverables as of the dates indicated:


	As of		As of
	March 31,		December 31,
	2004		2003
	(in millions)
Reinsurance recoverables	$	4,352	$	4,445

Reinsurance recoverables decreased by $93 million, or 2%, from December 31, 2003 to March 31, 2004. We have used reinsurance to exit certain businesses, such as the dispositions of FFG and LTC. The reinsurance recoverables relating to these dispositions amounted to $2,335 million at March 31, 2004 and $2,410 million at December 31, 2003.

We utilize ceded reinsurance for loss protection and capital management, business dispositions and, in Assurant Solutions, for client risk and profit sharing.

Loss Protection and Capital Management

As part of our overall risk and capacity management strategy, we purchase reinsurance for certain risks underwritten by our various business segments, including significant individual or catastrophic claims, and to free up capital to enable us to write additional business.

For those product lines where there is exposure to catastrophes, we closely monitor and manage the aggregate risk exposure by geographic area, and we have entered into reinsurance treaties to manage exposure to these types of events.

Under indemnity reinsurance transactions in which we are the ceding insurer, we remain liable for policy claims if the assuming company fails to meet its obligations. To limit this risk, we have control procedures to evaluate the financial condition of reinsurers and to monitor the concentration of credit risk to minimize this exposure. The selection of reinsurance companies is based on criteria related to solvency and reliability and, to a lesser degree, diversification as well as developing strong relationships with our reinsurers for the sharing of risks.

Business Dispositions

We have used reinsurance to exit certain businesses, such as the dispositions of FFG and LTC. Reinsurance was used in these cases to facilitate the transactions because the businesses shared legal entities with business segments that we retained. Assets backing liabilities ceded relating to these businesses are held in trusts, and the separate accounts relating to FFG are still reflected in our balance sheet.

Assurant Solutions Segment Client Risk and Profit Sharing

The Assurant Solutions segment writes business produced by its clients, such as mortgage lenders and servicers and financial institutions, and reinsures all or a portion of such business to insurance subsidiaries of the clients. Such arrangements allow significant flexibility in structuring the sharing of risks and profits on the underlying business.

A substantial portion of Assurant Solution’s reinsurance activities are related to agreements to reinsure premiums and risk related to business generated by certain clients to the client’s captive insurance

companies or to reinsurance subsidiaries in which the clients have an ownership interest. Through these arrangements, our insurance subsidiaries share some of the premiums and risk related to client-generated business with these clients. When the reinsurance companies are not authorized to do business in our insurance subsidiary’s domiciliary state, our insurance subsidiary generally obtains collateral, such as a trust or a letter of credit, from the reinsurance company or its affiliate in an amount equal to the outstanding reserves to obtain full financial credit in the domiciliary state for the reinsurance. Our reinsurance agreements do not relieve us from our direct obligation to our insured. Thus, a credit exposure exists to the extent that any reinsurer is unable to meet the obligations assumed in the reinsurance agreements. To minimize our exposure to reinsurance insolvencies, we evaluate the financial condition of our reinsurers and hold substantial collateral (in the form of funds, trusts and letters of credit) as security under the reinsurance agreements. SeeItem 3 - Quantitative and Qualitative Disclosures about Market Risk - Credit Risk.

Liquidity and Capital Resources

Assurant, Inc. is a holding company, and as such, has limited direct operations of its own. Our holding company assets consist primarily of the capital stock of our subsidiaries. Accordingly, our future cash flows depend upon the availability of dividends and other statutorily permissible payments from our subsidiaries, such as payments under our tax allocation agreement and under management agreements with our subsidiaries. The ability to pay such dividends and to make such other payments will be limited by applicable laws and regulations of the states in which our subsidiaries are domiciled, which subject our subsidiaries to significant regulatory restrictions. The dividend requirements and regulations vary from state to state and by type of insurance provided by the applicable subsidiary. These laws and regulations require, among other things, our insurance subsidiaries to maintain minimum solvency requirements and limit the amount of dividends these subsidiaries can pay to the holding company. Solvency regulations, capital requirements and rating agencies are some of the factors used in determining the amount of capital used for dividends. For 2004, the maximum amount of distributions our subsidiaries could pay under applicable laws and regulations without prior regulatory approval is $302 million.

Dividends paid by our subsidiaries net of infusions totaled $0.2 million and $99.5 million for the three months ended March 31, 2004 and the year ended December 31, 2003, respectively. We use these cash inflows primarily to pay expenses, to make interest payments on indebtedness and to make dividend payments to our stockholders. On April 16, 2004 we declared a quarterly cash dividend of $0.07 per common share. The dividend will be payable on June 8, 2004 to shareholders of record as of May 24, 2004.

The primary sources of funds for our subsidiaries consist of premiums and fees collected, the proceeds from the sales and maturity of investments and investment income. Cash is primarily used to pay insurance claims, agent commissions, operating expenses and taxes. We generally invest our subsidiaries excess funds in order to generate income.

In March 2004, we established a $500 million commercial paper program, which is available for working capital and other general corporate purposes. Our subsidiaries do not maintain commercial paper or other borrowing facilities at their level. This program is backed up by a $500 million senior revolving credit facility with a syndicate of banks arranged by Banc One Capital Markets, Inc. and Citigroup Global Market, Inc., which was established on January 30, 2004. The revolving credit facility is unsecured and is available until February 2007, so long as we are in compliance with all the covenants. This facility is also available for general corporate purposes, but to the extent used thereto, would be unavailable to back up the commercial paper program. We did not use the commercial paper program or the revolving credit facility during the three months ended March 31, 2004 and no amounts are outstanding.

The revolving credit facility contains restrictive covenants. The terms of the revolving credit facility also require that we maintain certain specified minimum ratios or thresholds. As of March 31, 2004 we are in compliance with all covenants and we maintain all specified minimum ratios and thresholds.

In December 2003, we entered into two senior bridge credit facilities of $650 million and $1,100 million. The aggregate indebtedness of $1,750 million under the facility was in connection with the extinguishment of our mandatorily redeemable preferred securities of subsidiary trusts.

On February 5, 2004, we received a $725.5 million capital contribution from Fortis simultaneously with the closing of the IPO. The proceeds from that contribution were used to repay the $650 million of outstanding indebtedness under the senior bridge credit facility and $75.5 million of outstanding indebtedness under the $1,100 million senior bridge credit facility. In addition, we repaid a portion of the $1,100 million senior bridge credit facility with $49.5 million in cash. We also refinanced the remaining amount outstanding under the $1,100 million senior bridge credit facility with the proceeds of our $975 million senior note offering described below.

On February 18, 2004, we issued two series of senior notes in an aggregate principal amount of $975 million. The first series is $500 million in principal amount, bears interest at 5.625% per year and is payable in a single installment due February 15, 2014. The second series is $475 million in principal amount, bears interest at 6.750% per year and is payable in a single installment due February 15, 2034.

Interest on our senior notes is payable semi-annually on February 15 and August 15 of each year, commencing August 15, 2004. The senior notes are our unsecured obligations and rank equally with all of our other senior unsecured indebtedness. The senior notes are not redeemable prior to maturity. The net proceeds from the issuance of the senior notes were used to repay a portion of our outstanding indebtedness under our $1,100 million senior bridge facility.

At the time of offering our senior notes, we entered into a registration rights agreement. The registration rights agreement requires us to file a registration statement under the Securities Act to permit the exchange of the senior notes for registered notes having nearly identical terms as the senior notes or to permit the registered resale of the senior notes. This requirement was met on May 4, 2004 when we filed a registration statement, Form S-4, with the Securities and Exchange Commission. This registration statement became effective on May 12, 2004.

During January 2004 we paid to participants in the Assurant Appreciation Incentive Rights Plan an aggregate of $25 million in connection with the cash-out of all outstanding Fortis, Inc. incentive rights.

In management’s opinion, our subsidiaries’ cash flow from operations together with our income and gains from our investment portfolio will provide sufficient liquidity to meet our needs in the ordinary course of business.

Cash Flows

We monitor cash flows at both the consolidated and subsidiary levels. Cash flow forecasts at the consolidated and subsidiary levels are provided on a monthly basis, and we use trend and variance analyses to project future cash needs.

The table below shows our recent net cash flows:


	For The Three Months
	Ended March 31,
	2004			2003
	(in millions)
Net cash provided by (used in):
Operating activities	$	177		$	272
Investing activities		(312	)		(122	)
Financing activities		(249	)		(22	)

Net change in cash	$	(384	)	$	128

The key changes of the net cash outflow of $384 million for the three months ended March 31, 2004 were net purchases of fixed maturity securities of $175 million, issuance of debt of $972 million, issuance of common stock of $726 million and repayment of debt of $1,750 million. The key changes of the net cash inflow of $128 million for the three months ended March 31, 2003 were net purchases of fixed maturity securities of $580 million, maturities of these securities of $315 million and net sales of short term investments of $287 million.

At March 31, 2004, we had total debt outstanding of $996 million, as compared to $1,970 million at December 31, 2003. At March 31, 2004 this debt consisted of $972 million of senior notes and $24 million of mandatorily redeemable preferred stock. At December 31, 2003 this debt consisted of $1,750 million of two senior bridge credit facility arrangements, $196 million of mandatorily redeemable preferred securities of subsidiary trusts, and $24 million of mandatorily redeemable preferred stock.

The table below shows our cash outflows for distributions and dividends for the periods indicated:


	For the Three Months Ended
	March 31,
Security	2004		2003
	(in thousands)
Mandatorily redeemable preferred securities of subsidiary trusts	$	2,163	$	47,595
Mandatorily redeemable preferred stock dividends and interest paid		3,438		263
Common Stock dividends		—		20,823

Total	$	5,601	$	68,681

Letters of Credit

In the normal course of business, letters of credit are issued to support reinsurance arrangements and other corporate initiatives. These letters of credit are supported by commitments with financial institutions. We had approximately $60 million and $118 million of letters of credit outstanding as of March 31, 2004 and December 31, 2003, respectively.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a provider of insurance products, effective risk management is fundamental to our ability to protect both our customers and stockholders interests. We are exposed to potential loss from various market risks, in particular interest rate risk and credit risk. Additionally, we are exposed to inflation risk and to a small extent to foreign currency risk.

Interest rate risk is the possibility that the fair value of liabilities will change more or less than the market value of investments in response to changes in interest rates, including changes in the slope or shape of the yield curve and changes in spreads due to credit risks and other factors.

Credit risk is the possibility that counterparties may not be able to meet payment obligations when they become due. We assume counterparty credit risk in many forms. A counterparty is any person or entity from which cash or other forms of consideration are expected to extinguish a liability or obligation to us. Primarily, our credit risk exposure is concentrated in our fixed income investment portfolio and, to a lesser extent, in our reinsurance recoverables.

Inflation risk is the possibility that a change in domestic price levels produces an adverse effect on earnings. This typically happens when only one of invested assets or liabilities is indexed to inflation.

Foreign exchange risk is the possibility that changes in exchange rates produce an adverse effect on earnings and equity when measured in domestic currency. This risk is largest when assets backing liabilities payable in one currency are invested in financial instruments of another currency. Our general principle is to invest in assets that match the currency in which we expect the liabilities to be paid.

Interest Rate Risk

Interest rate risk arises as we invest substantial funds in interest-sensitive fixed income assets, such as fixed maturity investments, mortgage-backed and asset-backed securities and commercial mortgage loans, primarily in the United States and Canada. There are two forms of interest rate risk - price risk and reinvestment risk. Price risk occurs when fluctuations in interest rates have a direct impact on the market valuation of these investments. As interest rates rise, the market value of these investments falls, and conversely, as interest rates fall, the market value of these investments rises. Reinvestment risk occurs when fluctuations in interest rates have a direct impact on expected cash flows from mortgage-backed and asset-backed securities. As interest rates fall, an increase in prepayments on these assets results in earlier than expected receipt of cash flows forcing us to reinvest the proceeds in an unfavorable lower interest rate environment, and conversely as interest rates rise, a decrease in prepayments on these assets results in later than expected receipt of cash flows forcing us to forgo reinvesting in a favorable higher interest rate environment. As of March 31, 2004, we held $8,884 million of fixed maturity securities at fair market value and $976 million of commercial mortgages at amortized cost for a combined total of 87% of total invested assets. As of December 31, 2003, we held $8,729 million of fixed maturity securities at fair market value and $933 million of commercial mortgages at amortized cost for a combined total of 89% of total invested assets.

We expect to manage interest rate risk by selecting investments with characteristics such as duration, yield, currency and liquidity tailored to the anticipated cash outflow characteristics of our insurance and reinsurance liabilities.

Our group long-term disability reserves are also sensitive to interest rates. Group long-term disability reserves are discounted to the valuation date at the valuation interest rate. The valuation interest rate is determined by taking into consideration actual and expected earned rates on our asset portfolio, with adjustments for investment expenses and provisions for adverse deviation.

The interest rate sensitivity of our fixed maturity security assets is assessed using hypothetical test scenarios that assume several positive and negative parallel shifts of the underlying yield curves. We have assumed that both the United States and Canadian yield curves have a 100% correlation and, therefore, move together. The individual securities are repriced under each scenario using a valuation model. For investments such as mortgage-backed and asset-backed securities, a prepayment model was used in conjunction with a valuation model. Our actual experience may differ from the results noted below particularly due to assumptions utilized or if events occur that were not included in the methodology. The following table summarizes the results of this analysis for bonds, mortgage-backed and asset-backed securities held in our investment portfolio:

Interest Rate Movement Analysis
of Market Value of Fixed Maturity Securities Investment Portfolio
As of March 31, 2004


	-100			-50			0			50			100
							(in millions)
Total market value	$	9,426		$	9,149		$	8,884		$	8,625		$	8,374
% Change in market value from base case		6.1	%		3.0	%		0.0	%		(2.9	)%		(5.7	)%
$ Change in market value from base case	$	542		$	265		$	0		$	(259	)	$	(510	)

Credit Risk

We have exposure to credit risk primarily as a holder of fixed income securities and by entering into reinsurance cessions.

Our risk management strategy and investment policy is to invest in debt instruments of high credit quality issuers and to limit the amount of credit exposure with respect to any one issuer. We attempt to limit our credit exposure by imposing fixed maturity portfolio limits on individual issuers based upon credit quality. Currently our portfolio limits are 1.5% for issuers rated AA- and above, 1% for issuers rated A- to A+, 0.75% for issuers rated BBB- to BBB+ and 0.38% for issuers rated BB- to BB+. These portfolio limits are further reduced for certain issuers with whom we have credit exposure on reinsurance agreements. We use the lower of Moody’s or Standard & Poor’s ratings to determine an issuer’s rating.

The following table presents our fixed maturity investment portfolio by ratings of the nationally recognized securities rating organizations as of March 31, 2004:


			Percentage of
Rating	Fair Value		Total
	(in millions)
Aaa/Aa/A	$	6,024		68	%
Baa		2,326		26	%
Ba		397		4	%
B and lower		137		2	%

Total	$	8,884		100	%

We are also exposed to the credit risk of our reinsurers. When we reinsure, we are still liable to our insureds regardless of whether we get reimbursed by our reinsurer. As part of our overall risk and capacity management strategy, we purchase reinsurance for certain risks underwritten by our various business segments.

Inflation Risk

Inflation risk arises as we invest substantial funds in nominal assets, which are not indexed to the level of inflation, whereas the underlying liabilities are indexed to the level of inflation. As of March 31, 2004, approximately $391 million or 13% of Assurant PreNeed’s total policy benefit reserves are for insurance policies that have death benefits that are guaranteed to grow with the Consumer Price Index. In times of rapidly rising inflation, the credited death benefit growth on these liabilities increases relative to the investment income earned on the nominal assets resulting in an adverse impact on earnings. We have partially mitigated this risk by purchasing a contract with payments tied to the Consumer Price Index. See -Derivatives.

In addition, we have inflation risk in our individual and small employer group health insurance businesses to the extent that medical costs increase with inflation, and we have not been able to increase premiums to keep pace with inflation.

Foreign Exchange Risk

We are exposed to some foreign exchange risk arising from our international operations mainly in Canada. We also have limited foreign exchange risk exposure to currencies other than the Canadian dollar, primarily British pounds and Danish krone. Total invested assets denominated in these other currencies were less than 1% of our total invested assets at March 31, 2004.

Foreign exchange risk is mitigated by matching our liabilities under insurance policies that are payable in foreign currencies with investments that are denominated in such currency. We have not established any hedge to our foreign currency exchange rate exposure.

We assess our foreign exchange risk by examining the foreign exchange rate exposure of the excess of invested assets over the statutory reserve liabilities denominated in foreign currency. Two stress scenarios are examined. The first scenario assumes a hypothetical 10% immediate change in the foreign exchange rate. The second scenario assumes a more severe 2.33 standard deviation event (comparable to a one in 100 probability under a normal distribution).

The modeling techniques we use to calculate our exposure does not take into account correlation among foreign currency exchange rates or correlation among various markets. Our actual experience may differ due to correlation assumptions utilized or if events occur that were not included in the methodology, such as significant illiquidity or other market events.

Derivatives

Derivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, financial indices or the prices of securities or commodities. Derivative financial instruments may be exchange-traded or contracted in the over-the-counter market and include swaps, futures, options and forward contracts.

Under insurance statutes, our insurance companies may use derivative financial instruments to hedge actual or anticipated changes in their assets or liabilities, to replicate cash market instruments or for certain income-generating activities. These statutes generally prohibit the use of derivatives for speculative purposes. We generally do not use derivative financial instruments.

On August 1, 2003, we purchased a contract to partially hedge the inflation risk exposure inherent in some of our pre-funded funeral insurance policies. See -Inflation risk.

In October 2003, we determined that the modified coinsurance agreement with The Hartford contained an embedded derivative. In accordance with DIG B36, we bifurcated the contract into its debt host and embedded derivative (total return swap) and recorded the embedded derivative at fair value on the balance sheet. Contemporaneous with the adoption of DIG B36, we transferred the invested assets related to this coinsurance agreement from fixed maturities available for sale to trading securities, included in other investments in the March 31, 2004 and December 31, 2003 consolidated balance sheets. The combination of the two aforementioned transactions has no net impact in the consolidated statements of operations for the three months ended March 31, 2004 and for the year ended December 31, 2003.

Item 4. Controls and Procedures.

Under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2004. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of that date in providing a reasonable level of assurance that information we are required to disclose in reports we file or furnish under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods in SEC rules and forms. Further, our disclosure controls and procedures were effective in providing a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

PART II
OTHER INFORMATION

Item 1. Legal Proceedings.

On October 1, 2003, a grand jury in Mower County, Minnesota, issued an indictment of American Bankers Insurance Company (“ABIC”), part of the Solutions segment, and two of its officers. The indictment alleged that ABIC and its two named corporate officers each violated the Minnesota Fair Campaign Practices Act in connection with two contributions by ABIC to the Republication National State Election Committee totaling $15 thousand. On April 5, 2004, the prosecuting authorities voluntarily dismissed all charges against ABIC and the two officers. ABIC, in turn, agreed to reimburse Mower County for costs of investigation and prosecution.

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

(a) None.

(b) On April 16, 2004, our board of directors adopted Corporate Governance Guidelines of Assurant, Inc. which provide for, among other things, the consideration of director candidates recommended by our stockholders. These guidelines state that nominees submitted by stockholders will be

considered at the same time and in the same manner as all other nominees. A stockholder that desires for the Nominating Committee to consider a nomination for director must comply with the notice, timing and other requirements provided for in our Bylaws.

For director candidates to be considered for election to the board at our annual meeting of stockholders in 2005, stockholders must submit recommendations of such nominations not sooner than January 18, 2005 nor later than February 17, 2005. These are also the dates within which stockholders must submit to the Company any other business that may be properly brought before the annual meeting.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

The following exhibits either (a) are filed with this report or (b) have previously been filed with the SEC and are incorporated herein by reference to those prior filings. Exhibits are available upon request at the investor relations section of our website at www.assurant.com.


Exhibit
Number		Exhibit Description
3.1		Restated Certificate of Incorporation of the Registrant (incorporated by reference from Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

3.2		Amended and Restated By-Laws of the Registrant (incorporated by reference from Exhibit 3.2 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

3.3		Shareholders’ Agreement between the Registrant and Fortis Insurance N.V. (incorporated by reference from Exhibit 3.3 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

3.4		Registration Rights Agreement between the Registrant and Fortis Insurance N.V. (incorporated by reference from Exhibit 3.4 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

4.1		Specimen Common Stock Certificate (incorporated by reference from Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-109984) and amendments thereto, originally filed on January 13, 2004).

31.1		Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer. 31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.

31.2		Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.

32.1		Certification of Chief Executive Officer of Assurant, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer of Assurant, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

On March 11, 2004, Assurant, Inc. furnished a Form 8-K announcing its financial results for the fiscal year ended December 31, 2003.

On May 12, 2004, Assurant, Inc. furnished a Form 8-K announcing its financial results for the three months ended March 31, 2004.

SIGNATURES

Pursuant to the requirements the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	ASSURANT, INC.

Date: May 12, 2004	By:	/s/ J. Kerry Clayton

		Name:J. Kerry Clayton
		Title:President and Chief Executive Officer

Date: May 12, 2004	By:	/s/ Robert B. Pollock

		Name:Robert B. Pollock
		Title:Executive Vice President and
		Chief Financial Officer

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Assurant (AIZ) 10-Q2004 Q1 Quarterly report

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