Assurant Inc (AIZ) 2015 Q1 法說會逐字稿

Welcome to Assurant's first-quarter 2015 earnings conference call and webcast.

(Operator Instructions)

It is now my pleasure to turn over to Francesca Luthi, Senior Vice President, Investor Relations, Marketing, and Communication. You may begin.

Thank you, Sean, and good morning, everyone. We look forward to discussing our first-quarter 2015 results with you today. Joining me for Assurant's conference call are Alan Colberg, our President and Chief Executive Officer, and Chris Pagano, our Chief Financial Officer and Treasurer.

Yesterday afternoon, we issued a news release announcing our first-quarter 2015 results. The release and corresponding financial supplement are available at Assurant.com. We will start today's call with brief remarks from Alan and Chris, before moving to Q&A.

Some of the statements on today's call may be forward-looking and actual results may differ materially from those projected in these statements. Additional information on factors that could cause actual results to differ materially from those projected can be found in yesterday's news release, as well as in our SEC reports, including our 2014 Form 10-K.

Today's call will also contain non-GAAP financial measures, which we believe are meaningful in evaluating the Company's performance. For more details on these measures, the most comparable GAAP measures, and a reconciliation of the two, please refer to the news release and financial supplement posted at Assurant.com. Now, I will turn the call over to Alan.

Thanks, Francesca, and good morning, everyone. While our first-quarter results at health were disappointing, we are encouraged by solid performance at our other businesses. The results also reinforce the importance of our strategic realignment going forward.

This morning, I want to highlight the opportunities ahead, and then we will elaborate on the first quarter. Following a comprehensive review of our businesses, last week, we announced our decision to concentrate on specialty housing and lifestyle protection products and services, provided by our solutions and specialty property segments. We believe this sharper focus will enable us to more consistently generate specialty returns long-term.

Accordingly, we are exploring strategic alternatives for health and employee benefits, including a sale of both businesses. Given their limited strategic fit in our portfolio and the current market environment, we do not believe they can deliver the returns we require. During this process, we will continue to uphold our commitments to customers, policyholders and employees.

Our housing offerings, especially property, protect against risk where people live through lender placement flood insurance, multi-family housing and mortgage solutions. Lifestyle offerings provided through solutions protect what people purchase and use every day, such as their mobile devices, cars, appliances, as well as their assets, which are safe guarded with pre-need funeral insurance.

Specialty property and solutions have track records of sustained industry leadership positions, and proven financial performance. Importantly, these businesses generally deliver specialty returns, generate significant free cash flow, and have the highest profitable growth potential. Looking ahead, we see a broad array of attractive opportunities in housing and lifestyle, and plan to build upon our success in the US and abroad. We will do this by further capitalizing on favorable market trends and identifying unmet consumer needs, where we can leverage our core capabilities, such as our advantaged distribution networks, and strong risk management.

Let me offer a few examples. Mobile continues to transform the consumer experience, and we believe there are many opportunities ahead for Assurant. Our connected living platform at solutions allows us to leverage our strengths to create new offerings, as consumers are increasingly dependent on staying connected, to each other, their devices, and even their homes. With market-leading positions in housing, mobile, and extended service contracts, we are in a strong position to capitalize on these trends, and we are already seeing success.

Additionally, we continue to extend beyond insurance to offer other services related to various consumer risk events. Increasingly, we succeed in the market because of our ability to offer these integrated solutions. Our fee-based offerings now account for nearly 20% of solutions and property's total revenues, and we expect this percentage to grow over time.

Recently, we expanded our agreement with Claro Brazil, one of the largest mobile operators in Latin America, by adding another smart phone manufacturer to the device upgrade program we introduced last quarter. While early, consumer response to this program has been promising, and demonstrates our ability to customize solutions for our partners, and strengthen these relationships over time.

Our move into the mortgage solutions business is another example. We have broadened our array of property preservation and valuation services through a series of acquisitions that are natural extensions of our collateral risk capabilities. Our strong processes, technology platforms, and advantage vendor networks allow us to provide superior customer service for our clients. Since establishing mortgage solutions, we have expanded market share with nine clients that are among the leading mortgage servicers and originators. As a result, we expect the business in total will contribute more than $300 million to fee income this year.

These examples demonstrate the momentum we are gaining in areas targeted for growth. We believe a more tightly-focused Assurant can enhance long-term shareholder value, as we continue to execute on our strategy, and align resources toward housing and lifestyle.

Now, let me offer some highlights from our first-quarter results. Overall, our portfolio of specialty businesses, most notably solutions and specialty property, continued to generate strong cash flow in the first quarter, which allowed us to return $100 million to shareholders through buybacks and dividends and end the quarter with $570 million of holding company capital.

Annualized operating ROE, excluding AOCI, decreased to 3.9%, driven by the loss at health. Book value, excluding AOCI was unchanged since year end. Net earned premiums and fees increased 8%. Our housing and lifestyle products account for the majority of our revenue and earnings during the first quarter. Fee income overall increased by 42%, primarily due to our expanded service offerings in mobile and mortgage solutions.

We are excited about the future. We believe our sharper focus will create additional opportunities for profitable growth, and strengthen our ability to help people protect what matters most, while also allowing us to realize our aspirations of generating top quartile shareholder returns.

Now, Chris will review results for the quarter and our outlook for 2015 in more detail. Chris?

Thanks, Alan. I will start with solutions. Segment earnings totaled $54 million, an increase of 10% from the prior year, as we expanded our mobile business. We now provide coverage on more than 28 million mobile devices, up nearly 20% year over year.

In the quarter, we also benefited from increased handset repair and logistics activity, and favorable domestic loss experience. Results were partially offset by higher integration costs related to our acquisition of CWI Group in France, and higher loss experience on a mobile program in Latin America. Total revenues increased 4%, driven by growth in mobile, our vehicle protection business, and at a large domestic service contract client. This was partially offset by foreign exchange pressures and lower production volumes at brick and mortar retailers in North America, trends that we expect to persist for the rest of the year.

In addition, as we mentioned on our last call, we will discontinue a tablet program that represents around $100 million of annualized net earned premiums when it transfers to our clients' in-house logistics provider. This will lower earnings beginning in the second quarter. Despite these headwinds, solutions overall revenue and earnings this year should remain level with last year. Expansion of our integrated mobile offerings and vehicle service contracts will continue to drive 2015 performance.

Now, let's look at specialty property. In the quarter, net operating income was $75 million, a decrease from the prior year, primarily driven by the ongoing normalization of lender-placed. Despite cold winter weather, we incurred lower non-catastrophe losses due to fewer weather and fire related claims compared to the prior year.

Net earned premiums in the quarter declined by $95 million year over year, primarily reflecting the January sale of American Reliable and lower lender-placed premiums. Placement rates in lender-placed decreased 17 basis points from the first quarter of 2014, but remained flat from year-end, driven by some small loan portfolio additions. Overall, we continue to expect our placement rates to gradually decline as the housing market improves.

Moving to property's targeted growth areas, we were pleased by the performance of our multi-family housing business, where revenue increased 18% year over year. Fee income more than doubled, driven by mortgage solutions, as we increased market share by cross-selling our offerings and adding new clients. For the quarter, specialty property's expense ratio increased by 910 basis points, of which nearly half was due to our shift toward fee-based products and services. Lower lender-placed premiums also contributed to the increase.

During the quarter, we continued to implement our expense management initiatives. We incurred a modest severance charge related to staff reductions, and made additional investments in our lender-placed platform to reduce our cost structure as the business normalizes. These actions are on track to generate net savings beginning in the second half of the year.

Turning to health, the net operating loss of $84 million was significantly worse than we anticipated. Approximately half was due to our reduction in our estimated recoveries under the ACA risk mitigation programs for 2014 policies. We refined our accruals to take into account market data available since year-end and additional claims development. This change was reflected in our first-quarter results. The balance of the loss was driven by elevated claims on 2015 policies, which were only partially offset by risk mitigation programs.

For the first quarter, we accrued $64 million related to the risk adjustment program for 2015 policies. Recoverables under reinsurance totaled $56 million for the period, and we did not accrue any net recoverables for the risk corridors. While we are eligible to participate in this program, we believe this is a prudent measure, given that funding has not yet been authorized. To further manage risk, we reduced commissions in January. As a result, individual sales dropped 15% from the prior year, despite significant market growth.

Despite rate actions taken, initial claims submissions on 2015 policies indicate that loss experience on our ACA in-force block will remain elevated throughout the year. ACA policies now account for 60% of health's premiums, compared to 18% last year. Quarterly results will vary, based on loss experience and the estimated recoveries for the risk mitigation programs. We expect insurance carriers will be notified by June 30 of final payment amounts related to 2014 business, and any changes in current estimates will be recorded in our second-quarter results.

The process to explore strategic options for health is well underway. Absent a sale, we will begin the process to exit the market, and will not participate in the 2016 ACA open enrollment. We will provide updates as we can. In the meantime, we remain focused on mitigating losses and prudently managing capital as we work through this process.

At employee benefits, first-quarter earnings declined to $10 million, primarily due to lower real estate joint venture partnership investment income. Disability results were less favorable, reflecting lower recoveries, and the discount rate change implemented last quarter. Benefits expense ratio decreased 80 business points due to premium growth and savings realized from previous expense actions.

We view our enrollment capabilities and broad suite of voluntary products and services, including dental, to be unique until the market. As we explore strategic alternatives for the segment, we believe these will be viewed as valuable assets for any benefits-focused organization.

Moving to corporate, we ended March with $320 million of deployable capital. Total segment dividends in the first quarter, net of infusions, were $55 million. We continue to expect 2015 segment dividends to approximate segment operating earnings, as capital releases from lender-placed insurance offset capital needs in other product areas. As always, this is subject to rating agency requirements.

During the first quarter, we returned $19 million to shareholders in the form of dividends, and we repurchased $82 million worth of stock. In April, we repurchased nearly 670,000 more shares for $41 million. Year to date, we have retired 3% of total shares outstanding. We continue to believe the stock is attractively priced. The proceeds from expected transactions will provide additional flexibility to deploy capital prudently through share buybacks, common stock dividends, and investments in housing and lifestyle. The corporate loss for the quarter declined to $4 million, due to a reduction in tax liabilities, which will reverse during the course of the year, and lower employee-related benefits expenses. We still expect our full year of 2015 corporate loss to be in the range of $60 million to $65 million.

We will assess other opportunities to accelerate expense management efforts as we realign the organization toward housing and lifestyle. For the balance of the year, our focus remains on repositioning the company for profitable growth, and successfully managing potential transactions for health and benefits. We believe the actions underway across Assurant will help build a stronger future for the Company. And with that, operator, please open the call for questions.

(Operator Instructions)

Seth Weiss from Bank of America Merrill Lynch.

My first question is just on the philosophy of capital deployment while you're in this disposition stage of these two businesses. Could you just philosophically walk us through how you're thinking about capital deployment in the next, call it four to six quarters, while there's uncertainty about how much capital health may need? And of course uncertainty about how much you will generate from those businesses?

Yes, Seth, let me start, this is Alan, and then Chris can add a few other comments. I think we are going to continue the same capital management approach that we have had, which is a disciplined and balanced deployment of capital between returning capital to shareholders and investing in the future of the Company. And I think you saw the first quarter as a good example of that. We ended the quarter with essentially the same amount of capital that we started.

We have $320 million of deployable capital still on hand. We still expect segment dividends to approximate what we are going to earn in the segments. We returned capital. We still think the stock is attractively priced, and so I think it's business as usual, as we go through the next few quarters.

I think, a couple more things to add. Again, we are assessing the intrinsic value of the stock, relative to the share price, and we think it's -- share repurchase is a prudent use of capital, so we're going to continue to do that. But we also think that, again, it's this combination of returning capital to shareholders, and investing in profitable growth opportunities in the housing and lifestyle sectors, that is going to create long-term shareholder value. As Alan said, we think we have been consistent in the last five or six years with our capital deployment process. It's worked quite well for us, and we see no reason to change it now.

Okay, thank you, and if I could ask a question also on employee benefits. You mentioned the value proposition to the market. If we look at employee benefits' segment ROEs over the last two years or so, they have been in this mid to upper single digit level, trailing some of the pure play group provider peers, and trailing what was low to mid-teen double digit ROEs if we go back several years ago. What's been the pressure there, aside from lower rates, which everyone seems to be dealing with?

Yes, a couple of thoughts on that, Seth. I think we feel very good about the employee benefits business and franchise. They do have really strong and unique capabilities, and we have been investing heavily over the last many years now, especially the last three to four years, to really build out the voluntary business and capabilities in the dental.

We think those are very attractable assets, and for an owner more focused on healthcare employee benefits, I think this will be a very positive addition to another company. That's really been the pressure, somewhat investing, somewhat, we've been at a low interest rate environment as well, which puts pressure on the earnings of that segment.

Okay, thank you.

Mark Hughes from SunTrust.

In the specialty housing business, how would you describe the underlying growth, if you take out the lender-placed business? What should we anticipate in terms of organic expansion in coming years?

We have several different businesses under property, in addition to the one you mentioned. We have multi-family housing, and you've seen how well we have grown that business, and we have continued to have double digit growth now for multiple years in that business, and we expect to continue to grow. There's a significant opportunity to penetrate that market, further gain share in that market.

We have created a new growth engine for us over the last few years, called mortgage solutions. We see very robust growth for us, as we leverage our capabilities and our distribution to expand our footprint in that business. And then finally in flood, we are one of the market leaders in flood, and we have seen good growth in flood in the last couple of years. We see pretty strong growth in all the other lines beyond lender- placed.

The other thing I would point out, just in particular on mortgage solutions is the investment thesis and our thought process around investing in that space was not about growth in market but growth in market share, leveraging our position as a trusted adviser, expanding product offerings to the existing client base, as well as gaining new clients. And we are seeing that happening already.

Would that be, if you take those discrete businesses, is that double digit growth within those three? High single digit?

I think originally when we acquired those businesses within the mortgage solutions space, it was roughly $250 million of revenue. We expect $300 million of revenue this year. The other thing we expect is expanding operating margins as we leverage scale, and then, of course, multi-family housing has got smaller but double digit revenue growth, which again, meets our investment criteria.

Okay, good, thank you, and then the lower production in the bricks and mortar, can you give us some sense of the magnitude of that? Has that trend changed over the last quarter? What's driving it? Is it a macro issue, or is it Company specific?

What we have seen in retail for quite a few years now has been a gradual decline in the bricks and mortar distribution, being more than offset by growth in other channels, whether that's through other forms of retail, like digital or through OEMs. It's really a macro trend that we have been expecting, and we've been investing against over the last many years. As you heard Chris say, or I think we say in the outlook, our view of solutions is still going to be consistent with last year, despite the various trends going on.

Thank you.

Jimmy Bhullar of JPMorgan.

I had a couple of questions, first on the health business, I think there's around $440 million of capital in that business. Assuming that you're not able to sell the health division, then how much of the capital do you expect to be absorbed, as you're winding the business down? And would you expect some of the capital to be freed?

And then secondly, on the employee benefit sale, assuming that you are able to sell it at some point over the next year, do you expect to use the majority of the proceeds for buybacks, and how fast would you buy back, if that's the case? Or would you be more balanced and wait for potential deals? And not speed up buybacks until after the deal? Just trying to assess potential dilution from the sale of the employee benefits business, and the wind down of the health business.

Sure, Jimmy, let me start, and then Chris, you add on this one. I start by the future for Assurant, which we are very excited about. The businesses that we have in housing and lifestyle generate very good returns. There is leadership position, strong growth potential, both organic and again, additional very selective acquisitions. I start with, we are very excited by the future.

For health and then for employee benefits, we are really running two different processes. With health, as we have said very clearly, we are attempting to sell the business, and absent a sale, we will move to exit that business. Employee benefits, we are highly confident in a sale for that business. We believe that there are many attractive capabilities that buyers will value.

We have robust, thorough processes running for both. It is too early to really speculate on what might come out of those processes. What I would say, though, is go back to where we started in the Q&A. We have a disciplined capital management strategy, which we have been following for years, we're going to continue to follow. Chris?

Maybe just a couple specifics on health in particular. Absent a sale, we will not be open for 2016 open enrollment, so what we do expect is to be substantially out of the health business by the end of 2016. So for 2015 and through that process, we will appropriately capitalize the business, but then expect by the end of 2016 to have gotten significant, if not all of the capital out.

Do you have an idea or could you give us some numbers on how much corporate overhead is allocated health and to employment benefits, that would still stay with the company at least initially, and would need to be allocated to other businesses?

Again, it's early in the process, but as we go through the sale process of health and benefits, we are reassessing the corporate infrastructure and our operating efficiencies, and we will address the issue of stranded costs during that time.

Okay, thank you.

John Nadel from Piper Jaffray.

I guess a couple of questions, and two quick ones, I will start two quick ones on the lender-placed business. First, as far as premium rate reductions go, can you just give us a sense for how much of those expected reductions, the ones that have already been approved state-by-state, how much of those are already now in the premium numbers as of first quarter, and how much more would you estimate is left to roll into the numbers, as we move through the remainder of this year?

So I think in terms of what is already in the numbers, I think you're looking at roughly a 7% rate reduction that is reflected. There's always ongoing rate reviews on an annual basis, ongoing dialogue with the states, which may affect the rate reductions going forward. Keep in mind we are also making changes around the infrastructure, operational efficiencies in response to normalization of lender-placed. Again, lots of moving parts there, but I think roughly 7% of, call it, virtually all of the rate reductions from last year are now in the numbers.

And the total you had expected would roll through it, again understanding that state-by-state these things can change, but the total that you had expected I think was 8% to 9% or something along those lines. You're pretty close.

That's correct. Full year 2015, 8% to 9%.

And then as I think about the comment, I believe you made it, Chris, about the 900 or 9 percentage points increase year over year in the expense ratio, about half of that just being the growth of the fee-based business and half of that being the reduction in lender-placed premiums, and I guess, negative operating leverage there. How much of that piece of it, once the expense initiatives are completed, do you think you can recover?

So a couple things, again, the increase in the -- increased higher expense ratio associated with fee business, it's important to remember there's no loss ratio associated with that business.

Understood.

So again, an important distinction there. We do think the insurance expense ratio is going to be in the mid-40s percentage over the long-term, combines in the 85 to 90, I think is the long-term protection we have got there.

A lot of that is going to be dependent upon our ability to standardize and create greater efficiencies around the lender-placed infrastructure, which we are now net investors the first half of the year. We expect to be net savers in the second half and the out-year. We will keep pace with the normalization of lender-placed. And at the end, we think we're still going to have a 20% ROE business, which definitely meets our definition of specialty.

Yes, understood. And then also, one last one related to lender-placed, and then I have one on solutions. You mentioned a couple of smaller loan portfolios that came on board, that maybe is masking the placement rate underlying falling. Can you give us a sense for how much? Can you do that math? Do you have the data to be able to do the math on how much the placement rate would have fallen had you not had a few portfolios come on board?

Just qualitatively, John, they are small loan portfolios with high placement rate. I think the challenge on quarter over quarter placement rate and premium linkage is always a challenge. I think a longer term 17 basis point decline year over year is a better indication. And again, this trend towards 1.8% to 2.1% over the long-term is really -- we still see that trend in place.

Okay, and then last one for you, just thinking about the international piece of solutions. If I look at the last couple of quarters, obviously particularly weak combined ratios, even the trailing 12 months, the combined ratio is maybe 102, maybe 102.5, something along those lines.

I know from years ago the target was to ultimately get this business down to the mid-90s. What is going wrong there? I guess, Alan, how long should we expect it to take for this particular piece of solutions to get to its targeted ROE? It seems like it's that piece of solutions that is preventing the overall segment from hitting its target.

I think we feel like there's been good progress in international. We see lots of opportunities to continue to expand our offerings there, and become more integrated around the risk event, and be more than just insurance. As Chris was talking about, we do have noise sometimes in the short-term, and we had a couple of one timers around integration costs in the quarter that affect the quarter, but we still feel like there's good progress, and we are moving forward to where the returns that we expect in international.

Just, as we think about, you have some intangible amortization, obviously running through there, too.

Yes.

Over the next couple of years, how much should just the wind down, assuming no incremental acquisitions, which I guess is a probably a bad assumption, but assuming based on what you have today, how much should just the wind down of intangible amortization help that ratio?

So I don't have the breakdown international versus domestic. I can tell you in general the acquisitions we have done in 2013 and 2014 in specialty, property, and solutions, it's roughly $40 million to $45 million of intangible amortization on a pretax basis. And again, you're right to point that out, because what we are focused on is cash, and that's going to be a non-cash drag on operating income. But it doesn't affect how we think about the business, and the investment thesis, and how we valued the acquisitions initially.

Okay, thank you very much.

Sean Dargan from Macquarie.

Thanks and good morning. I have a question about how to think of your thought process, as you either sell or exit these businesses, and deploy the capital that is freed up. Is your motivation, is your driving force going to be, to make up for those GAAP earnings that were lost, or do you want to show EPS growth, or is your focus on increased cash flow generation? I'm just wondering how to think of the Company, and how you're thinking of the puts and takes of share repurchase versus M&A?

Let me start broadly on that and then answer specifically. The intent of refocusing the Company around housing and lifestyle is to create a more attractive Company for our shareholders. That comes for a few different points. One is we have a proven track record in those areas of generating specialty returns, long-term.

Virtually every business that is a part of future of Assurant, we're a market leader, and that's something we can build off of. Almost every one of those businesses, we are doing more than insurance. We have integrated offerings around the risk event, which allow us to have a better duration with partners, better economics for us. In general these are less capital-intensive businesses.

What we are really focused on is free cash flow generation. That gives us the power to create value for our shareholders through the capital deployment. As we looked across our portfolio, by far the highest profitable growth potential we have is in these areas of housing and lifestyle, really leveraging the consumer trends, the market trends, et cetera.

One of the things we will do later this year, as we refocus on the future of Assurant and we get the health and benefits transition behind us, we will put out new metrics and new disclosures, and we'll hold an investor day late this year, to really help everyone how to think of Assurant going forward. But we are very excited about the opportunities ahead, and think we will generate more cash flow in the future, not less.

Okay, thanks, that's all I had.

Your next question comes for the line of Steven Schwartz from Raymond James. Your line is open.

A couple just to follow up on John's question, these are the LatAm. I think, Alan, you referenced, or maybe it was Chris, I don't remember, referenced an account in Latin America that performed poorly during the quarter. My sense was that was on the loss side, but then you referenced integration costs, so I was just wondering about the story on that account.

So there's a couple of things. So the mobile client in Latin America, there were some issues with higher replacement -- repair and replacement cost, product availability. This happens from time to time. One of the benefits of having partnerships is that we are able to make adjustments to pricing terms and conditions in conjunction with our partner, and return to profitability, which we expect to -- target profitability, excuse me, which we expect to happen over the next one or two quarters.

The one-time integration costs are related to the acquisition of the CWI Group, so that's Europe, again mobile, but Europe, which is a one-time, not repeat. You will see that the combination of the one-timer and then the return to target profitability in the Latin American mobile client, will help improve the combined ratio.

Has pricing -- has new pricing already been worked out with the client in Latin America?

All of the changes in terms of terms and conditions and pricing have all been finalized, correct.

Great and then moving on to health, just a quick couple. In the quarter's results, the quarter obviously negatively affected by what I would call negative prior-year development of your government repayment assumptions, I guess, but still bad absent that.

I was wondering if there was some type maybe of a premium deficiency reserve, or something like that. What I'm trying to get at is whether you have reserved to try to get that income down to $0 with the losses down to $0, or should we still be thinking about losses running much higher than previously?

So, the loss reflects estimates, changes in estimates around 2014 risk mitigation programs, and then also estimates around the 2015 program. Again, very early in the process, with respect to 2015. In particular, as you think about the risk adjustment mechanism, we have some information about our own block, but have no information on the market yet.

And then we expect to be told, in mid-June -- at the end of June, what the actual recoverable risk -- reinsurance recoverable adjustment amounts will be from our 2014 block. So still very early in the phase for 2015, and we will know by the end of the second quarter, hopefully, what the 2014 actuals will be.

Okay, one followup on that, just so I understand this. So the risk adjustment benefits that you accrued in this quarter, if everything goes according to your thoughts, okay, big assumption -- but if everything goes according to your thoughts, is there no more of these accruals to be expected? Is that how that works?

There's two blocks of accruals. The first of the accruals around the 2014 policies.

Forget those. I'm just talking about 2015.

Okay. So 2015, for the risk adjustment mechanism, we accrued $64 million, and we will continue to accrue throughout the course of 2015, and then as we sit here a year from now, we will be waiting for final amounts around the 2015 policies for -- in mid-June of 2016.

I guess what I'm asking, does it accrue as you go as premiums are earned, or do you accrue up front and then change over the year?

No, these quarterly estimates will be accrued as we incur claims.

The other important point I would make is there are really three programs now that we are eligible for, because of having sold on exchanges for the last open enrollment, we're eligible for the risk corridor program as well. We took a prudent approach there, which is, we did not book a net recoverable on the risk corridor.

Right. That hasn't been funded yet. And then one more just on health, the $300 million, call it $400 million of GAAP equity that you report on page 4 of the supplement, does that roughly approximate statutory equity or statutory capital?

The GAAP equity is slightly higher, I think, if you look at the year end numbers. We had $440 million of GAAP equity, and I believe stacked capital was right around $400 million.

Okay, thank you.

Colin Devine from Jefferies.

Two questions, with respect to health and employee benefits, are you also exploring an option of selling them as a package?

No, we are not. We are running separate processes. The processes are very robust and very thorough, but we fundamentally believe the buyer universe is very different for those two businesses, and so they are completely separate.

We also think that approach maximizes value for our shareholders. And one of the reasons why we announced this when we did was to assure the widest possible participation in the sale of both of those businesses, but they are completely separate processes.

Okay. And then second, I didn't catch it in your comments, but I was wondering if you could just give us an update on really how CWI is proceeding, according to your expectations, as well as the eMortgage Logic. If I remember on the latter, I think you were expecting $250 million potentially in fee income this year. How are we doing moving towards that?

On eMortgage Logic, again, that's part of the broader mortgage solutions initiative, we -- the combined revenue of the acquisitions at the point of time was roughly $250 million. We expect about $300 million this year, we do expect also some margin expansion. We are seeing some -- we are having success cross selling, leveraging our distribution as a trusted adviser, and selling products on the appraisal and property preservation and broker price opinion side into the same clients, so really executing right, according to plan there.

CWI, we are still in the midst of an integration, again, with the LSG team is driving that, we do think that's going according to plan. It will give us a nice footprint in Europe, around global mobile.

Following up, you highlight in the press release that net earned premiums from solutions and specialty property were up 3%, taking out American Reliable. But if we also back out the acquisitions to really get at a same-store basis, how are the businesses, what you've got this year doing, compared to last year, in terms of premiums? Thanks.

I don't have that in front of us. What we have been focused on is, we do have strong organic growth in many parts of solutions and property and the fee income. A lot of that in mobile is organic, but I don't have that in front of me. We do feel good, though, about the future growth potential of the companies and the businesses that are part of the Assurant of tomorrow.

Okay, thank you.

John Nadel from Piper Jaffray.

Thanks for the follow-up. Two quick ones. I guess we have danced around a little bit in international solutions, the loss in LatAm and the integration costs. Would you at least give us a sense for the combination of what those two factors together cost the business, either in combined ratio points or dollars, or something along those lines?

I think in terms of the one timers you're talking about mid-single digit millions pre-tax, and probably $2 million to $3 million pretax in terms of the client replacement cost and recontracting in mobile in Lat Am.

Perfect, that's helpful, thank you. The second question is just, you have got these processes ongoing now, around the potential sale of these two businesses. Is it fair for us, I assume it's fair for us to think about you operating your capital management program under a sort of automated program, a 10b5 or whatever it is called, such that as you become aware of critical information, material information around these deals, you're still able to be in the market buying back your stock. Is that fair?

The way we go about share repurchases is 10b5-1, and the activity in April was all during a blackout and all part of a 10b5-1 program, so continue to again think the stock is attractive, want to be in the market consistently, and have ample financial flexibility to do that.

Okay, thank you, and Alan, I appreciate your commentary about an investor day, and maybe some additional disclosure and metrics around the two key businesses going forward. I think that would be very helpful.

Certainly. Thank you everyone for participating in today's call. We look forward to updating you on our progress throughout the year. As always, you can reach out to our investor relations team with any followup questions. Thanks.

This concludes today's conference call. You may now disconnect.