Acquisitions

9 Months Ended

Sep. 30, 2018

TWG Acquisition

On May 31, 2018 (the “Acquisition Date”), the Company completed the acquisition of TWG Holdings Limited (“TWG”) and its subsidiaries for a total enterprise value of $2.47 billion. This amount included $894.9 million in cash, the repayment of TWG’s $595.9 million pre-existing debt and $975.5 million in newly-issued Assurant, Inc. common stock. As a result, the equityholders of TWG, including TPG Capital, received a total of 10,399,862 shares of Assurant, Inc. common stock. TWG specializes in the underwriting, administration and marketing of service contracts on a wide variety of consumer goods, including automobiles, consumer electronics and major home appliances. The acquisition will enhance the Company's position as a leading lifestyle provider, particularly within the Global Automotive business, with significant operating synergies expected and a deepened global footprint. The Company financed the cash consideration and repayment of TWG's pre-existing debt through a combination of available cash and external financing. Refer to Notes 12 and 15 for more information on the issuances of debt and mandatory convertible preferred stock, respectively, related to the financing of the acquisition.

Acquisition Consideration

The table below details the purchase consideration:

Calculation of acquisition consideration



Common stock shares issued to TWG equityholders	10,399,862
Volume weighted average common share price of Assurant, Inc. on May 31, 2018	$	93.80
Share issuance consideration	$	975.5
Aggregate cash consideration	894.9
Repayment of pre-existing TWG debt	595.9
Total acquisition consideration	$	2,466.3

Fair Value of Net Assets Acquired and Liabilities Assumed

The fair values listed below are estimates and are subject to adjustment, including assessment of the value of business

acquired ("VOBA") and other intangible assets, as well as certain components of deferred tax liabilities included within accounts payable and other liabilities. The initial accounting included certain provisional amounts recorded as of June 30, 2018 (the end of the reporting period in which the acquisition occurred). In the third quarter 2018, the Company made adjustments to the provisional amounts to reflect new information obtained about facts and circumstances that existed as of the Acquisition Date that, if known, would have affected the measurement of the amounts recognized as of that date. Such adjustments impacted certain identifiable assets acquired and liabilities assumed, resulting in a net increase to identifiable net assets acquired and a corresponding decrease in goodwill of $55.8 million. The adjustments to income that would have been recognized in previous periods if the revisions had been completed as of the Acquisition Date were immaterial. The Company may recognize additional measurement period adjustments to the provisional amounts in future periods until one year from the Acquisition Date.

Assets acquired and (liabilities) assumed (updated as of September 30, 2018)



Fixed maturity securities available for sale	$	2,268.8
Equity securities	49.4
Short-term investments	165.5
Other investments	100.9
Cash and cash equivalents	380.1
Premiums and accounts receivable, net	274.2
Reinsurance recoverables	1,917.5
Accrued investment income	31.6
Property and equipment	15.4
Value of business acquired	4,048.0
Other intangible assets	459.3
Other assets	214.1
Unearned premiums and contract fees	(7,598.1		)
Claims and benefits payable	(420.5		)
Reinsurance balances payable	(186.1		)
Funds held under reinsurance	(200.8		)
Accounts payable and other liabilities	(459.2		)
Non-controlling interest	(1.8		)
Total identifiable net assets acquired	1,058.3
Goodwill	1,408.0
Total acquisition consideration	$	2,466.3

Total goodwill of $1.41 billion is mainly attributable to expected growth and profitability, none of which is expected to be deductible for income tax purposes. Total VOBA of $4.05 billion and amortizable other intangible assets of $447.7 million will be amortized over their estimated useful lives, ranging from 3 to 15 years. Refer to Note 11 for additional information.

Acquisition-related Costs

Transaction costs related to the acquisition were expensed as incurred. These costs include advisory, legal, accounting, valuation and other professional or consulting fees, as well as general and administrative costs. Transaction costs incurred to date in connection with the acquisition of TWG totaled $39.5 million, including $0.2 million and $30.2 million for the three and nine months ended September 30, 2018, respectively, which were reported through the underwriting, general and administrative expenses line item in the consolidated statements of operations.

As a part of the ongoing integration of TWG's operations, the Company has incurred, and will continue to incur, costs associated with restructuring systems, processes and workforce. These costs include such items as severance, retention,

facilities and consulting. Integration costs incurred to date in connection with the acquisition of TWG totaled $23.6 million, including $10.1 million and $22.9 million for the three and nine months ended September 30, 2018, respectively, which were reported through the underwriting, general and administrative expenses line item in the consolidated statements of operations.

Financial Results

The following table summarizes the results of the acquired TWG operations since the Acquisition Date that have been included within our consolidated statements of operations (based on how TWG was allocated to the Company's reportable segments).



	June 1, 2018 to September 30, 2018
	Global Lifestyle		Corporate and Other (1)			Total
Total revenues	$	863.9	$	(5.2	)	$	858.7
Net income	$	39.3	$	(17.6	)	$	21.7

(1)

The TWG operating results allocated to the Corporate and Other segment included $11.6 million of net pre-tax losses as a result of the remeasurement of the Argentina subsidiary's non-U.S. Dollar denominated monetary assets and liabilities, pre-tax integration expenses and net realized losses on investments, partially offset by income tax benefits, which include a $5.7 million tax structuring benefit. Refer to Note 2 - Basis of Presentation for further information on the net losses due to remeasurement and Note 19 - Income Taxes for further information on the income tax benefit.

Supplemental Pro Forma Information

The following table provides unaudited supplemental pro forma consolidated information for the nine months ended September 30, 2018 and 2017, as if TWG had been acquired as of January 1, 2017. The unaudited supplemental pro forma consolidated financial information is presented solely for informational purposes and is not necessarily indicative of the consolidated results of operations that might have been achieved had the transaction been completed as of the date indicated, nor are they meant to be indicative of any anticipated consolidated future results of operations that the combined company will experience after the transaction.



	Nine Months Ended September 30,
	2018		2017
Total revenues	$	6,790.2	$	6,331.6
Net income	$	306.8	$	247.1

For the nine months ended September 30, 2017, pro forma net income includes $26.0 million of nonrecurring transaction and integration costs, net of taxes. For the pro forma presentation, given the assumed acquisition date of January 1, 2017, transaction and integration costs that were incurred at, or subsequent to, the actual acquisition date have been included in the 2017 pro forma net income, whereas transaction and integration costs that were incurred prior to the actual acquisition date have been excluded from the 2017 pro forma net income.

Prior year acquisition

On February 1, 2017, the Company acquired 100% of Green Tree Insurance Holdings, Corp. and its subsidiaries Green Tree Insurance Agency and Green Tree Insurance Agency Reinsurance Limited (collectively “Green Tree”) for $125.0 million in cash with a potential earn-out of up to $25.0 million, based on future performance. Green Tree sells housing protection products, including voluntary homeowners and manufactured housing policies, and other insurance products. In connection with the acquisition, including measurement period adjustments, the Company recorded $10.4 million of net liabilities and $69.6 million of agency relationship and renewal rights intangible assets, all of which are amortizable over periods ranging from 7 to 16 years, and $65.8 million of goodwill, none of which is tax-deductible. The primary factors contributing to the recognition of goodwill is future expected growth of this business and operating synergies within Global Housing.