High Cat Loss Hurts Assurant's 2Q - Analyst Blog
July 28 2011 - 8:30AM
Zacks
Assurant Inc. (AIZ) has reported second quarter
2011 operating earnings of 76 cents per share, missing the Zacks
Consensus Estimate by 8 cents and significantly lagging the
prior-year quarter’s earnings of $1.35 per share. The quarter’s
results were hit by high catastrophe loss (cat loss) incidence and
a weak performance at the company’s health unit.
Total revenue for the reported quarter stood at $2.1 billion,
down 3.6% year over year. Lower earned premiums, along with a
decrease in net investment income, primarily accounted for the
decline.
Net earned premiums fell 4.4% year over year to $1.8 billion
owing to a decline in premium across all the business segments. Net
investment income inched down 0.8% to $173.8 owing to a drop in
yields, while the invested assets remained stable.
SegmentPerformance
Year over year, net operating income at Assurant
Solutions increased 31% to $39.7 million, primarily due to
stronger business from international operations and stable preneed
results. Net earned premiums inched down 1% to $679.5 million,
primarily owing to continued run-off of the domestic credit
business and service contract from old customers.This decline was
partly offset by premium growth in both domestic as well as
international units.
Assurant Specialty Property’s
net operating income plunged 59% year over year to $42.6 million.
The drop was primarily caused by $42.7 million of cat loss, coupled
with higher loss frequency from non-catastrophe events. Net
earned premiums decreased 3.0% to $483.3 million due to an increase
in ceded premiums coupled with higher cat reinsurance premium,
partly offset by a growth in creditor-placed homeowners as well as
flood and renters insurance.
Net premiums earned at Assurant Health fell
9.0% year over year to $434.3 million. This was attributable to
premium rebate accrual, partly offset by an increase in premium
from affordable choice and supplemental products. Net operating
income dropped 79% year over year to $5.2 million due to $10.9
million of after-tax accrual of premium rebates associated with the
minimum medical ratio requirement provisions as stated by the
Health Care Reform Act. Assurant Health competes with companies
like CIGNA Corp. (CI) and
Aetna Inc. (AET).
Year over year, Assurant Employee Benefits’ net
premiums earned slipped 4.0% to $270.6 million due to pricing
actions on a block of assumed disability business and lower sales
in 2010, partly mitigated by premium growth in voluntary and
supplemental products. Net operating income dropped significantly
by 31% to $8.5 million on the back of lower favorable loss
experience and low disability incidence.
The financial position of Assurant remains strong with $4.5
billion of equity capital, unchanged from the level at 2010 end.
The company maintains a low leverage ratio of 17.8% and has no debt
maturing until 2014.
Book value per share, excluding accumulated other comprehensive
income, increased 7.1% to $46.16 from $43.08 at December 31, 2010.
The company repurchased 3 million shares during the quarter at a
total cost of $110.4 million.
During the quarter under review, Assurant increased dividend by
13% to 18 cents, representing its eighth dividend increase since it
went public in 2004.
During the quarter, Assurant also entered into a comprehensive
catastrophe (CAT) reinsurance program to shield itself from
losses that looms ahead as an above-average hurricane season this
year. The program is intended to provide the shareholders with an
acceptable return on the risks assumed in the company’s property
business, and to reduce variability of earnings while providing
protection to its customers.
Based in New York’s financial district, Assurant competes with
Principal Financial Group Inc.
(PFG), Loews Corp.
(L), and Conesco Inc.
(CNO) among others.
ASSURANT INC (AIZ): Free Stock Analysis Report
CNO FINL GRP (CNO): Free Stock Analysis Report
LOEWS CORP (L): Free Stock Analysis Report
PRINCIPAL FINL (PFG): Free Stock Analysis Report
Zacks Investment Research
Assurant (NYSE:AIZ)
Historical Stock Chart
From May 2024 to Jun 2024
Assurant (NYSE:AIZ)
Historical Stock Chart
From Jun 2023 to Jun 2024